Forex Day Trade on USD/CHF – No Trade

No Trade: 2013-08-14 23:45 ET

Good evening forex friends! No luck in catching that USD rally on an retracement as USD/CHF powered higher during the Wednesday Asia and European session. Time to close orders with bearish bars forming with a new start to the day.

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

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The chart pretty much lays it all out as there was no pull back to the Fib levels I drew at the beginning of the Wednesday session. Positive US sentiment carried on, and it wasn’t until we saw positive data from Europe and the UK that the USD rally ran out of steam and sentiment started to reverse. By this time, the market seem to find resistance at my profit targets and then reversed.

With a few bearish candles forming, positive European data and the positive sentiment sparked by US retail sales seemingly passed, I think it’s time to wrap this idea up and look for new opportunities in forex. Trade orders closed to buy USD/CHF at .9300. No trade.

I’ve made the mistake of trying to wait for a pull back many times in the past and I can’t seem to get past it. Of course, every situation is different, and this was sort of an unusual one since I was trading on a smaller time frame than what I usually do. Even if I had jumped in at market, that would have put my reward-to-risk ratio well under 1:1 as my exits would not have changed. On one hand, that might be okay because the probability of making a profit was high because of momentum, but on the other hand, out-sized reward-to-risk is what usually get’s ya in the green at the end of the year.

At the end of the day, I think I made the right decisions and the market just didn’t behave in a way that allowed me to partake in the move. In the future, with shorter term trades, I’ll try to find a better middle ground with my R:R to make sure I decrease my chances of missing moves like today.

That’s it for me for today. I’ll check back in during the US session to see where the UK retail sales and US CPI data takes the markets. Stay tuned by following me on Twitter and Facebook! Good luck and good trading!

Trade Idea: 2013-08-13 16:39 ET

Good afternoon forex friends! We got better-than-expected US retail sales data, which seems to have put the Taper back on the table for September–at least for now. More upside for the Greenback this week?

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So, this is a play on the intraweek rally that’s been going on in the Dollar across the board. Now the fact that we didn’t see a sell off reaction after the positive US retail sales data (core 0.5% vs. 0.4%) suggests that traders think the Taper may be back in play for September. We also got comments from Federal Reserve Bank of Atlanta President Dennis Lockhart suggesting a possible bond purchase slowdown in September as well. Of course, that story has been flip flopping for what seems like forever now, so who knows how long current sentiment will last, but I think it’ll play out for a bit with the lack of major tier 1 events in the forex calendar line up for the rest of the week.

The framework to enter this trade is a simple Fibonacci/major psychological level combo with a stop exit below the Fibonacci retracement area and profit target just under the next major psychological handle, which makes sense given the daily average volatility range of about 72 pips. Here’s what I am going to do:

Long quarter position on USD/CHF at .9300, stop at .9265, max profit target at .9375

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

I’m only risking 0.25% of my account on this trade, and with this structure, my potential reward-to-risk is 2.14:1. 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!