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

Paper trade: Stopped out GBP/JPY @ 141.70 (-116.10 pips)

Just got back from a long weekend and found that my GBP/JPY long is stopped out for a loss of -$40.63. It looks like the resistance is holding up from the looks of Figure 1. This setup is toasted for now. GBP/JPY 140.00 – 143.00 is the range for the time being. However, I still think 141.70 is an important pivot. I’ll need to wait and see which way does it go though.

On the other hand, my EUR/JPY long is doing well and I’m still riding it. EUR/JPY broke through a previous resistance at 131.50 and shot through 132.00. I have moved my stop up to 131.50 to lock in some profit.

GBP/JPY, 3-hour

Paper trade: 50% long GBP/JPY in @ 142.861, stop 141.16

The strength in my EUR/JPY long gave me confidence in entering this GBP/JPY long trade. I entered on market at 142.861 last night with a 50% position size. The 141.00 support seems to be holding so far, see Fig. 1. Also the RSI have been way oversold (best in my basket of pairs) and it has now broken above the RSI 30 line (Fig. 1).

In the short term, GBP/JPY broke a resistance line at 142.60 when I entered this position. However, it has since retraced back below it to a support from the day before. So there’s no short-term confirmation yet.

Position size: 50%

Entry: 142.861, above short term resistance

Stop: 141.00, below congestion zone of last couple of days

Target: 144.00 and then 148.00

Reward / Risk = 514 / 186 = 2.76 < 3… I’m moving my stop tighter to 141.16, right at the bottom of the congestion range.

new R/R = 514 / 170 = 3

GBP/JPY

GBP/JPY, 3-hour

Paper trade: EUR/JPY long 100% @ 129.99, stop 128.80

I placed this EUR/JPY long order a couple of days ago. It just got triggered overnight in the Pacific market hours. See Figure 1 for my entry chart. Note the following reasons for long EUR/JPY:

1. Support trendline coincide with round number 130.00
2. RSI in oversold territory and moved up
3. EUR/JPY in a trading range with the MA’s oscillating since April

EUR/JPY was testing 131.00 when I placed this order and I didn’t think it would get triggered. I placed a full 100% position in this but 1/2 of my position has a trailing stop of 50 pips and it got run down within a few hours of entry. That 1/2 was out at 129.666 for a loss of 3.33 pips. I’m only left with a 1/2 position in this at the moment.

In hindsight, that trailing stop was too close as the 3-hour ATR is 25-30 pips.

Entry: 129.99, round number support

Stop: 128.80, see Figure 2, just below recent low and support line

Target: 134.00, see Figures 1 and 2. At the bottom range of a congestion zone.

Reward / Risk = 401 / 119 = 3.4 > 3.

EUR/JPY

EUR/JPY, 3-hour

Paper trade: USD/CHF 50% long @ 1.02747, trailing stop 1.0236

I’ve switched back to using the daily chart as noted earlier today to save myself some hassle. This is the first entry using the daily chart since the switch. But I actually placed this order before going to bed and then it was executed last night while I was sleeping.

USD is taking a beating these days and USD/CHF is testing a double bottom. I entered this trade based on Figure 1 for the following 4 reasons:

1. RSI is shaping up a positive divergence if we can hold this support.
2. RSI is as oversold as December 2008.
3. Entry price of 1.027 is at a previous congestion zone based on Figure 2.
4. USD/CHF took a very fast dive in the past 3 days, which usually prelude a retracement up.

However, the trend remains obviously downward. That’s why I’m entering with only a 50% as there’s no confirmation just yet. Once there’s confirmation, such as the RSI making a U bottom, I plan to add the other 50% position.

Entry: 1.02747, previous congestion zone, see Fig. 2

Stop: 1.0236

Target: 1.045

Reward / Risk = 175.3 / 38.7 = 4.5 > 3

USD/CHF daily

USD/CHF 3-hour