Trade Closed: 2011-09-30 14:05 ET
Good afternoon fellow forex fanatics! It looks like that rising trendline turned into a great resistance area as the pair retested and dropped on a shift back into risk aversion. Check it out!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
A quick look at the chart above, we can see that the double top turned into a triple before moving lower. A focus back on global weakness brought on by a mix of weak reports from China, German retail sales, and a fresh downgrade of New Zealand’s credit rating. Of course, the European debt issues are still on the forefront with the EFSF vote in motion, along with rising inflation in Europe.
So, it looks like traders took that retest as another opportunity to sell into today’s session. Again, I shorted at 1.3600, and just before the Chicago PMI report, I announced on my Twitter and Facebook pages that I closed my trade manually at 1.3440. With the weekend approaching, and the pair now retesting support, I thought it was a good time to bank profits.
Total: +160 pips/ +0.91% gain
In retrospect, one thing I could have done better was be more conservative with my entry and more aggressive with my stop. On the day I entered my orders, I saw the top of the daily range was actually at 1.3630. Had I entered there with my usual quarter weekly ATR stop, I could’ve done much better on this one. I’ve missed a lot of good trades lately, so that is why I entered at 1.36 and I let my loss at the beginning of the week become a bias on this trade, causing me to use a really wide stop.
Overall, I think it was a good trade, and while I didn’t overcome the loss from Tuesday, I certainly can say it wasn’t a bad week at all. It’s always good to end the week/month/quarter with a win, right?
Thanks for checking out my blog and have a great weekend everyone!
Trade Idea: 2011-09-28 17:18 ET
Just when I thought traders were back into risk buying mode, the markets turned on a dime once again. And after seeing a couple of bearish patterns on EUR/USD form, the break of the rising trendline might be the cherry on top. Time to short?
Fundamentally, I’m not too sure what the cause of the turn is. Could it be that European countries are still undecided on the Greece bailout? The slowing pace of economic activity in China, and thus the harsh sell off in commodities? What about the inability of Washington, DC to come to an agreement to fix the debt, jobs, and economy overall? Whatever spooked traders out of risk, or back into risk aversion assets, it looks like the shift in sentiment may be for real in EUR/USD. Let’s take a look at the chart.
On the one hour chart above, we got early signs of turn in the form of divergence just under the 1.3700 handle. In my opinion, it also looks like a double top. What may be the confirmation is that the pair broke the rising trend of high lows today.
I’m more biased towards buying the Dollar given the issues described above, so I look to go short IF I see a retest of the 1.3600 handle. My stop will be the daily ATR of 170 pips, and I will look to target this week’s lows–and maybe beyond. Here’s what I am going to do:
Short EUR/USD at 1.3600, stop at 1.3770, pt at 1.3400
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
After being burned on my trade earlier this week, I’m a bit more conservative on entry and stop on this trade. If it does go my way, I’ll hold on over the week and possibly add to it if the pairs moves lower. As always, check out my Twitter and Facebook pages for updates and adjustments. Stay tuned and good luck!