Forex Trade Idea: 2041-09-08
It looks like I have another chance to jump into the euro downtrend thanks to a simple trend pullback setup in EUR/CAD. Is it too late to catch the strong momentum lower?
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Of course, I don’t know when downward momentum will come to an end, but with a nice technical setup back by a major catalyst from the ECB monetary policy meeting last week I gotta take this trade.
The technical setup is a simple one on the one hour forex chart of EUR/CAD as the pair has pulled up higher in a downtrend to just under what has the potential to be a resistance area: Fibonacci retracement and moving averages. It’s not guaranteed that sellers will jump in here, but I’m sure there are some shorter-term forex traders checking it out.
Of course, it’s been a pretty big run lower for EUR/CAD since March, which is why I’m going with a nibble to test the waters for now. I’ve already shorted at market (and another order if it pulls back higher), with a stop above the Fibs and moving averages. And my initial target is the major psychological level. Here’s what I am doing:
Short half position at market (1.4150), stop at 1.4275, initial target at 1.4000
Short half position at 1.4250, stop at 1.4275, initial target at 1.4000
I’m only risking 1.00% of my account on this one if both positions are triggered, and with this trade structure, I have a potential reward-to-risk ratio of about 3.33:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!