Fibonacci Short on EUR/USD? – Trade Closed

Trade Closed: 2011-08-09 22:40 ET

So, how bout them markets? It was a wild one today and on top of the extreme volatility, it wasn’t a good day for me as I let what could have been a great trade turn into a sour one.

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

PCDPOD20110809.review.png

It was FOMC interest rate decision day today, and Big Ben and the Fed announced that they will leave borrowing costs between zero and 0.25% until mid-2013. Of course, this sparked huge volatility in EUR/USD. First, the pair spiked higher, topping out around 1.4317, then dropped all the way down to 1.4200 where it found massive buying support. It was a big USD sell off from there as the pair rallied up, up and away–topping out just under 1.4400.

EUR/USD was able to hit my orders and go 100 pips my way almost instantly; it should have been a good trade, right? Unfortunately, it didn’t play out that way for me. Today I was called away from my office on personal matters, but I did bring my laptop with me. The funny thing was, it wasn’t working–I wasn’t able to adjust my orders or get on the net…gaaaaahhhh! So, my trade was at one point up 100 pips before stopping out later at 1.4350.

Total: -50 pips/-0.25% loss

A tough loss given that I was already up 2:1 at one point. But to be honest, had my laptop played nice with me, I was ready to close my orders before the FOMC meeting; I don’t usually like to gamble like that.

Lesson learned today? Don’t leave the office on FOMC meeting day and ALWAYS have a back up for your back up! Got it? :)

Well, the week is young, so I’m not going to let a 0.25% loss get to me–always plenty of opportunities out there. I hope the rest of you did better than me on EUR/USD. If so, I’d love to hear about it. Leave a comment below, or hit me up on my Twitter and Facebook pages to say hello!

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Trade Idea: 2011-08-09 03:25 ET

Good morning FX friends! I’ve spotted one of my favorite setups for a short-term play on EUR/USD. Will the bounce be an opportunity to buy back into recent USD strength?

PCDPOD20110809.png

On the 15 minute chart above, I’ve spotted a typical Fibonacci setup on EUR/USD. After yesterday’s sell off in risk, the Greenback has fallen against most of the majors during today’s Asia session. Is it a full blown reversal or just a pull back?

With everything going on recently with the US debt downgrade by S&P, recent central bank rate decisions, and mixed economic data, today’s environment is super tough as uncertainty remains supreme. So, for this week, I’ll stick to what has worked in the past and couple it with my general bias that we are in risk aversion mode.

So, I look to short for a day trade today at 1.4300. This is a minor broken-support-turned-resistance area that lines up with the 61% Fibonacci area. Also, because it is a major psychological level, I figure a lot of seller will be looking to jump in short there. I’m going to use a tight stop of 50 pips (a quarter of the daily average true range), and my profit target will be around today’s low. Here’s what I am going to do:

Short EUR/USD at 1.4300, stop at 1.4350, pt at 1.4150

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

This trade structure gives me a potential 3:1 return-on-risk; potentially more if I add to a winning position. Also, because this is a day trade, I’ve lowered my risk to 0.25% of my account.

I don’t look to hang onto this trade long if triggered, mostly due to the upcoming FOMC interest rate decision. So, be sure to stay tuned by joining my Twitter and Facebook pages for adjustments and updates. Good luck and good trading!

12 comments

  1. ani

    DEAR pipcrawler
    i cancelled my pending order b4 the fomc news.  Didnt wanna take risk as the order was long pending and couldnt get executed sufficiently b4 the news. 
    ani

    Reply
  2. disqus_OzfXGMPz4t

    I agree, it is not gonna work. Long buy positions were added after last week, I doubt EUR is gonna reach 1.30. If it short, it is gonna be after 1.32 for not more than 50-75 pips, after germany and french news of tomorrow, and then all the way up to 1.33.

    Reply
  3. Power pip'n

    wow that was a wild ride yesterday. I set up a limit sell order about 20 pips away from yours (downwards).. got activated and stopped before profits were actualized…I saw your blog before the spike happened and felt even more secure in my trade. I actually was attempting (premeditated) to “Ride the spike downward” and placed a huge stop in anticipation for the inevitable upward spike. wow should have realized there was alot of security at 1.4400…thats what i regret..but then again that throws off my risk ratio…so anyways just thought i would share. Love the site! :)

    Reply
  4. MissForex

    I held on. Awesome trade. I did not place stop loss – FOMC in my opinion was more of a blip, so I did not want to stop out because of a glitch. So, I took some sleeping pills and let it play out. Good choice, I am happy with trade. Good gain for my small account. 

    Reply
      • Pipcrawlerpipcrawler Post author

        Hey @8ddbe0008ce25ef800d265fc1f7ef545:disqus I got stopped out, but due to me not having a back up plan for hardware failure…check out my blog update!

        Reply

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