Waiting for a Pullback in USD/CHF – Trade Closed

Trade Closed: 2011-10-20 16:20 ET

It would be an understatement if I said today was just one of those wacky days in the markets–it was nuts! Despite a constant stream of rumors, news and data releases, USD/CHF played out as I hoped. Check out how I closed today’s session.

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

PCDPOD20111020.review.png

It wasn’t a huge volatility day, but the US session certainly had its twists and turns as we saw more protesting in Greece against austerity, surprising US data (initial claims and existing home sales weaker, Philly Fed very strong) spark some movement. What had traders mixed up all day was mixed rumors of whether or not this weekend’s summit would be postponed. It was back and forth, but we eventually got a final decision that it would be postponed until Wednesday.

In all of this madness, we can see on the chart above that USD/CHF did pull back enough to hit my short orders at .9000. It looks like sellers jumped back on strongly at the close of the European session and pushed the pair back down to the session lows around .8940. With the US session closing, and seeing strong support with stochastics showing oversold, I decided to close manually at .8935.

Total: +65 pips/ +0.50% gain

So, today’s traded ended well but what could I have done better? Upon reflection, I think I did everything correctly from planning, risk, and execution. My adjustment of taking profits early was sound because it was just a day trade and the pair was finding strong support. I think that profit target may have been too ambitious for a day trade anyways.

Overall, it was nice and easy textbook trade and great way to end the day. That’s it for me today, but as always, I’ll be on the look out for new setups. Be sure to follow me on Twitter and Facebook to catch my thoughts and ideas. Until then, thanks for checking out my blog, good luck and good trading!

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Trade Idea: 2011-10-20 8:20 ET

Good morning forex friends! I’ve got a new intraday idea on a pair I rarely touch on: USD/CHF! Got some good data from Swissy land and optimism on the euro bailout fund to jump in on a pullback very enticing. Check it!

PCDPOD20111020.png

As mentioned above, Switzerland released much better than previous ZEW survey expectations (-54.4 vs. -75.7), but it’s risk-on mode today as we’re starting to get improvements to the draft guidelines for the euro bailout fund. Now we’re seeing a broad based US Dollar sell off as traders move capital to higher-yielding assets, and while we still don’t know what the outcome of this weekend’s EU leader summit will be, I think this sentiment of “risk-on” will hold throughout the day.

Technically, on the 15min chart above we can see a rising trendline break on a very strong move that started at the beginning of the London trading session. I’m thinking the break is good-to-go based on the sentiment shifting news above, but I want to wait for a pullback before I jump in. The .9000 area has been a strong level of interest for the past week, and I think if it is retested I’ll short there. My stop will be one half of the daily ATR and I’ll target this week’s low. Here’s what I am going to do:

Short USD/CHF at .9000, stop at .9060, pt at .8880

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

This trade structure gives me a potential return-on-risk of 2:1; more if I scale into a winning position. Since this is a day trade, I’ll only be risking 0.50% of my account on this one.

We do have initial claims and existing home sales data coming from the US soon, so that should provide nice volatility to today’s session. As always, stay tuned for market thoughts, ideas, or adjustments to my trade by following me on Twitter and Facebook. Good luck and good trading!