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Trade Closed: 2010-08-27 1:11 pm ET

PoD Chart

And the choppiness continues! There was no follow through to the downside after a nice break of the falling triangle and major support area.

Soon after my trade idea, the pair did fall back to test near the week lows, but that was about as far as it went before buyers jumped in on Thursday. The market broke above the major price level of 1.55 and above the falling trendline that now serves as resistance-turned-support area. This invalidated the technical setup and my trade was closed automatically at 1.5560.

Total: -70 pips/-1.0% loss

This is a good technical setup that I would take over and over again, but unfortunately, we do get quite a bit of choppiness during the summer.

With one week left to go before traders come back from vacation after Labor Day weekend, I think I’ll take time off to relax, review my trades, and get my head back in the game before a potentially action packed Fall season of trading.

Until then, thanks for checking out my blog, have a great weekend and I’ll see you in September! GBPUSD Forums
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Trade Idea: 2010-08-24 12:23 pm ET

PoD Chart

Good afternoon Forex friends! While I missed the initial break of the descending triangle, today’s pull back to the major support-turned-resistance level may be a new opportunity to jump in the downtrend? Who’s with me?

It’s a simple technical setup as we see a descending triangle broken during the morning Asia trading session and finding a bottom at the beginning of the European trading session. The market rallied strongly after weaker than expected existing US home sales (3.83M vs. 4.65M forecast), which I assume is typical “buy the rumor, sell the news” market behavior along with a lack of confidence in the US assets.

Now that the market has rallied back up to the major psychological area around 1.55, will sellers jump in? Of course, who really ever knows?! But the probability is that traders see the major psych level (1.55) and the Fibonacci retracement as another opportunity to jump into the down trend as risk aversion is growing with every back piece of economic data we’ve been getting.

Now, since we can’t ever pick tops and bottoms, I have decided to break up my short entries between here at the 38% Fib and the 61% Fib. My stop will be the 76% Fib level and I will ultimately target the major support level at 1.5200 again.

Short half position at market (1.5460), stop at 1.5560, pt at 1.5200

Short half position at 1.5520, stop at 1.5560, pt1 at 1.5200

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

If both positions are triggered and I hold to 1.52, then this presents a more than 4:1 reward-to-risk trade. Even if I only have my half position opened at 1.5460 and hold to 1.5200, it presents almost a 2:1 reward-to-risk ratio, with less that 1% of my account at risk. I like those odds. Of course, I will make adjustments depending on price action or shifts in fundamental sentiment.

Stay tuned, thanks for checking out my blog, and be sure to check out our awesome Forex calendar for upcoming risk events. Good luck!

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