Paper trade: Long USD/CHF @ 1.009, out 1.0245 (+155 pips)

The U.S. dollar finally picked up some strength last Thursday and I loaded to ride the trend.  One of the earliest trade I made in this wave is going long on USD/CHF.  Figure 1 is taken today after a full week since the initial move in USD.  The vertical line marks the day when I entered this trade on Thursday 22nd late afternoon.  Here are my reasons for making the entry:

1. Parity level 1.0000 was a mere 30 pips away from the low the day before
2. Obvious positive divergence on the indicator, Fig. 1.
3. Breakout on the shorter 3-hour timeframe, Fig. 2.

I placed the order just above the resistance and beyond the short term channel.  The order was filled the next day in the morning on the 23rd.  In hindsight, I should have used a half position only and added to it once it broke the longer term descending resistance as shown in Fig. 2.  That’s because a short term break is a low probability move given that the downtrend was strong.  However, USD/CHF was testing parity, which is as strong a support as you can find for many reasons.

As you can see from Fig. 2, the entry was rather good overall (could have been better as discussed above).  However, I think the exit was also a disciplined move.  My original target was 1.026 as noted below.  It was just below that horizontal resistance at 1.0267 which I marked on Fig. 1.  Yet, there’s also the longer term trendline marked on both Fig. 1 and Fig. 2.

I had 4-5 positions open at the time and this was one of my strongest two (the other being CAD/JPY short), so I tried to add to my position once the pair broke that longer term trendline.  However, the line proved to be strong as USD/CHF retraced and took out my stop as shown in Fig. 2 (red dot, 2nd from right).  Nevertheless, the pair remained above 1.0200 and my core position was safe (I moved my stop up).

But not all was well.  USD/CHF eventually broke 1.025 but it didn’t go far.  It printed a couple more bars on the chart while I kept moving my stop closer and closer.  Also noting that the pair was short-term overbought, I moved my stop right up to below 1.025 at 1.0245 to lock in most of the profit.  That stop was eventually taken out and the pair took a dive as shown in Fig. 2.

Moving the stop up tight in a short-term overbought condition was a good choice.  I learned this from my recent trades when I left profits on the table.  So I got out against my hope for higher pips even when the talk of USD making a return to strength was ubiquitous.  I traded what I saw and not what I hoped for, and against the opinions of other people.  If only my entry was a bit more patient, this would have been one of my best executed trades.

Below are the data for my entries.

Position size: 100%

First Entry: 1.009

First Stop: 1.0030

First Target: 1.0260

Reward / Risk #1 = 170 / 60 = 2.8 < 3, but close enough.

Second Position Size: 25%

Second entry/stop: 1.0232/1.0220

I didn’t have a target in mind for this addition because it was only to add on the strength of the existing position.

USD/CHF

USD/CHF, 3-hour

Related posts:

1. EUR/USD +95 pips in 2 hours: An example of swing and day trade convergence
2. Paper trade: Stopped out AUD/JPY longs @ 81.3 (+7 pips) and 81.29 (-28 pips)
3. Paper trade: USD/CAD long 1.07426, stopped out 1.06999 (-42.7 pips)
4. Paper trade: USD/CHF entry 1.0320, stop 1.0300
5. Paper trade: Closed EUR/JPY @ 135.00 (+500.1 pips)