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Trade Closed: 2009-09-23 10:20

Good morning! The EURUSD continues to defy gravity as US Dollar weakness has been, and continues to be, the driver for financial markets in the past week or so.

PoD Chart

Stopped out at 1.4825

Total: -240 pips/ -1.0% loss

So, my technical signals of a possible reversal didn’t pan out this time, or maybe because of the weekly time frame, my stops were a bit too tight. Or maybe this insane rally in risk will continue regardless of fundamentals. Either way, thank goodness for risk management because a small 1.0% loss is a setback that can be easily overcome. Thanks for checking out my blog and stay tuned!

Trade Idea: 2009-09-13 19:25

PoD Chart

Good morning and welcome to another wonderful week of trading! My trade idea for today is more of a “pick of the quarter” as it is a longer term technical trade based on the weekly charts.

There’s a lot going on the weekly EURUSD chart – some clear and not so clear signs of a potential reversal move. First, the pair is testing resistance at the 61% Fibonacci area, and this also happens to be a previously tested resistance area back in December 2008 we quickly saw sellers push the pair back lower. Stochastics are still indicating overbought conditions, suggesting the rally could be running out of steam. Will previous resistance hold again? Are there still US Dollar sellers in the market?

A “not so clear” sign is that it appears there is a rising wedge pattern forming on the chart. This tends to be a signal that the pair may be poised for a move lower, especially with a break of the bottom rising trendline.

Fundamentally, if you pay attention to mainstream media, there are signs of recovery everywhere which has sparked a significant rally in risk from the March bottom. But are we really in a recovery?

Well, in my opinion we are still in a recession. Unemployment is still high, (and probably still rising), housing is still in the dumps with rising foreclosures and a new wave of mortgage resets coming in 2010 – 2011, and it’s tough to get credit so consumers are spending less. How can this be good? How can economies grow when people are losing jobs or are afraid they are going to lose their jobs? Apparently, there is something I am missing, and until I figure that out I still think we are in a recession that is artificially being slowed down from a lot of government stimulus. I am bearish on risk until the someone figures out how to replace the almost 7 million jobs lost and find jobs for those coming to the job market fresh out of college and high school.

So, I have decided to short EURUSD at the market, my stop is a very wide 240 pips (two times the average daily range of 120 pips) to weather volatility, and my target is 1.4000. Here’s what I am doing:

Short EURUSD at market (1.4585), stop at 1.4825, pt1 at 1.4365, pt2 at 1.4000

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

Again, this is probably a longer term trade where if my trade is triggered and goes my way, I may hold it beyond my second profit target and trail my stop along the way. This week may be action packed as we see the usual economic releases during this time of the month, most notably retail sales, inflation, and housing data from various major economies. Be safe, good luck and good trading!

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