Forex Adjustment: 2014-11-03
Dollar bulls continue to be in control with no pullback after the Fed ended QE last week, and with the momentum still looking strong, it’s time to make a few adjustments to reduce my risk and maximize my potential reward.
Original Trade Idea: Long USD/CHF after FOMC
Like I mentioned above, momentum is still with the bulls for the Greenback, putting me up around 100 pips on my small half position. With a pretty heavy data week coming up of employment reports and central bank decisions, I thought it would be a good idea to reduce my risk. With the market already moving higher, I canceled my open order to buy at .9450 and moved position stop to breakeven (.9550). This essentially creates a “risk-free” trade for me at the moment.
And just incase we see more bullish data for the Greenback, it would be a good idea to take advantage of any further moves to the upside in USD/CHF. To do so I:
Added a buy order at .9750 for another half position, stop at .9650. If this is triggered, I’ll move the stop on my first half position to .9650 to lock in 100 pips on that. This still makes my trade “risk-free” (in the rare case of a big price gap, there is risk of loss), because if the entire position is closed at .9650, then the profit on my first half position is negated by a loss on my second position.
My new target is parity (1.0000), which I think is a possibility with the U.S. Non-farm payrolls report this week. I don’t know what the number will be or how forex traders will react, but I do know volatility will pick up and if it does go my way, I’d like to have a big target ready to take advantage of any big moves that could happen.
These adjustments again make it a “risk-free” trade, and by adding on to a winning position and going for a bigger target, I’ve increased my potential reward-to-risk from 1.48:1 to about 2.6:1. Now I can just sit back and relax on this trade and wait to see what the market does. Stay tuned by following me on Twitter and Facebook!