I executed 3 trades this week. Let’s take a look at them:
1) 8th March: Short GBP/USD at 1.5151
I took this trade a few hours before I went LIVE on CNBC. I just wasn’t convinced that the Sterling was going to continue edging up. I mentioned on CNBC that the Sterling wouldn’t touch 1.52 and it would fall all the way down to 1.50.
The best way to “put my money where my mouth is” was to take the trade! From the chart, you can see that the highest price on the candle was 1.5194. It dropped to 1.50 about 12 hours later; and has since broken 1.49.
From the chart, you can see that I actually tightened my stop along the way. Stop was initially at 1.5251 but I tightened it to 1.5048 to lock in a 100 pip profit.
Price went on to hit my target of 1.5000.
Result: 151 pips profit. Here’s the chart:
(Click to enlarge)
2) 8th March: Short GBP/JPY at 136.95
Support level at about 139.36 was broken on 25th Feb. After making a new low of 132.17 on 1st March, I waited for a retracement before going short again (since the momentum was down).
Went short at 136.95, and decided on a stop loss of 200 pips. I didn’t enter a profit target for this one; although I knew that my minimum risk/reward ratio had to be 1:1 for this trade. I exited at 134.90.
Result: 204 pips profit. Here’s the chart:
(Click to enlarge)
3) 11th March: Long EUR/CHF at 1.4605 (Trade in Progress)
My pending order for the EUR/CHF was triggered on Thursday evening. There was an immediate “spike” of about 25 pips once the price dipped below 1.46. I don’t think it was the SNB, but it does look juicy. Let’s see if the SNB steps in and jacks it up another 150-200 pips!
14 pips in the money so far. Here’s the chart:
(Click to enlarge)
EUR/CHF Trade Update on 15th March 2010
My stop loss of 1.4555 was hit at 4.45pm in the afternoon today (Singapore Time). Lost 50 pips. The chart is still moving downwards as I write this. It’ll be interesting to see at which point the SNB comes in to weaken the Swiss Franc again! Well, on to the next trade I say!
Here’s the chart:
Hi Mario, great trade sharing and I truly learn and appreciate your to the point explanation of the trades taken. Please explain the 200 pips Stop loss u input for GbpJpy, is it becoz this pair is so volatile and daily range is around 150-200 pips? Tks in advance.
Hi Mario, GBPUSD – you mentione you ‘wasn’t convinced that the Sterling was going to continue edging up… touch 1.52′ – what make you said that? Thanks, Peter
Hi Mario, sometime back you mentioned that, if I remember correctly, you will not trade in US$ nor will you do trading with a US broker. If so, which currency(ies) are you trading and do you use brokers from countries like UK? Your advise, please. Thanks, Peter
Hi Patricia!
Good analysis. When placing stops, it is imperative to consider the daily trading range of the currency. Every currency pair has a different trading range.
The trading range of GBP/JPY is a lot higher than for say, EUR/CHF.
A good indicator to determine the trading range and volatility of each pair is the Average True Range.
Another consideration for me placing the stop in this trade is this:
I am playing the DOWNTREND, hence, the stop is located near the previous support of 139.36.
The MOST IMPORTANT point is this: regardless of how FAR the stop appears to be, DO NOT RISK more than 2-3% of your capital per trade.
Hi Peter!
For starters, I am currently bearish on the Sterling for a few reasons:
1) General weakness in the economy
2) Soaring deficits
3) Stimulus spending
4) Lousy government (according to British local sentiment)
On the day of the trade, there was also going to be a strike in central London involving about 300,000 people.
Now, the “edging up” to 1.52 provided a fantastic opportunity to GO SHORT because the dominant trend is STILL DOWN (starting from the swing high of 1.5813 on 17th Feb).
In fact, if you draw a Fib retracement from this swing high to the swing low of 1.4785 on 1st March, my entry point coincides almost exactly with the 38.2% retracement.
Hi Peter,
With regards to your question on currencies and US brokers:
1) I still trade US currencies, it is still the dominant currency (base or counter) in most pairs worldwide. What I meant is that my LIVE account is in Euros and not US dollars.
2) I have a “long-term” view that the US dollar will depreciate heavily in value, hence it wouldn’t make sense for me to have my account in US dollars.
3) No doubt, the Euro is weak now, but if anything, I can take advantage of its “low exchange rate” and top up my account should I choose to do so.
4) I don’t use US brokers for 3 reasons:
– Most allow funding in ONLY US dollars
– They don’t allow hedging (a law passed by the NFA)
– They are currently lobbying to REDUCE the leverage in FX margin trading to 10:1. That would mean you need MORE money in your trading account to take a trade
In fact, because of all these restrictions, many US brokers are planning an “exodus” out of the country. The latest one, is FXDD.
The EUR/CHF went very much below 1.46 on Friday. What was the stop that you put. Based on the current trend, do still feel SNB will intervene in the short term or await for the monthly adjustment around month. Also what is your take on EUR/USD say by end March since it went above the physcological level of 1.374. Wht do you think is the next resistance and support levels for EUR/USD.
What’s your stop loss on your long Eur/Chf?
Hi John!
My stop for the EUR/CHF is at 1.4555, 50 pips from my entry. You can see it from the chart I posted. It’s currently 5 pips from my stop.
I won’t know for sure when the SNB intervenes. All we can do is to “watch for clues” when they issue monetary policy statements.
Hi John!
With regards to the EUR/USD, I’m currently not trading it. I would like to see the outcome of the meetings that Greece has with the finance ministers of the EU first.
The major trend is still down. It would be interesting to see if it breaks the psychological round number of 1.4000.
Hi HY,
My stop loss for the EUR/CHF trade is 1.4555.
Hi Mario!
Thks again for an insightful review!
I’m – in particular – ‘enlightened’ by your sharing that your LIVE account is not in USD$ but in EUROS!
1. Wld you recmd us to do e same?
2. What if this changes over time and USD$ strengthens – wldnt changing LIVE account be very problematic?
3. In situations like this – wld you ever encourage opening up 2 separate LIVE accounts?
Thks Mario!
Rdgs
Lionel
Hi Lionel!
1) I have a view that the US dollar will lose much ground in the long-term. Hence, I chose the Euro since I will be playing this game for a long time. If you concur with this view, then yes, I would recommend opening an account in Euros.
2) I guess the US dollar will strengthen at some point; BUT, in Forex, it’s always a play of “one currency over another.” I am for the view that while the Fed will increase rates at some point, and unemployment rates will decrease in time, other economies will fare BETTER than the US.
3) It would be too “troublesome” to open up 2 LIVE accounts. The only time I would recommend doing that is when you want to play different strategies (or currency pairs) for different time frames. E.g. you might want to place short-term trades on one account and long-term trades on another.
It is difficult to play BOTH in one account because typically, your margin is held “captive” by the broker when you play long-term, leaving less room to maneuver for short-term trades.
Hi Mario,
Thanks for your input on GBPUSD. Looking at the current chart (16th March), since yr last posting, it has gone DOWN to 1.4780 and then gone up to, like you said not higher than, 1.52 or so. I am right to say it is ranging between 1.478 and 1.521? Yr insight, please. Thanks, Peter (PS could not understand why there was a spike down yesterday… could not find any news – yr view, please.)
Hi Peter!
Yes, you are right. You can say that the chart is ranging between 1.4780 and 1.5200.
Regarding the “spike down” followed by the massive move upwards of about 260 pips:
1) Typical of a “short squeeze” (google the term to get the exact definition)
2) Due to a war of words between the European Commission and UK Treasury Secretary Liam Byrne. Click on the link to listen:
http://news.bbc.co.uk/today/hi/today/newsid_8569000/8569657.stm
Here’s an interesting fact on Bloomberg:
“Wagers on the pound weakening against the dollar outnumber futures that profit on a rise by EIGHT TIMES MORE than when George Soros made $1 billion betting against the currency in 1992.”
With all this news, your next question would be “How would I know which news FOR SURE affects the currency I’m playing?”
Answer: You DON’T.
“As a trader, your job is to react. Not predict.” – Mario Singh
Thanks for the reply Mario. I guess the Swiss has given up supporting itself against the demise of the Euro.
Hi HY!
Yup, the EUR/CHF sure has fallen a lot since the trade I took.
It came within 10 pips of its ALL-TIME-LOW (1.4307 in Oct 2008).
At its current price, it looks juicy for a BUY. Good trade to take – play with 2% risk. Nice upside if SNB steps in. If they don’t, then 2% risk is well affordable.
Hi Mario,
The EUR/CHF have set a new record for ALL-TIME-LOW. However, pretty doubt to go in as the movement is obviously down trend and there is seems no sign of intervention… Any advise on the entry as of now ?
Thanks.
Hi!
Yup! EUR/CHF is at an all time low now. It’s in a firm downtrend. Many traders would have added to the momentum once the all-time low price of 1.4307 (achieved in Oct 2008 after the Lehman collapse)was broken.
Mixed signals from the SNB. Check out this article:
http://www.ft.com/cms/s/0/e5a17a92-3663-11df-8151-00144feabdc0.html
Final Analysis: Don’t predict when the SNB will step in. It can be very painful if the markets are proving otherwise.
If they were serious about intervention, then Hildebrand (SNB chairman) would be more precise in his language.
Remember, in any intervention, the central bank WOULD SIGNAL their intention; primarily because they want to enlist the help of traders to push the price in the direction they want.
Hi Mario,
Thanks for the info. As you said, in the event of intervention, central bank would signal their intention. Then, how is the SIGNAL look like ?
Thanks.
The signal is almost always in their language when they communicate with the financial press.
“We are watching exchange rates closely.”
“Exchange rates must reflect the fundamentals of the currency.”
“SNB to sell Swiss Francs.”
These are all examples of their “coded” language.
Hi Mario,
So now, we just need to watch out for their statement from time to time, right ? Also, can I get the so-called 1st hand statements/press release from FT.com or SNB’s website or ForexFactory.com ?
Btw, I have a Buy position @1.4250 with SL 20pips currently. The position is still opened as of now. Hence, need your advise whether should I keep the position or closed the position (with some TP) and re-enter again when there is a signal from them.
Thanks.
Yup,
Those sites are good for you to see the SNB statements.
Here’s what I think on your open position:
1) EUR/CHF is in a downtrend, so going short is the best bet
2) SNB may NOT intervene, because some of their earlier statements include “1.4300 francs is fair value on the basis of simple purchasing-power parity”. Traders have been “waiting” for intervention for the last 800 pips
3) With your position, it’s still OK considering 20 pips; (check your lot size though). Just don’t risk more than 2-3% of your capital per trade.