Giving EUR/USD Short Another Go – Trade Closed

Trade Closed: 2012-01-13 13:46 ET

It’s Friday the 13th, and while the Eurozone’s luck may have run out with S&P today, it was all good for my short trade EUR/USD.

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

PCDPOD20120112.review.png

The big news of the day is rumors of an impending series of European sovereign debt downgrades by S&P rating agency. According to Reuters, government sources said “S&P would cut a number of the currency bloc’s sovereigns, making an announcement after New York markets close at 4 pm.” Read more about the event here.

The big blow to the euro today was a positive boost for my short EUR/USD position, turning my swing trade into a day trade. Less than 24 hours after entering the trade, I decided to close as the pair tested 1.27. My line of thinking as I closed was that the S&P downgrades were still speculation, the exact details who would get downgraded are still unknown, and since it wouldn’t be announced until after the markets closed, a less pessimistic announcement as perceived by the markets may blow away that strong move lower. That’s a risk I didn’t want to take so I closed my trade at market (1.2696).

Total: +132 pips/ +1.05% gain

After a little bit of reflection, I think the one thing I could have done better was to wait for the market to give a clear signal that the sell off was exhausted. We got that in the form of a hammerish type bar at the strong support area. The stochastic indicator also signaled that market was potentially exhausted. Had I waited for that signal, I probably could have squeezed another 10 or 20 pips from the move. Despite not executing to full potential, it was a good setup and it looks like Friday the 13th brought me good luck and a great way to start the weekend.

So, that’s it for the week. Thanks for checking out my blog and stay tuned for new ideas or observations by following me on Twitter and Facebook. Have a great weekend!

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Trade Idea: 2012-01-12 15:39 ET

Good afternoon mates! After narrowly missing another nice Fib play, it looks like the market has given me another chance to play my short EUR/USD bias at a great price on today’s news. Check it out!

PCDPOD20120112.png

With the ECB interest rate decision out of the way, I’m taking another stab at shorting EUR/USD today as it looks like I can get in at better price and a nice looking technical setup. In the one hour chart above, we can see the market popped higher today after a positive Spanish bond auction and comments from ECB President Mario Draghi that there are “tentative signs” that the European economy is stabilizing.

To me, it’s what a leader is suppose to say to avoid sparking panic selling, so I’ll take it with a grain of salt and remember that situation stays the same as growth looks to slow with impending austerity measures to hit the Eurozone area. But it was enough to spark some buying, possibly a short covering.

Technically, we can see the pair found resistance at the Fibs I drew this week, as well as the 200 moving average on the one hour chart. Also, stochastic is indicating that conditions are oversold, and finally, we can see a doji in that potential resistance area indicating that buy and sell orders have balanced out. I think this will appear to euro bears as a great opportunity to jump back in the longer term down trend.

So, I look to short in this area, with a wide stop above Fib area and have a tentative target at this week’s low. Here’s what I am doing:

Short EUR/USD at market (1.2828), stop at 1.2950, pt at 1.2665

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

This trade structure gives me a potential 1.33:1 return-on-risk. I feel strongly about the euro downtrend, so I’ll look to scale into a bigger position if the market goes my way and trail my stop.

As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

  • asterios

    pairsXAU/USD 80.38% 19.62% USD/JPY 77.25% 22.75% GBP/USD 63.78% 36.22% EUR/USD 52.14% 47.86% USD/CAD 51.56% 48.44% AUD/USD 48.49% 51.51% USD/CHF 47.32% 52.68%
    I got this today from OANDA showing todays long/short positions in currencies. As you can see the E/U is almost 50/50. Is it possible that it is not yet oversold and has still some power to the UP? 

  • pipcrawler

    Thanks for the comments everyone!  I really appreciate that you all read my blog :)  Have a great weeekend everyone!

  • Aquducts

    THanks for sharing pipcrawler. I have got a question though. Why did not you wait lonnger to TP as markets on Monday will react to downgrade news coming out of SP,which surely will make you a little bit richer? :)

  • cybergianni

    1.26 proved to be a strong support.. on daily charts the downtrend channel has not been broken yet.. fiber may see a trend reversal against all odds. technical analisis is supported from rumors of further QE on greenback that would definitely rocket the fiber… be careful on shorting

  • Schnitzel

    congrats, nice trade.. unfortunately i wasn’t in front of my trading desk when EUR/USD moved..

  • Asif4fx

    great work, got the 140 odd pips (still on demo)

  • Velting Kaylen

    good call : ).. now for the tough decision on when to exit

    • pipcrawler

      I usually don’t like holding positions into the week and it’s tough to not take that quick profit, so I’m out Velting.   

      • Velting Kaylen

        as am i.. thanks

  • Schnitzel

    isnt that 122 pip stop loss set a bit too high?

    • pipcrawler

      You should check out our lessons on setting stop losses found here: link to babypips.com…  It’ll clear up how I approach setting my stops.  I hope it helps :)

      • Schnitzel

        Thanks, i’ve already finished that articles. ;)
        I know everyone’s trading strategy is different, it just occured very high to me since there were other possibilities to set a lower stop loss. For example 20-30 Pips above the falling trendline at the 4h chart. But I didn’t want to question you, I just wanted to understand your strategy.
        Congrats on your great trade anayway!

    • Jānis Pusplatais

      It isn’t, at least for PipCrawler :D
      anyway – we do have the wondrerful opportunity to move it, when price is moving in our favor!

  • Topgun

    Wow, I never expected tht TP to get hit this week. Nice Trade.

  • Mattspips

    Not a bad trade, I would have entered at 1.2850 and had my stop at 1.2925, 1.2870 may hold as support turned resistance, I also would only look to go short, no long trades until we break out of this channel and we see 1.2650 holding as support again.  

    Just my opinion of course.  Good luck with the trade!

  • Spiperman

    Great trade! Fibs held perfect! I’m pretty amazed that divergence didn’t appear on the RSI though…