Long AUD/USD: Time to Try Again! – Trailing Stop Hit

Trade Closed: 2011-05-03 11:42

Aaaand my losing streak comes to an end! Phew. While this “win” wasn’t as big as I hoped, I’m so happy that my trailing stop saved the day again.

It looks like 1.1000 is the ceiling for AUD/USD and the pair can’t raise the roof no more! It tested that major psychological level twice before falling back near my entry area. Good thing my 90-pip trailing stop was already a few notches above breakeven, which was why I was able to narrowly dodge another loss.

AUD/USD 1-Hour Chart

Unfortunately (or is it fortunately?) my second entry order around 1.0880 didn’t get filled, probably because of the spread (again!). Because of that, I was only able to risk 0.5% of my account. And since I bagged only 5 pips on this trade, my profits won’t even be enough to pay for gas! Argh!

How could I have played this trade better?

First, I probably shouldn’t have been so ambitious by aiming for 1.1200 as my profit target. I know, I know, it looks so far away, but I really couldn’t find a reason for the Aussie uptrend to end. As I observed from past price action, AUD/USD usually tests a major psychological level first, pulls back, then breaks above that resistance on the second try. Well, this wasn’t the case this time around.

I could’ve closed my trade early when I saw that the price had a tough time breaching the 1.1000 mark. At that time, the RBA announced that they’ll be keeping rates on hold, but they did keep their hawkish stance. Prior to that, the U.S. dollar was flexing its muscles after the U.S. government successfully killed Al Qaeda leader Osama bin Laden.

For now, I have yet to determine whether these events resulted to a temporary pullback or if this is already the start of a reversal. After all, the RBA still has much better prospects of hiking rates compared to the U.S. Fed. From what I’ve learned in the School of Pipsology, rate expectations are one of the major driving forces of price action.

Who knows? This could be my chance to buy AUD/USD at an even cheaper price. Based from the feedback I got from Facebook, Twitter, and the comment box below, some of y’all are thinking of going long around the 1.0800 area. Maybe I should hop in with you guys…

‘Til my next trade idea! Toodles!

Happy 😀

Trade Idea: 2011-04-28 7:47

Good day, forex folks! I’m back again with another long AUD/USD trade. I may have taken a tiny hit from last week’s trade but I’m ready to give this pair another shot. After all, wasn’t it the 90’s R&B phenom Aaliyah who sang that “If at first you don’t succeed, dust yourself off and try again”? It’s been almost a decade since she passed yet her music still lives on…

Anyway, take a look at the 1-hour chart of AUD/USD to see where I entered and where I plan to add to my position:

AUD/USD 1-Hour Chart

As you can see, I missed the retracement to 1.0785 (38.2% Fib) yesterday but I’m still planning to ride this northbound AUD/USD train all the way up. I decided to hop in when the pair broke above the 1.0900 major psychological handle because my gut feel told me to just go for it. I was able to go long at market at 1.0920 with 0.5% risk.

Of course, since I plan to risk a full 1% of my account on this trade, I will be adding to my position if the pair pulls back to my designated “shopping area” on the chart. Stochastic is overbought, which means that Aussie bulls might need to take a break later on. If they do, I’ll be waiting to buy probably at the 38.2% Fib because it’s in line with the previous day high.

I have good reason to believe that this Aussie uptrend will continue because Australia just printed a couple of strong inflation figures recently. Both their PPI and CPI came in better than expected, printing a 1.2% increase and a 1.6% rise respectively. This puts more pressure on the RBA to hike rates and, as we all learned from the Interest Rates 101 lesson in the School of Pipsology, rate expectations play a huge role in driving price action.

On top of that, my favorite bling-bling just hit the $1530/ounce level, which is a new record high! You see, the Fed just announced that they’ll be keeping their benchmark rate “exceptionally low for an extended period” of time. This spooked market participants into thinking that, unlike the Harry Potter movie franchise set to release its final installment in July, rising inflation would be around for a very long time.

Now, gold is considered a hedge against inflation and the Aussie is positively correlated to gold prices. Putting two and two together, long AUD/USD seems to be the best deal in town!

Before I get too excited about this trade, let me share with you what I plan to do:

Long AUD/USD at market (1.0920), initial 90-pip trailing stop set at 1.0830. I risked 0.5% on this position.

Long AUD/USD at 1.0880, initial 50-pip trailing stop set at 1.0830. I’ll be risking another 0.5% on this position.

I decided to set my initial stop for both positions at 1.0830, just below the day open price and the broken top weekly ATR resistance. It’s also located 20 pips below the 1.0850 minor psychological level, which could provide a bit of support for the pair in case it falls back down.

Based on the comments on my Facebook page, I see some of you already caught some pips off your long AUD trades. Don’t leave me behind! You can also share your thoughts on my Aussie trade, gold prices, or just about anything under the sun through my Twitter account.

Happy trading, everyone!

  • foricks

    Hey, Doll, I liked what you said about “no reason for a reversal on the pair just yet”, but it is a little late in the week for me to jump back in. There tends to be some profit taking from the land down-under on Thurday nights. I enjoyed a tasty 106 pips on 3 trades this week, so will sit on my hands until next week. Thanks for the insight and good luck.

    • happypip

      Yikes, I did notice that the rally tends to simmer down before the end of the week. But I’m hoping to hold on to this long trade much longer and possibly add at a better price. Congratulations on your big wins with this one though!

      RBA statement is due next week, could be our chance to catch more pips with AUD/USD. See ya then!

      • Flushpunter

        buy or sell

        • happypip

          Hey Flushpunter!

          I’m still bullish on the Aussie because I think that there’s really no major catalyst for the strong trend to end anytime soon. How about you? Are you in any Aussie (or dollar) trade right now? 🙂

      • foricks

        Nicely played, nicely played…we’ll have to see what the RBA statement does (as well as the Chinese rates which could be negative for the AUD if they increase as expected). Cheerio, govnah (LOL)

        • happypip

          Bah, it looks like the RBA statement and the death of bin Laden were both negative for this pair. It’s at the 1.0800 area now, could this be the retracement you were waiting for?

  • foricks

    A successful trade! As a pilot once told me, any landing you walk away from is a good one…preserving dollars is better than losing them any day.
    As for the next big thing. I am sitting on my hands as the AUD approaches 1.0780 (had that number jotted down last week as a fib retracement from somewhere…) While this looks like a good jumping in point on the upward channel on the 4hr, I think we need to see two things to confirm the reversal up: Where will silver stop – 40.25 is a strong support line on my chart; and second, Is China going to raise it’s rates in the next 10 or so days. Either one of these would lead to a correction down IMHO, so I’m standing by to see if this one flips or flies.

    • happypip

      Why, thank you foricks! I’m loving your quotes too, haha. That 1.0780 area does look like a potential bounce off point, based on the trend line I drew on my 4h AUD/USD chart. Let’s wait and see if it “flips or flies” liek you said. As always, thanks for the feedback, mate! Really appreciate it! 🙂