Hopping Back on My EUR/USD Short Bias – Trade Closed

Trade Closed: 2012-11-30 09:30 ET

Good morning! Well, not so good for my trade as the euro crept up higher during Asia and European sessions. While I feel it was a good trade, I did make one small mistake…

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

pcpod.20121119.review.jpeg

…and that mistake was my stop. But before I get into that, let’s talk about price action.

As I mentioned in my original trade idea, sentiment of a fiscal cliff deal, a Greek Debt deal and improving US data should boost EUR/USD higher, but unfortunately, I underestimated that boost as traders propelled the currency pair all the way back up to 1.3000. Then we got the Greek Debt deal passed on Wednesday, but sellers held at 1.3000 and turned the pair back down to below 1.2900. I was feeling good that the lack of buying at 1.3000 signaled that it was fully priced in and that the lack of finalized details in the Greek deal has traders less than committed to being long the euro.

Finally, we got a spark in risk taking from John Boehner, US Speaker of the House of Representatives, with his positive comments on fiscal cliff talks–which subsequently turned negative just a day later.

So, it was a week of choppy sentiment shifting, which ended with my stop loss level at 1.3020 being hit and triggered.

Total: -120 pips/ -1.0% loss

It wasn’t until I did my chart review that I noticed I should have paid more attention to the 1.3020 level; it served as support, then turned into resistance and held twice before the re-test today. I usually only pay attention to MaPs and MiPs levels (’00s and ’50s respectively), weekly highs/lows, and weekly volatility ranges, so this minor area of resistance didn’t hit my radar. If it did, I might have chosen a bigger stop and weathered the noise coming from Congress.

Besides that, I probably could have cut the trade for a small profit after the initial positive comments from Boehner, but after missing a 300+ pip move on my last EUR/USD trade thanks to being spooked by bailout speculation and rumors, I held this one to the very end.

Overall, I took another small loss, but it was a good trade and a lesson learned on what to pay attention to for my stops.

Man, with so much flip flopping of sentiment, I haven’t been in sync with the markets as I was in the third quarter. With the Greek debt deal, and hopefully, a US fiscal cliff deal coming through, the markets can stabilized and get back to trends. Until then, it’s back to short-term trades for me.

Thanks for checking out my blog everyone. Good luck and have a great weekend!

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Trade Update: 2012-11-27 13:24 ET

Good afternoon traders! EUR/USD saw quite a bit of action over the past week, so I thought I’d post a quick update and my thoughts on the recent events.

pcpod.20121119.update.jpg

Over the last week, EUR/USD rallied higher as expected on general optimism on the US fiscal cliff, positive European data, and expectations of a Greece deal. Well, we finally got the Greece deal on the table yesterday, but the pair was unable to rally beyond the major psychological level of 1.3000. What’s up with that?

It looks like a “buy-the-rumor, sell-the-news” event to me because at the end of the day, what does this event change about the European outlook? While it is a positive step towards helping the people of Greece, I don’t think it changed anything at all. I feel like we’re watching the same movie over and over, every year: Greece gets help–but the system fails to make substantial changes. And every time the euro falls not too long afterward.

I think many traders are inline with that same thought process, which is shown by the protection of the 1.3000 handle and heavy selling after it held. I’m still short bias for now, holding my short position created with entries at 1.2950 and 1.2850. I will continue to hold short for now with the same exit plan, and I may scale in another position if EUR/USD continues lower and the story stays the same.

That’s it for now, but I have my eyes open for a short-term trade with a few tier 1 events on the forex calendar this week. Stay tuned by following me on
Twitter and Facebook for my observations and thoughts. Thanks for checking out my blog…good luck and good trading!

Trade Idea: 2012-11-19 17:32 ET

Good afternoon forex friends! I’m still short bias on the euro for reasons mentioned in my previous EUR/USD trade, and it looks like I may get another chance to jump in the renewed downtrend.

pcpod.20121119.png

EUR/USD has been on a down trend since failing to break the strong resistance around 1.31 in mid-October on European debt fears, US Fiscal Cliff worries, and a host of other problems. Fortunately for euro bulls, risk-on flows have picked up to start off the week on sentiment that we’ll avoid the fiscal cliff, but I think that will be short-lived. In this week’s forex calendar, we have various Euro zone PMI’s on deck, which has been a market mover in the past. And given that the US will be on holiday this week, the lower liquidity conditions could create a volatile environment–great for picking up short term moves. Data has been showing contracting growth as of late, which I expect will continue and be bearish for the euro and risk.

So, I look to short on the pair, but on a bit more retracement. This sentiment that we’ll avoid the fiscal cliff may continue until we get the PMI data on Wednesday. Also, recent positive US housing data may contribute to investors appetite for risk. If it does, I look to short in the area of potential resistance marked in the chart above. This area is of previous strong interest, as well as a Fibonacci retracement area–I’m sure it’s being closely watched by euro bears. I will target the previous week lows and my stop will be above the 61% Fibonacci retracement level. Here’s what I am going to do:

Short EUR/USD half position at 1.2850, stop at 1.3020, max profit target at 1.2660

Short EUR/USD half position at 1.2950, stop at 1.3020, max profit target at 1.2660

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

If both positions are entered, this trade structure gives me a 2:1 potential return-on-risk. Of course, anything can happen in this crazy times, so if the data comes out differently than expected, or we get an unforeseeable event, I’ll be sure to adjust quickly. Stay tuned by following me on Twitter and Facebook for updates and adjustments.

Thanks for checking out my blog–good luck and good trading!

  • Hebert

    You said it was a “small mistake” by not setting a wider stop to weather the noises?? The pair hit 1.3107!!! How wide a stop is needed? 1.32 or 1.33? With these stops, your trade would have to be sold down by 500-600 pips in order to hit your TP of 1.26! Possible? At the moment, sellers cannot even moved the pair down 20-30pips without it bouncing back up the next minutes. Fiscal cliff solution may happen only at December end. have the With the coming NPF and rounds and rounds of EU meets , any of these events may change the pair’s direction. Your trade was doomed to be stopped out sooner or later. Never under estimate the noises generated by sentiment of the market.

  • George

    You rejoiced too soon. The pair is back at 1.326 . You should stop dwelling on the euro crisis and that nothing has change. The crisis is already 4 years old and it is not going to be solve anytime soon.It may take years or decade. The euro has already drop from 1.54 till now and you still think the only way is down?The market knew about the crisis and may have factored it in ie: that is not much surprises left , Noticed the mute response from market when some EU banks or country being downgraded vs a year or two back???On the other hand, each time there is a EU summit or special event like the current “fiscal clift” or when Ben or Draghi speaks, any news interpreted as positive will sent the euro up fast .Recognized that the euro direction is not solely decided by the euro crisis. Many factors comes into play. Being stubborn cost as this is not the 1st time you lost due to continuing shorting the pair.

    • pipcrawler

      Thanks for your comments George. I take everything into consideration, including the fiscal cliff, and try my best to determine what are the driving factors. The fiscal cliff wasn’t in focus for the eur/usd until Boehner made his comments 2 days ago. And my stance is that mere talk means little, especially from politicians–I’ll believe it when I see it. But the market didn’t see it that way and pushed the pair up from 1.2900 to 1.3000, and tested my stop at 1.3020 (which it hasn’t convincingly broke). Do I feel I was wrong? Maybe in my trade plan structure, but the events have yet to play out. We won’t know what the US will do with the fiscal cliff until a deal is done or we hit Jan. 1st without one. If it’s done, I’ll cautiously buy because it seems to be priced in now, and if not I’ll sell again.

      • Tanver Ahmed Khan

        PLz tell what r u seeing GNP/USD. will go up or come down to 1.59 or even low.

  • Mohammad Ahsan Ali

    I am a newbie in trade system. I didn’t know much except
    watching the candles moment and do the short trades of 10 – 15 pips. I am in
    great loss after buying two sell positions at 1.2800 & 1.2790 last week of EUR/USD.

    Now as you know the Euro is highly charged and going upward
    since last week so could you please help me to close my trade??

    I wanted to know that should I wait for EURO to get down or
    should I close the position and bare the loss.

    Your help and earliest response will be highly appreciated.

    Thank you in advance,

    • Sam

      The sooner you cut your loses short the sooner you will get rid of the passive mind set and you will be able to take advantage of new trading oportunities by trading actively. For me, I don’t know how people trade on the news, it is very hard because nobody knows what the outcome might be and how the market will respond to that. It is a whole lot easier to just listen quietly to what the market is telling you and surf with it.

      • Leonardo Vicente

        it depends if your an proactive or reactive trader. i am reactive as i set my orders after news breakout. about 5 minutes after news was released. i usually visit forexfactory.com or bloomberg, whichever comes first for the news then look up if the news will either demonstrate a positive or negative feedback

  • Olivier Rivest

    I make -600$ profit, Fantastic !

  • womentribe

    hmmm.. this pair is going up like crazy since past week and i have a gut feeling that it will go towards 1.3150..

    • pipcrawler

      Yeah, optimism is creeping back into the pair thanks to speculation Greece will get its loan and positive German numbers. If those events continue, and EUR/USD breaks above 1.3000 and stays there, we could see 1.3150 again. Let’s see what happens…

  • ARTjoMS

    Lack of sellers around 2880 clearly indicated that sentiment is bullish. 3020 was 20 day high at that moment, even if you don’t trade “turtle soup” make a habit of paying attention to these 20 day-high levels.

    Enter below resistance and if there is no resistance where you expected then get out. Unless you are a guru who can predict the future then you better follow what market does.