While all the technical signals lined up nicely, fundamentals had other plans for me.
The ECB downgraded its growth forecast for 2013, slashing it from 1.0% to just 0.6%. The central bank then followed that up by adding salt to the wound and highlighting some potential downside risks.
Naturally, this sent the euro lower as investors are slowly losing confidence that the ECB will do whatever it takes to support the eurozone and the euro.
As for my trade, EUR/GBP broke below the rising support trend line and bottom WATR, hitting my stop loss at .7865.
Stopped out at .7865: -30 pips / -0.50%.
Despite the loss, I have no regrets about this trade. I did state that it was a technical setup and followed my trade plan to a T. Also, I scaled down my risk so it didn’t hurt my account too much. The only thing I can do now is to learn from this trade and move on!
Speaking of lessons, a couple of you pointed out that I missed the lower high on the 4-hour time frame and that you drew your trend line differently. Thanks for sharing your thoughts, guys. I really appreciate it!
This is one of the main purposes of this blog – it serves as an avenue for all of us to share our thoughts and constructive criticism so that we can all become better traders!
Hope you all had good trading and have a better weekend! See you next week, playas!
Trade Idea: 2012-08-09 02:00
I’ll be honest with y’all. This is a technical play more than anything. I mean, come on, this trade has a checklist of reasons to go long! Have a look:
- Rising channel? Check!
- Spinning tops? Check!
- Support at the 50% Fibonacci retracement level? Check!
- Bullish divergence and oversold Stochastic? Chickity check!
Now, I know that the euro came under a bit of selling pressure yesterday on renewed concerns about the debt crisis, and I’m fully aware that the pound has been rallying as of late… but with a technical setup like this staring me in the face, I just couldn’t resist buying this pair at the market!
Hear me out, fellas. I think the potential rewards that this trade could give me are worth the risk! The way I see it, I only need to place my stop below the rising trend line and the bottom WATR, while the upside potential for this trade seems very high!If support at the trend line holds, I think it’s likely that the pair will retest the previous high. It’s also possible that the pair will rise to new heights and touch .8000.
Here’s how I set this baby up:
Bought EUR/GBP at market (.7895), stop loss at .7865, first profit target at .7950, second profit target at .8000.
Basically, I’ll be looking to exit at the previous high and at the top of the rising channel. I’m putting just 0.50% of my account on the line since I understand that there is quite a bit of risk involved here.
If all goes well and both of my profit targets get hit, I should be able to bag an average of 80 pips, which translates to a return on risk of about 2.67:1 given my stop of 30 pips.
Now, don’t y’all think that’s worth the risk?
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