Thursday, October 31, 2013

Big FX Trade #2

All right, so back to the drawing board I went.

The picture here below is the current trade set-up that I have going on right now in the FX world.

So the pair is the USD/CHF. I've actually been in and out of this pair over the past few days because it does seem like it has bottomed out, so I was trying to go long with it, while capturing short daytime swings in it as well. So far, I've had mixed results.

Since everyone was just waiting for the FOMC announcement, trading the past few days and the last week has been quite erratic. Regardless of the Fed decision, I knew that it translate to either dollar strength, or dollar weakness.

I've decided to really simply and dumb down my trading style. I was hearing from DDTrader in the Live Analysis Room on how he knows some people who only trade based on slow stoch crossovers and have been reasonably profitable. Now, I was intrigued by the simplicity of the method he mentioned, so I went to fish around myself. I can't remember who was the interviewee in LAR, but the number that I got for the slow stoch was 10, 3, 3.

I set my slow stoch to those settings and I surfed around many pairs, and true enough, I do find this method a very simplistic, but reasonably reliable and accurate indicator. It can't follow huge trend movements, but it fares quite robustly on turnaround for less volatile pairs, especially on the daily timeframe, I felt.

Anyway, with this new-found knowledge, I decided to test it out. I identified the USD/CHF to be the most promising pair for dollar strength, and the USD/CAD for dollar weakness. Both pairs seem to be in a turnaround, with the Swissie already looking to correct upwards, while the Loonie looks like it was just about to make its major turnaround.

I pulled up both screens, set alerts on both pairs at pivot resistances and supports, and I just waited for the FOMC announcement. After the announcement took place, it wasn't long before the Swissie gave out alerts to go long, but I waited for a bit more confirmation before I entered into my positions. It did go against me almost the moment I entered in, but since then it has been pretty much positive.

You can see my entry points based on the small like blue triangle sort of things on the graph.

My current target is to hit back at the 50% retracement line off September highs and October lows, but I'll look out for clues based on the slow stoch. It might cue me to exit and take profits earlier, or to stay longer past the retracement level for more profits. I'll have to see how it goes.

I'll have an update for you guys once I exit my position. All the best out there in the market!

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