Pick of the Day: EUR/USD – Trade Closed

Trade Closed: 2008-09-17 12:00

My remaining position closed yesterday at break even, shortly after the adjustment as we witnessed wild swings during yesterday’s trading session.

1st Half: +50 pips
2nd Half: +00 pips
Total: +0.25% gain

I probably could have held on and close out on a few more pips, but the markets were crazy enough and the uncertainty with the Fed rate decision was too great to take unnecessary risk on.

It looks like we’re back to risk aversion, even after the AIG bailout, and EUR/USD is currently falling along with USD/JPY. So much uncertainty, so we’ve got to stay on our toes and be ready to change ideas fast. Stay tuned for new ideas!

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Trade Update: 2008-09-16 11:10

It’s been a wild ride for the Forex markets for the past couple of days, especially for EUR/USD. A recent rumor that there may talks of government help for AIG brought in a burst of USD buying, bringing the pair to my entry level at 1.4125.

This is a tricky time to be in a position, especially with the recent report of AIG help in the works. If there is a plan of government help, then we probably won’t see a rate cut today from the FOMC and the USD may continue to rally. If not and AIG fails, then holy crap…who knows what will happen next as a bankruptcy in AIG could mean big trouble in the financial system globally.

Again, I’m not smart enough to figure out what will happen next, but I would like to lock in my current profit to protect myself from event risk.

Close half position at market (1.4175) to lock in 50 pips. Adjust stop on remaining position to breakeven to create a risk free trade.

Good luck and stay tuned!

Trade Idea: 2008-09-15 11:57

PoD Chart

Quite a bit of volatility to start off the week as major changes took place on Wall Street this weekend. We saw EUR/USD move in a range of around 300 pips, and it’s only Monday. Where to next?

So, this is what happened: Lehman goes bankrupt, Merrill Lynch gets scooped up by Bank of America, and there’s a potential ratings downgrade of AIG. There’s plenty of commentary and articles on the internet dissecting these events and the potential fallout, so I won’t really go much into it here. My only comment is that we are witnessing events that no one has ever seen before, which I think is “pretty freaking cool!” As a Forex trader, I love a little bit of volatility!

Seriously, these events continue to bring on many questions about when the credit crisis will end and its effects on growth globally. I don’t think there’s anyone on the planet who does know the answer to that, so I’m not going to try to answer that either. I do know that this leads traders to look to the next event that may take us one step closer to the answer: the FOMC meeting. The markets are already pricing in a potential rate cut as Fed Funds futures price in a 25 bps rate cut this Wednesday after what happened this weekend. Of course, if this scenario does play out, we could see the US Dollar sell off against the Euro. I’d like to prepare for that possibility.

Now, the US Dollar is currently rallying on oil weakness after the initial sell off at the open of this week’s trading. This may continue and bring the pair back to a level where I would like to go long – the 61% Fibonacci retracement level as drawn on today’s chart. I’ll definitely have a stop prepared a bit wider than normal as we will probably continue to see an elevated level of volatility. This is what I’m going to do:

Long EUR/USD at 1.4125, stop at 1.4025, pt1 at 1.4225, pt2 at 1.4500

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

14 comments

  1. Assaf

    Hey Pipcrawler.
    I jumped in at the 50% Fib (A favorite of mine).
    What made you decide on the 61% retracement level?
    Thanks.

    Reply
  2. -Conan-

    That’s quite a wave you’re riding on with that pick. Heh. Nice job. It’s only Monday and you’ve already netted like 200 pips.

    Reply
  3. PipcrawlerPipcrawler

    For a lot of my trades I actually scale in small portions of my overall position, but for this blog I usually pick the most conservative levels like the 61% Fib to keep it simple. :)

    Reply
  4. Assaf

    Hey Pipcrawler.
    I jumped in at the 50% Fib (A favorite of mine).
    What made you decide on the 61% retracement level?
    Thanks.

    Reply
  5. -Conan-

    That’s quite a wave you’re riding on with that pick. Heh. Nice job. It’s only Monday and you’ve already netted like 200 pips.

    Reply
  6. PipcrawlerPipcrawler

    For a lot of my trades I actually scale in small portions of my overall position, but for this blog I usually pick the most conservative levels like the 61% Fib to keep it simple. :)

    Reply
  7. barrooo

    hey pipcrawler, just curious as to why when this trade reached point one you didn’t close half your position and move stop to break even, as on most of your trades.Epecially with the impending rate decision event risk?

    Reply
  8. PipcrawlerPipcrawler

    greetings barroo, my blog entry point was not triggered until the morning US trading session today. If you went in on your own at anytime before then (ie the 50% Fib level), then you probably hit that first target as the pair made a high around 1.4250 during the morning Euro session. As for my blog specifically, I only managed to grab a few pips before volatility took me out at breakeven on my remaining position.

    Reply
  9. barrooo

    Thanks for the reply, I think the time difference caught me out here, I’m on GMT and thought you’d entered on the US morning session on the 15th

    Reply
  10. barrooo

    hey pipcrawler, just curious as to why when this trade reached point one you didn’t close half your position and move stop to break even, as on most of your trades.Epecially with the impending rate decision event risk?

    Reply
  11. PipcrawlerPipcrawler

    greetings barroo, my blog entry point was not triggered until the morning US trading session today. If you went in on your own at anytime before then (ie the 50% Fib level), then you probably hit that first target as the pair made a high around 1.4250 during the morning Euro session. As for my blog specifically, I only managed to grab a few pips before volatility took me out at breakeven on my remaining position.

    Reply
  12. barrooo

    Thanks for the reply, I think the time difference caught me out here, I’m on GMT and thought you’d entered on the US morning session on the 15th

    Reply
  13. delbertino

    I brought my cowboy ways to these crazy days and have learnt better. We are a part of this exciting history. What would Mr. Spock say? Can’t put it down now. I’m glad you are out in front. Thanx for the support. Yours truly, a truly newbie.

    Reply
  14. delbertino

    I brought my cowboy ways to these crazy days and have learnt better. We are a part of this exciting history. What would Mr. Spock say? Can’t put it down now. I’m glad you are out in front. Thanx for the support. Yours truly, a truly newbie.

    Reply

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