Forex Trade Idea: 2014-07-24
On top of raising the main interest rate to 3.50%, the RBNZ signaled a pause in future rate hikes, which forex traders took as a signal to sell the Kiwi. I’m still bullish, but I decided to change up my entry technique on this pair because I can never be sure on where the bulls may re-enter.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
I consider my arguments to go long NZD/CHF still valid, but I decided to adjust my entry technique to go from a full position entry to a scale in technique. As I mentioned above, you can never know when the bulls will get active again, so to avoid trying to be perfect with my entry and possibly missing a move higher, I’m going to nibble a bit at current levels with a very small position. And if the market gets to my original entry level, then I’ll scale in another small position there as well. Here’s what I am doing:
Long half position at market (.7750), stop at .7575, profit target at .8000
Long half position at .7700, stop at .7575, profit target at .8000
Combined, the brings my average entry price to .7725 and my total account risk to only 1% of my account. My potential return-on-risk is 1.83:1 if both positions are entered, and this doesn’t account for the positive carry interest I’ll collect, which is super nice now that the RBNZ raised rates again to 3.50%. In today’s low interest rate environment, that’s a hard thing to ignore and not take advantage of, which is why I think the pullback may not be as long or as deep as the one after the first RBNZ rate hike earlier this year.