Forex Adjustment to USD/CHF Long

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

USD/CHF 4 Hour Forex Chart

USD/CHF 4 Hour Forex Chart

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!

  • ForExchange

    Hi Pipcrawler,

    I am happy it went to your direction in the end (as I was worrying for the setup in your last post). As you said, after the good work you can chill a bit and see if it turns out to be a really big win or a breakeven. This kind of situation is always nice to have.

    I have a question: do you follow silver, gold and oil prices? As commodities are very cheap, it will be tougher to push them even more down. If they would start rising then it would be bad for the USD which can have an effect on your USD/CHF trade result.

    What do you think?


    • Pipcrawler

      I’m aware of what’s going on in those markets, but I don’t trade them. Overall, it looks like global demand plus the strong Dollar looks like the reason we’re seeing weak commodities, and in oil’s case, there’s seems to be an oversupply now that the US has the ability to crank out a lot of oil. At the moment, there’s still an argument for lower prices, but you may be right in that there could a short supply of sellers at these levels. And even if they did rise, I don’t see it having a big effect on what’s going on with my USD/CHF trade. What I’m looking out for now is NFP, the ECB, and what EUR/CHF is doing. All three have potentially big influence on my position over the next week.

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