Monday, October 14, 2013

Big Forex Trade #1

I actually have had a previous huge forex trade a while back. I pretty much caught the entire strong ride of the AUD/USD run up from it's low at just under 0.9 to around 0.93+. I pretty much entered and exited trades the whole time to lock in profits and continue going for the ride. At the end of the trade when I finally called it quits, I had made around 300 odd pips to finally end off with an amazing 140% ROI. I was patting myself on the back for days.

Now, I'm not going to say I'm a good CFD trader. In fact, I'm a horrible one. Other than that amazing trade, I've lost tons and tons and tons of trades when I first started. If I'm not wrong, I lost 24 of my first 26 trades until I finally hit the AUD/USD payload. The good thing was back then I kept my stops quite tight to prevent me from losing too much capital.

After that, I've got a lot more bold, and I made some horrible calls on indices especially, and I've been totally in a the red since the crazy US government shutdown.

However, I'm still in it to win it, plus this is all gambling money anyway. As much as it pains me to lose this money, at least it keeps me from messing around with my other money, so that's a plus, isn't it?

Well, now I'll be sharing with you my current trade that I'm already betting on. It is the GBP/USD, and I'm shorting it.

So, as of about Thursday last week, I entered into a short trade at around 1.593/4. Since then, the trade has been mostly moving against me, but it is respecting the 1.60 resistance, while also having a hard time breaking the 1.5927 support. My stop loss is above another layer of strong resistance and also a weak resistance, lying just above the main shoulder at 1.61.

Technically, the set-up is looking quite good on the day chart. The pair recently topped out on 1st Oct, and it seems to be on a decline since then.

RSI values on 18th September and 2nd October confirms that the Higher Highs have RSI Lower Highs, which translates into a bearish divergence. RSI is also below 50%, although it is pointing upwards.

MACD is red and above zero, meaning that it has room to continue downwards. Slow Stoch is also showing a downward bias, with the white line leading the red line.

Timeframes on the hourly and lower shows that is is ranging for the past 2-3 days within the 2 strong supports and resistance.

Fundamentally, this ranging is likely due to the markets waiting for a clearer picture coming out of the US. I personally don't really think that the US will default on it's debt. If it does, then I really wouldn't mind taking this small bet and losing, in exchange for watching the world burn. I am a very contrarian trader, I feel, haha.

Since then, the probability of the US default is very low, I will expect this pair to range until some strong information develops that pushes it over from one side to the other. In that case, we should be seeing the pair break down past the support and head pretty much for my 1st take profit zone.

The reentry plan for the 2nd target is simple. I will be taking ALL profits when it hits the first target. I will also be setting a limit sell entry for half the current amount, so that if it runs straight for the finish line, I'll be in it too. The stop loss will be the first reasonable area in case of a possible stall and start. In the event of a pullback, I will be entering short again, but this time at the peak of the pullback, following the same method aiming for the 2nd target.

Looking at how things are going and the scale of things, I doubt a resolution will be had anytime soon. From the arrows I drew on my graph, I'm only expecting to hit the first target at the end of this week, followed by the 2nd target at the end of the month - of course assuming that all goes well.

This is my first time sharing my current, on-going live trade, I hope I can have something to show for it!

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