Range Play on USD/CHF – Trade Closed

Trade Closed: 2012-02-17 12:00 ET

Good afternoon forex friends! It looks like USD/CHF bears couldn’t push the pair any lower in Friday’s trading session. With the weekend quickly approaching, I’ve closed down my position to avoid weekend risk. Check it!

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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While we saw decent volatility from the majors in Friday’s session, USD/CHF was pretty much dead in the water as it consolidated around the .9200 handle. With the weekend quickly approaching, I have decided to close down the position to avoid any weekend event gap risk. While a gap could possibly go your way, it’s also not the greatest feeling to wake up to the market opening up way past your stop against ya. Here’s how I did:

1st half position: +44 pips
2nd half position: +98 pips
Total: +71 pips (avg)/ +0.94% gain

In retrospect, I don’t really think there is anything I could have done differently on this one. It was a simple, straight-forward setup and I thought my trade management was pretty sound given how close I was to the weekend. A pretty good trade all-around and I’m happy with that.

That’s it for this week and I hope you all did just well or better! Thanks for checking out my blog and be sure to join me again by following me on Twitter and Facebook…have a great weekend!

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Trade Adjustment: 2012-02-16 17:50 ET

Good evening! After a few days of waiting, both of my short entry orders finally triggered on USD/CHF. And thanks to the ECB’s latest actions, it looks like risk aversion is off the table and the USD is selling off. With the weekend approaching, it’s time to make an adjustment.

PCDPOD20120213.adjustment.png

It was a steady climb for USD/CHF this week as the Greek bailout situation may turn ugly, but we got an announcement today from the ECB that it will be swapping 50B euro worth of Greek government bond holdings for new Greek bonds. Traders took this as a signal that a second bailout was in the cards, postponing an ugly default and spurring risk taking for the day. We saw capital flow broadly away from the safe haven of the US Dollar, causing the side effect of a USD/CHF drop off. To top it off, we got positive US data in the form of declining weekly Initial Claims (348k vs 364k) and a better-than-expected Philly Fed Manufacturing Index (10.2 vs. 9.0) to spark more risk taking.

So, it looks like I’m doing well with this trade idea, but with the weekend quickly approaching and stochastics indicating oversold conditions, I have decided to lock in profits. Here’s what I did.

Closed my second position (opened at .9290) at market (.9192). Adjusted stop on remaining position to its entry at .9230.

This adjustment locks in a 0.65% gain and creates a risk free trade. And I’ll most likely close out my position before the end of the week to avoid weekend risk, but I’ll hold on for now as the latest development should push sentiment in its current direction into the end of Friday.

Of course, if there is a new catalyst or shift in sentiment, I’ll be sure to adjust with it. Be sure to follow me on Twitter and Facebook to stay in tune. Good luck and good trading!

Trade Idea: 2012-02-13 20:00 ET

Good evening forex friends! For this week, I’m gonna keep it really simple once again by playing the USD/CHF range. With uncertainty in Europe still the name of the game, will we continue to see consolidation?

PCDPOD20120213.png

This is mostly a technical trade idea as I play the simple range on USD/CHF. The pair has been in a downtrend since the beginning of the year as traders look to sell Greenbacks on rhetoric from the FOMC that the outlook remains weak, rates will remain low and that we may see potential further quantitative easing.

But for the past couple of weeks, we’ve seen the majors having trouble breaking out of a range as uncertainty of the Greek debt situation continues to keep traders from jumping in and picking a direction. Even with the recent Greek Parliament approval of the austerity measures, Eurozone finance ministers still need to iron out the rescue package. For now, I imagine this consolidation will continue for at least the rest of this week, which is why I’m gonna stick to playing the range levels.

On the 60 minute chart above, I’m targeting the top of the range, and previous week high, as my entry area. My stop will be one third of the weekly ATR and I’ll target the bottom of the range for a swing trade. Here’s what I’m going to do:

Short half position USD/CHF at .9230, stop at .9335, pt at .9100

Short half position USD/CHF at .9290, stop at .9335, pt at .9100

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

This trade structure gives me a potential 2.13:1 return-on-risk, and if the trade does work out my way, I may hold on longer and possibly scale into it further, giving me a higher potential return-on-risk.

As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!