Pick of the Day: EUR/USD – Trade Closed

Trade Closed: 2008-10-30-2008 08:47

The FOMC cut rates by 50 basis points yesterday, which was enough to push EUR/USD further up to my entry orders at 1.3000. Unfortunately, it pushed it up way more than that as the rally took the pair as high as 1.33 during the Asian session before seller jumped in to take control during the European trading session.

My trade was entered, but quickly taken out for a stop by huge momentum to the upside.

Total: -100 pips/ -1.0% loss

So, is it back to the downside for EUR/USD? Well it looks like the “support-turned-resistance level” around 1.3260 was a better spot to jump in and traders have taken the pair back down to its current levels, just above 1.3000. If this swing lower continues, look for a retest of the previous lows around 1.23 to 1.25. Stay tuned!

BabyPips.com EUR/USD Forums
Setting Newbie Expectations
My Favorite Trading Books
BabyPips.com Chatroom
Freshpips.com
MeetPips.com

Trade Idea: 2008-10-28 17:00

PoD Chart

Hello Mates! Another wildly volatile day, but in a good way for risk takers, as risk tolerance grew on speculation the BOJ will cut rates. This translated into Japanese Yen selling and carry trade buying (i.e. purchasing higher-yielding currencies) or profit taking on carry trade selling. This pushed the Euro higher today, so the question now is, “Will the momentum continue higher?”

Today’s price action could be the start of a rally higher to correct the extreme sell off in this market. We’ve witnessed moves never before seen, and probably we’ll never see again in our trading career. Such extremes tend to lead to an exhaustion as the market runs out of buyers/sellers, especially when everybody and their mama becomes too scared or greedy. Are we at that point? I don’t know, but it is starting to feel like it to me. At the high point, USD has gained around 23% against the Euro in the last month… that is NUTS!!!! We’ve possibly come to that point, but not before we see some price action confirmation (consolidation and reversal).

An argument that we may head into consolidation phase is the recent bank interventions in the currency markets. The Reserve Bank of Australia and the Bank of Japan have stepped in, buying and selling their currencies to slow the rapid shift in exchange rates. Couple this with the speculation of rate cuts from the BOJ and the FOMC, we may see at least a temporary end to the rapid decline of risk and a move into a breathing period.

If we are at the point of consolidation, I think the area between 1.25 and 1.30 (as highlighted on the chart) for EUR/USD will be the battle field between the bulls and bears. That’s what I look to play now. For the most part, I will be shorting around the top of the area as it coincides with the general trend and maybe lower sized positions long at the bottom of the area. If there is a breakout in either direction, I will readjust my trading plans then. For now, here’s what I’m going to do:

Short EUR/USD at 1.3000, stop at 1.3100, pt1 at 1.2900, pt2 at 1.2500

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

So, that’s what I think we may see, and I could be completely wrong, which is why I love money management – Learn it, live it, love it! Haha! Stay tuned!

  • PipWolf

    Hey Pipcrawler, I’ve been looking at this trade too. Question though: Why EUR/USD? I’m looking at several charts and they all look very similar, including our chum the Cable. From a technical perspective, they all look about the same, so what logic did you use for choosing EUR/USD? Is there something fundamental that I’m missing?

    Cheers mate!

  • Pipcrawler

    Hey Pipwolf…I don’t really have a specific reason other than I probably trade EUR/USD way more often than Cable. I feel more in tune with its behavior. Plus I think 1.3000 will be closely watched….

  • PipWolf

    Hmm, I do see what you mean about 1.3000 in terms of the psychology of traders. The equivalent level on Cable is 1.6438, which just isn’t as sexy. However, I feel more “in tune” with Cable than EUR/USD. Maybe I’ll play this on Cable and you trade EUR/USD, and we can compare notes later?

  • PipWolf

    Hey Pipcrawler, I’ve been looking at this trade too. Question though: Why EUR/USD? I’m looking at several charts and they all look very similar, including our chum the Cable. From a technical perspective, they all look about the same, so what logic did you use for choosing EUR/USD? Is there something fundamental that I’m missing?

    Cheers mate!

  • Pipcrawler

    Hey Pipwolf…I don’t really have a specific reason other than I probably trade EUR/USD way more often than Cable. I feel more in tune with its behavior. Plus I think 1.3000 will be closely watched….

  • PipWolf

    Hmm, I do see what you mean about 1.3000 in terms of the psychology of traders. The equivalent level on Cable is 1.6438, which just isn’t as sexy. However, I feel more “in tune” with Cable than EUR/USD. Maybe I’ll play this on Cable and you trade EUR/USD, and we can compare notes later?

  • dailyearner

    right,i have the same point as you!
    nice post,thx for sharing with us!

  • dailyearner

    have got 73 points
    look 1.3000

  • dailyearner

    right,i have the same point as you!
    nice post,thx for sharing with us!

  • dailyearner

    have got 73 points
    look 1.3000

  • PipWolf

    Okay, my parallel trade on Cable just got triggered. Short GBP/USD at 1.6450, stop at 1.6550, pt1 at 1.6350 and pt2 at 1.6050. If pt1 is hit I will adjust my stop on the other half to a 100 pip trailing stop. Good luck on EUR/USD. Smoke me a kipper, I’ll be back for breakfast.

  • PipWolf

    Well, I thought it would take a little longer than this, but pt1 has already been hit less than two hours after the trade. Stop adjusted on the other half to a 100 pip trailing stop. I’ll stop spamming you all now. :D

  • PipWolf

    Okay, so I lied about the spamming. My trailing stop was triggered for a profit of +80 pips, so +180 pips overall from this trade. However, it looks like the pair is still consolidating around the 1.6450 mark, so I’ve gone ahead and set up the exact same trade all over again, except that this time I’m not going to use the trailing stop until the pair decides what it’s going to do. I’ll keep you posted.

  • PipWolf

    Okay, my parallel trade on Cable just got triggered. Short GBP/USD at 1.6450, stop at 1.6550, pt1 at 1.6350 and pt2 at 1.6050. If pt1 is hit I will adjust my stop on the other half to a 100 pip trailing stop. Good luck on EUR/USD. Smoke me a kipper, I’ll be back for breakfast.

  • PipWolf

    Well, I thought it would take a little longer than this, but pt1 has already been hit less than two hours after the trade. Stop adjusted on the other half to a 100 pip trailing stop. I’ll stop spamming you all now. :D

  • Pipcrawler

    Haha… maybe I should let you take over my blog PipWolf! I need a vacation!

  • PipWolf

    Okay, so I lied about the spamming. My trailing stop was triggered for a profit of +80 pips, so +180 pips overall from this trade. However, it looks like the pair is still consolidating around the 1.6450 mark, so I’ve gone ahead and set up the exact same trade all over again, except that this time I’m not going to use the trailing stop until the pair decides what it’s going to do. I’ll keep you posted.

  • Pipcrawler

    Haha… maybe I should let you take over my blog PipWolf! I need a vacation!

  • PipWolf

    Well, I got it wrong with that second trade – Cable shot up, triggered my trade and blew right on up through my stop. Oh well, I guess I’ll have to see where it consolidates, maybe around 1.6700.

  • PipWolf

    And I have no intention of taking over your blog, Pipcrawler. Unfortunately I have a PhD to finish and I definitely need a holiday too!

  • PipWolf

    Well, I got it wrong with that second trade – Cable shot up, triggered my trade and blew right on up through my stop. Oh well, I guess I’ll have to see where it consolidates, maybe around 1.6700.

  • PipWolf

    And I have no intention of taking over your blog, Pipcrawler. Unfortunately I have a PhD to finish and I definitely need a holiday too!

  • dailyearner

    have got 180 pips
    very good offer
    thx very much!

  • Helltopia

    I belive the trade is still valid if retaken.
    eurusd just broke through its supportlevel and theres probably quita a few traders looking to short this one yet again. So I’m giving it a second chance, wish me luck :)

  • dailyearner

    have got 180 pips
    very good offer
    thx very much!

  • Helltopia

    Happy days!
    Regained my loss and then some on this re-trade =)

  • Helltopia

    Happy days!
    Regained my loss and then some on this re-trade =)

  • Avion

    i entered in a trade at fibo level 61.8, it bounced right nicely off that level

  • Avion

    i entered in a trade at fibo level 61.8, it bounced right nicely off that level