Day Trade Short on USD/CHF Retracement? – Trade Closed

Trade Closed: 2011-08-03 04:15 ET

Well that was quick! The Swiss National Bank came out with a statement basically saying that the Swiss Franc is “massively overvalued” and won’t take it anymore! (Check out the story on Bloomberg here.) Needless to say, that is Swissy bearish in a big way. Check out how my day trade played out!

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20110803.review.png

The chart above pretty much says it all. So what could I have done better?

Well, the best solution is to have a direct line to the world’s central banks and have them let me know what and when they are going to announce something before they announce it to the world. Can someone please hook that up for me? Thanks! Haha

Of course, that is not possible and there was no way for me to know that the SNB was going to come out with that statement today. As a result my trade was triggered and I was VERY quickly stopped out.

Total: -70 pips/ -0.35% loss

Actually, the one thing I could have done better was to cut the trade off as soon as I found out the news shortly after my trade was triggered. But given that I only risked 0.35% of my account on this trade, I’m not going to beat myself up too much over that–I’ll just be sure to do cut out quick the next time I hear of a pending currency intervention. :)

So, that’s probably gonna be the only trade for this guy today, but as always, if I see a great setup I’ll be sure to share it on my Twitter and Facebook pages! Stay tuned and good luck in these wild markets!

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Trade Idea: 2011-08-03 01:15 ET

Konnichiwa forex fanatics! We’re well into the Asia trading session and it looks like USD/CHF is forming a technical day trade setup for sellers to jump back into the strong trend lower. More USD selling to go?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20110803.png

On the 15 minute chart above of USD/CHF, we can see that traders are still trading in Greenbacks for Swiss Francs even as US politicians finally agree on a deal to raise the debt ceiling. This behavior is probably due to the US credit agencies most recent stance on the US; even though they hold US debt at the highest rating, they’ve given the US a negative outlook (check out more news at Freshpips.com’s USD section). It looks like this will continue to put pressure on USD against “safe haven” currencies–at least in the short term.

So, I’m short USD/CHF bias as it seems the Swiss Franc is the only real “safe haven” left, IMHO, and a pullback to the Fibonacci areas drawn on the chart above may be areas where sellers will jump back in strong. With stochastics showing oversold conditions, we may see the market move higher and retest that area.

If so, I look to short at the 38% Fib area as it lines up with the major psychological level of .7700. My stop will be above the 61% Fib and I will target the major psychological level of .7500. Since USD/CHF is hitting all time highs for the year, there really isn’t anything I can pinpoint as profit targets other than major handles.

Short USD/CHF at .7700, stop at .7770, pt at .7500

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

This trade structure has a potential reward-to-risk return of about 3:1, and because it is only a day trade, I’m knocking down my risk to 0.35% of my account.

I’ll look to hold this through today’s European trading session and I may close out before the ISM Non-manufacturing PMI number at 10 am EST. I’ll stay flexible as always, so if I do make any adjustments I’ll be sure to update on my Twitter and Facebook pages! Stay tuned and good luck!

  • pipcrawler

    Yeah, SNB came out say Swiss Franc is “massively overvalued” and that “won’t tolerate” a “tightening of monetary conditions and is therefore taking measures” against the franc…. that’s defintiely a trade killer haha

  • Moraru Cosmin

    its allready been stopped out. i think a better level would have been the larger starter level, 0,7810. 

  • Btzll

    The problem was that during the last month, german and swiss newspapers were spreading the news that the Franc is overvalued, i went short on the EUR/CHF last week, just as the rally begun, but i chickened out when reading that and got out with 100 pips of profit, anticipating that the bank would intervene. They did take their “swees” time though to make this announcement. They key – in my opinion – is the EUR-CHF relationship. The EUR is too weak in opposition to the CHF, thus damaging the swiss economy. I’ve been waiting to go long on this one – EUR/CHF – and i’m expecting thousands of pips of profit. I think this kind of opportunity – to go bearish on an extremely overvalued currency – comes around very rarely

  • Nbhat

    actually there was speculation of this happening a few days ago. so best to have stayed put

    • pipcrawler

      True… but there’s always speculation that the SNB is gonna do something… I guess they finally had the guts to do it… haha

  • Max

    Its about to hit the stop order. Glad that I went long in .7660 . Closed after 100 pips. need to see if the 68% fib level holds as resistance or not so that I can consider going short.

    • Mm Vaghela

      Went short and on 100pips up.

    • MaxiV

      yes… its not looking too good….

    • MaxiV

      just hit that 68 level…. anyone gong short….?

  • MaxiV

    gone in for this one … and it hit the order… less see how this goes…

    • pipcrawler

      Did you jump in short after the pop higher? If so, good call!