Playing the Trend Lower in USD/CHF – Trade Closed

Trade Closed: 2013-10-02 22:00 ET

Good evening! Early in today’s trading session, I decided to close my short USD/CHF position ahead of the ECB monetary policy press conference to avoid event risk. Here’s how it all played 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.

USD/CHF forex trade review

USD/CHF forex trade review

After entering at market, USD/CHF got a bounce off of the major psychological level of .9000. This was a pretty broad USD rally on positive US ISM Mfg PMI data. The pair came within a few pips of hitting my stop point at .9080 before sellers took control. After topping out on Tuesday, Wednesday brought on risk aversion flows thanks to weak Australian, European and UK economic data, and USD/CHF dipped abit lower to the .9050 area.

By the time we hit the US session, we got to the ADP Jobs report, which despite the increased focus on it because of the US Government shutting down the Bureau of Labor Statistics, we saw no major reaction on a weaker-than-expected number. I knew the ECB monetary policy press conference was coming up quick, and knowing the strong reaction it usually causes–as well as the strong correlation USD/CHF has to EUR/USD–I decided to close my trade to avoid event risk manually at .9053.

Total: -49 pips/ -0.16% loss

In retrospect, I probably should have waited for a retest of the broken support area before jumping in. I do have recency bias of missing too many winning trades in the past year by waiting for retracements, which is why I decided to go in at market. This time it just didn’t work out. In hindsight, it looks like I made the wrong call by avoiding the event risk, but think over the longer term, taking a trade off ahead of monetary policy events will be the better thing to practice.

That’s it for this evening as I’ll relax and rest for the next session. Stay tuned for new ideas and observations by following me on Twitter and Facebook!

Trade Idea: 2013-10-01 3:11 ET

Good morning! For my first trade this week, I’m playing a simple trending move in USD/CHF as the pair breaks below its previous week low.

USD/CHF 1 hr

USD/CHF 1 hr

This is about as simple as you can get: previous low break in a downtrending market. I like this trade because it matches well with the current market drivers, mainly the US government shut down. It looks like the market is pricing this as a US Dollar negative event, which means the Greenback could be sold off in this session because of the freshness of this news.

If the pair does break the MaPs level of .9000 and move lower, the next support area could be .8930, which held off sellers for about three days back in February 2012. My stop will be slightly above the recent consolidation area. Here’s what I am doing:

Sold USD/CHF quarter position at market (.9004), stop at .9080, profit target at .8930

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

I’m only risking 0.25% of my account on this one because this is a day trade, and with this trade structure, I have a potential reward-to-risk ratio of about 1:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • ichwan

    Loss your brave? too thigh sl

    • Pipcrawler

      Yeah, it was meant to be a day trade, that’s why my stop was only about 75 pips. I did lose my conviction to hold onto the trade because of the ECB press conference. I’ve been burn by that event too many times, so it is one of the few I just won’t gamble on.

  • Neil

    Thanks for your advice on trading. I’ve been following your recent ideas this last month and have made some sweet pips.

    I simply trade the opposite to what you recommend..

    • Pipcrawler

      Glad I can help! haha I don’t recommend anyone follow me and that they trade their own way. I’m just sharing what I am doing in hopes that I can impart good risk management practices.

      • jaldel9929

        Don’t need to apologyze, I follow you with this trade, but I dont close it till later and make some very nice pips.
        Thanks.

        • Pipcrawler

          Haha thanks jaldel9929! But I still don’t recommend anyone to follow me. We all should find our own way to trade. I’m glad to hear I can provide some decent guidance though… congrats on your pips!