On Friday, my order got triggered when the pair finally broke out of the falling wedge formation. However, EUR/USD got rejected at its first test of the 1.3100 psychological handle and hit my trailing stop. Boo!
I’m pretty bummed out about it especially seeing that my trade could’ve hit my profit target at 1.3200 when the dollar became overbought and traders took profit on their dollar-longs.
Long EUR/USD at 1.3050 closed at 1.3058: +8 pips/0.001%
Lesson learned I guess. Next time, I’ll set wider trailing stops. After all, trailing stops are used to make sure that you stay in the trend for the longest possible time.
Trade Idea: 2012-3-15 00:18
Big Pippin spotted a nice potential reversal on the EUR/USD 1-hour chart. I thought it was a great idea so I decided to come up with a trade idea based off it!
As you can see, the EUR/USD 1-hour chart has formed a very clear (at least to me and Big Pippin) falling wedge. The falling wedge is a bullish pattern that begins wide at the top and gets smaller as the price moves lower. Sooner or later, the falling wedge will become too tight and will break either to the upside (likely) or to the downside (unlikely).
On top of that, a hammer candlestick has formed, which is a reversal candlestick pattern. I’m also concerned about the significant 1.3000 psychological level. It has served as a major support level in the past and could serve as one once again.But I won’t jump in and buy the pair just yet because if there’s one thing I’ve learned in forex is that trading against the trend is a pretty risk. I’ll wait for price to break out of its consolidation and close somewhere around 1.3050 before pulling the trigger.
If I enter, I’ll ultimately aim for 1.3200 but I could take my position off any time before that if the price shows signs of stalling. I’ll also set a 60-pip trailing stop just to be safe.
There are a couple of reports due later from the U.S. Individually, they wouldn’t normally cause a breakout. If taken together, however, then some strong moves could happen. The reports I’m talking about are the weekly unemployment claims, producer price index, TIC long-term purchases, and the Philly Fed manufacturing index.
Long EUR/USD at 1.3050, profit target at 1.3200, trailing stop of 60 pips. As usual, I will risk 1% of my account.
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