Trade Closed: 2011-07-29 4:40 ET
Good morning FX friends! With the weekend quickly approaching and the first look at Q2 US GDP around the corner, I have decided to close out my trade. Let's see how EUR/USD moved this week.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
I'm not a big fan of holding trades into the weekend, and with the potential market mover that is the Advanced Q2 US GDP coming up, I think I'll take my profits and call it a weekend.
I closed my trade manually at 1.4270.
1st Half: +150 pips
2nd Half: +230 pips
Total: +1.08% gain
A nice 1:1 gain on risk and I don't feel too bad about closing. The unknown event risk of US data, the debt ceiling vote (if they ever have one) and the weekend makes me too uncomfortable. Plus, I can always jump back in if EUR/USD continues to move lower next week, right?
Trade Adjustment: 2011-07-27 23:25 ET
Good evening friends! Well, my short entry at 1.4500 was triggered and with the US budget deadlock now spurring risk aversion back into the Greenback, my trade is looking pretty good. The events and crisis are still fluid, so I have decided to adjust my position to create a risk free trade.
So, the worries continue that the euro sovereign debt crisis will spread, and if you mix that in with the debt crisis in the US, it seems we have a risk aversion move back into the US Dollar...go figure.
On the chart above, we can see that the market did rise to the projected resistance level. And after holding for a bit, sellers are back in control, pushing the pair lower to the rising trend line drawn. With the outcome of the debt debacles still creating uncertainty, I'm not going to assume that that area will hold or break. I'm leaning towards it breaking, but being a risk manager I want to adjust my trade to keep me in the game but protected.
Closed half position at market (1.4350), adjusting stop on remaining position to 1.4470.
If the market rises all the way up to my new stop level of 1.4470, I still walk away with a little over 0.50% profit. If it continues to go my way, I can add back on and go for a much, much bigger profit.
That's it for now, but as always stay tuned on my Twitter and Facebook pages for adjustments in this wild market. Good luck!
Trade Idea: 2011-07-25 06:45
Good morning Forex friends! I've spotted a technical setup that may present an opportunity to short the euro with the sentiment that the emergency rescue plan won't be enough. Will I get into the trade this time?
I've got the four hour chart up above and we can see a very simple technical setup on EUR/USD. Since bottoming out a couple of weeks ago around 1.3900, the pair has rallied higher on broad USD weakness as Washington has yet to put together a deal to raise the debt ceiling. Also, EU leaders have a agreed on the details for Greece's second bailout package, giving the euro a boost. Now the market is about to hit a potential resistance area, formed by the crossing of a declining trendline with the major psychological area 1.4500. Also, we have the PWH (1.4439) and the top of the weekly range at 1.4558 to potentially draw in sellers as well. So, I feel this would be a good area to buy USD against the euro, especially if US politicians can agree on a deal.
Given that no one wants the US to be hit with a credit rating downgrade or default, most think a deal will most likely be put together at the last possible minute. Until then, we may see EUR/USD grind higher, which is why I'll look to sell at a higher price. Given that we have major data on the forex calendar this week, most notably the US preliminary Q2 GDP report, I'll use a wide stop of 1/2 the weekly average true range. I'm going for a far away target in case I get favorable price action. Here's what I am going to do:
Short EUR/USD at 1.4500, stop at 1.4675, pt at 1.4000
Remember to never risk more than 1% of an account on any single trade. Adjust position sizes accordingly.
This trade structure gives me a potential 2.8:1 return-on-risk, much more if I decide to scale in if the trade goes my way.
As always, I'll stay flexible with whatever the market decides to do (because the market is ALWAYS right), so be sure to follow me on Twitter and Facebook for fast updates and adjustments. Good luck!
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