Pick of the Day: EUR/USD – Trade Closed

Trade Closed: 2009-09-23 10:20

Good morning! The EURUSD continues to defy gravity as US Dollar weakness has been, and continues to be, the driver for financial markets in the past week or so.

PoD Chart

Stopped out at 1.4825

Total: -240 pips/ -1.0% loss

So, my technical signals of a possible reversal didn’t pan out this time, or maybe because of the weekly time frame, my stops were a bit too tight. Or maybe this insane rally in risk will continue regardless of fundamentals. Either way, thank goodness for risk management because a small 1.0% loss is a setback that can be easily overcome. Thanks for checking out my blog and stay tuned!

Trade Idea: 2009-09-13 19:25

PoD Chart

Good morning and welcome to another wonderful week of trading! My trade idea for today is more of a “pick of the quarter” as it is a longer term technical trade based on the weekly charts.

There’s a lot going on the weekly EURUSD chart – some clear and not so clear signs of a potential reversal move. First, the pair is testing resistance at the 61% Fibonacci area, and this also happens to be a previously tested resistance area back in December 2008 we quickly saw sellers push the pair back lower. Stochastics are still indicating overbought conditions, suggesting the rally could be running out of steam. Will previous resistance hold again? Are there still US Dollar sellers in the market?

A “not so clear” sign is that it appears there is a rising wedge pattern forming on the chart. This tends to be a signal that the pair may be poised for a move lower, especially with a break of the bottom rising trendline.

Fundamentally, if you pay attention to mainstream media, there are signs of recovery everywhere which has sparked a significant rally in risk from the March bottom. But are we really in a recovery?

Well, in my opinion we are still in a recession. Unemployment is still high, (and probably still rising), housing is still in the dumps with rising foreclosures and a new wave of mortgage resets coming in 2010 – 2011, and it’s tough to get credit so consumers are spending less. How can this be good? How can economies grow when people are losing jobs or are afraid they are going to lose their jobs? Apparently, there is something I am missing, and until I figure that out I still think we are in a recession that is artificially being slowed down from a lot of government stimulus. I am bearish on risk until the someone figures out how to replace the almost 7 million jobs lost and find jobs for those coming to the job market fresh out of college and high school.

So, I have decided to short EURUSD at the market, my stop is a very wide 240 pips (two times the average daily range of 120 pips) to weather volatility, and my target is 1.4000. Here’s what I am doing:

Short EURUSD at market (1.4585), stop at 1.4825, pt1 at 1.4365, pt2 at 1.4000

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

Again, this is probably a longer term trade where if my trade is triggered and goes my way, I may hold it beyond my second profit target and trail my stop along the way. This week may be action packed as we see the usual economic releases during this time of the month, most notably retail sales, inflation, and housing data from various major economies. Be safe, good luck and good trading!

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  • Piponacci

    Shorted this on a 7day fade. 1.4577 S/L 1.4640 T/P 1.4525. 52 Pips. I’ll take it.

  • jz166

    for this kind of trade setup, basically I have no respect.
    240 pips stop? LOL

  • Piponacci

    Shorted this on a 7day fade. 1.4577 S/L 1.4640 T/P 1.4525. 52 Pips. I’ll take it.

  • reko888

    use a smaller position size and it doesn’t matter where your stops are as long as you don’t risk more than 1-2% of your account.

  • jz166

    for this kind of trade setup, basically I have no respect.
    240 pips stop? LOL

  • reko888

    use a smaller position size and it doesn’t matter where your stops are as long as you don’t risk more than 1-2% of your account.

  • Pipster4lyphe

    Ditto reko888.

  • Pipcrawler

    Thanks for the comments everyone and for checking out my blog!

    To add to reko888′s comment, it does not matter how wide your stops are if you adjust your position size to stay within your predetermined risk parameters. I set my stops to the market environment, either current levels of volatility or support and resistance levels.

    Since my analysis is based on a higher time frame (weekly), my stop is going to be much wider than if I were to do a day trade based on the 15 min or 1 hour chart. Of course, I have to reduce my position size, and if I am wrong and lose, then I don’t lose any more than if I were to do a day trade with a 50 pip stop.

    240 pips is a wide stop, but this is a longer term position trade and I am targeting 500 pips and beyond if the trade goes my way.

  • Pipster4lyphe

    Ditto reko888.

  • pipsprof.

    pipcrawler,I think it is better to follow what the market is giving us rather than what we think is right!!!presently we are in an uptrend which is heavily due for correction,but the correction might not be able to get down to that 1.4000 level b4 the Eur finds friends to push it back to new highs.Personally am selling from 1.4600 and looking for profit at 1.4460 and my stop at 1.4740.I plan to be a friend of the uptrend from 1.4450 by buying right back.Ur analysis is spot on but the big institution traders seems to think otherwise by always buying the eur.Am in with you till 1.4460 level where we will hopefully part ways and I go northwards by reversing my trade.Thanks for your great analysis,i always look forward to reading them.Hope we all win!!!!!!!!!!

  • Pipcrawler

    Thanks for the comments everyone and for checking out my blog!

    To add to reko888′s comment, it does not matter how wide your stops are if you adjust your position size to stay within your predetermined risk parameters. I set my stops to the market environment, either current levels of volatility or support and resistance levels.

    Since my analysis is based on a higher time frame (weekly), my stop is going to be much wider than if I were to do a day trade based on the 15 min or 1 hour chart. Of course, I have to reduce my position size, and if I am wrong and lose, then I don’t lose any more than if I were to do a day trade with a 50 pip stop.

    240 pips is a wide stop, but this is a longer term position trade and I am targeting 500 pips and beyond if the trade goes my way.

  • pipsprof.

    pipcrawler,I think it is better to follow what the market is giving us rather than what we think is right!!!presently we are in an uptrend which is heavily due for correction,but the correction might not be able to get down to that 1.4000 level b4 the Eur finds friends to push it back to new highs.Personally am selling from 1.4600 and looking for profit at 1.4460 and my stop at 1.4740.I plan to be a friend of the uptrend from 1.4450 by buying right back.Ur analysis is spot on but the big institution traders seems to think otherwise by always buying the eur.Am in with you till 1.4460 level where we will hopefully part ways and I go northwards by reversing my trade.Thanks for your great analysis,i always look forward to reading them.Hope we all win!!!!!!!!!!

  • Babysteps

    Hello pip
    Thanks for reply my previous post on Gbp/usd blog ,I thought u will not answer it:-)
    I was short @1.46 and add another short 1.4660
    I don’t like this keep going up move!!Any way depends on my analysis with us index it’s at important point suppose it reverse point 76.45 let’s see
    good luck all

  • pipsprof.

    Pls Babysteps, which broker”s platform did u get the U.S dollar index?

  • Babysteps

    Hello pip
    Thanks for reply my previous post on Gbp/usd blog ,I thought u will not answer it:-)
    I was short @1.46 and add another short 1.4660
    I don’t like this keep going up move!!Any way depends on my analysis with us index it’s at important point suppose it reverse point 76.45 let’s see
    good luck all

  • pipsprof.

    Pls Babysteps, which broker”s platform did u get the U.S dollar index?

  • gilmazthe

    Hi there, I would like to know which stoch and RSI parameters you use ???
    ( Stoch (5,3,3) RSı (14) )- I want to compare them with mine, cause I do not have the same chart as yours shown above!!!!

    Thanks for your respond and good luck at your transactions…

  • gilmazthe

    Hi there, I would like to know which stoch and RSI parameters you use ???
    ( Stoch (5,3,3) RSı (14) )- I want to compare them with mine, cause I do not have the same chart as yours shown above!!!!

    Thanks for your respond and good luck at your transactions…

  • shjalilian68

    Hello, hopefully you win but move your stop loss to 1.4855, just 25 pip above the upward channel.
    Good luck

  • shjalilian68

    Hello, hopefully you win but move your stop loss to 1.4855, just 25 pip above the upward channel.
    Good luck

  • Babysteps

    have 3 position 1.46 – 1.4660 – 1.4720
    Still have faith :-) My SL as pip says also@1.4825
    US index hit my weekly TL and go up a littel but didn’t break it 76 :-)
    The only thing make me worry e/gbp breakout to 0.9050!!
    Any update pip?
    pipsprof You can get us index at global-view.com
    Thanks

  • Babysteps

    have 3 position 1.46 – 1.4660 – 1.4720
    Still have faith :-) My SL as pip says also@1.4825
    US index hit my weekly TL and go up a littel but didn’t break it 76 :-)
    The only thing make me worry e/gbp breakout to 0.9050!!
    Any update pip?
    pipsprof You can get us index at global-view.com
    Thanks

  • pipsprof.

    Thanks babysteps,I got it.Pipcrawler,this trade has been very bad,I lost 100pips already and out.Better for me to wait for a pullback so that I will buy so as to be a friend of the trend.Counter trend trading is always very risky as the big traders always follow the main trend.I hope you all win, i will be waitng for your trades to hit Profit b4 I buy hopefully nextweek.NO moire selling the EUR 4 me, eurgbp is making new highs and the threat of more quantitative easing from UK is still there to help the eur against the gbp,and the dollar index is making new lows.Am out now!!!!!!!!!!!

  • pipsprof.

    Thanks babysteps,I got it.Pipcrawler,this trade has been very bad,I lost 100pips already and out.Better for me to wait for a pullback so that I will buy so as to be a friend of the trend.Counter trend trading is always very risky as the big traders always follow the main trend.I hope you all win, i will be waitng for your trades to hit Profit b4 I buy hopefully nextweek.NO moire selling the EUR 4 me, eurgbp is making new highs and the threat of more quantitative easing from UK is still there to help the eur against the gbp,and the dollar index is making new lows.Am out now!!!!!!!!!!!

  • Babysteps

    Too bad pipsprof you shouldn’t close it if u have faith till hit tp or sl.
    In 1h chart bears in control now 1.4610
    Us index hit Botton of TL “76″ and now going UP
    Go baby…

  • Babysteps

    Too bad pipsprof you shouldn’t close it if u have faith till hit tp or sl.
    In 1h chart bears in control now 1.4610
    Us index hit Botton of TL “76″ and now going UP
    Go baby…

  • clipmax

    I think shorting EUR now is as hitting against rock. I’m long since 1.47, tp1 1.50, tp2 1.60 and beyond

  • Babysteps

    This suppose to be very good set up BUT…grrrrrrrrrr
    does usa only care about exports and downJ!!!
    Pip why that? I suppose we do everything and was not gamble!
    price reach 1.4820 hope not hit our sl.

  • clipmax

    I think shorting EUR now is as hitting against rock. I’m long since 1.47, tp1 1.50, tp2 1.60 and beyond

  • Babysteps

    This suppose to be very good set up BUT…grrrrrrrrrr
    does usa only care about exports and downJ!!!
    Pip why that? I suppose we do everything and was not gamble!
    price reach 1.4820 hope not hit our sl.

  • pipsprof.

    Hello,everyone,I told u this trade was no good holding on,babystep,the trade can give someone a heartache.ThankGod I got out since.Its no use hoping and praying for it to turn around.It is heading for 1.5000

  • Babysteps

    Us index still didn’t break 76,I took this trade because my set up goes with pip set up and still have faith till hit my sl or tp.But not understand why keep going up move!

  • pipsprof.

    Hello,everyone,I told u this trade was no good holding on,babystep,the trade can give someone a heartache.ThankGod I got out since.Its no use hoping and praying for it to turn around.It is heading for 1.5000

  • Babysteps

    Us index still didn’t break 76,I took this trade because my set up goes with pip set up and still have faith till hit my sl or tp.But not understand why keep going up move!

  • Pipcrawler

    Thanks for the comments everyone! Babysteps, market influences are always shifting, and right now everyone is focusing on US Dollar weakness. The public is now starting to pay attention to the ballooning deficit in the US and talks of a new reserve currency. In my opinion, this is the only reason we see a rally in commodities, equities, and every other currency trading against the USD, regardless of the terrible fundamentals. It’s a tough balancing act of going with what you know and what the market does, but we’re traders and that’s what we do… that and manage risk!

  • Pipcrawler

    Thanks for the comments everyone! Babysteps, market influences are always shifting, and right now everyone is focusing on US Dollar weakness. The public is now starting to pay attention to the ballooning deficit in the US and talks of a new reserve currency. In my opinion, this is the only reason we see a rally in commodities, equities, and every other currency trading against the USD, regardless of the terrible fundamentals. It’s a tough balancing act of going with what you know and what the market does, but we’re traders and that’s what we do… that and manage risk!