My Trade of the Week (Ending 2009/10/23)
Friday, October 23rd, 2009I wasn’t supposed to be trading this week (I was supposed to be writing the software to do the trading for me), but this trade on the EURGBP came up and I couldn’t resist.
EURGBP, Daily (Click to Enlarge)
EURGBP, M30 (Click to Enlarge)
Looking at the EURGBP on the daily chart, it has been trending up the last two months. In the last two weeks, it has retraced significantly, breaking through the daily 20 SMA and EMAs (orange and yellow lines, respectively) and on 10-21, smacked against the daily 50 SMA and EMAs (purple and medium purple lines, respsectively). Looking at the EURGBP on the 30 minute chart:
At 1, three 30 minute candles actually managed to close below the 50 SMA, but price managed to rebound and close the day above the 50 MAs. This was the first test of support.
At 2, the candles retested the 50 SMA and then rebounded with a 10 SMA/EMA cross. This was the second test of support, a double bottom.
At 3, I placed four buy stop orders at 0.9051 at 13 PIPs (10 PIP buffer plus 3 PIP spread) above the signal candle. I set the stop loss below the low of the day (at least, at that time) and seeing that the previous day had tested 0.9000, I decided to place my stop losses just below that at 0.8999. I set my take profits at just below each of the two 20 MAs (0.9130 & 0.9180 depicted at 6 on the 30 minute chart), at the most recent swing high (0.9400) and at where I would watch for a reversal to complete a head and shoulders pattern (0.9300, depicted at 1 on the daily chart).
At 4, I watched with disappointment as price dropped immediately at the start of the Asian session and began consolidating right on the daily 50 SMA looking like it was ready to shoot downward. I went to bed thinking this trade was going to be a loser.
At 5, while I was asleep, price did shoot down to 0.9000, 1 PIP away from stopping out my trades for a big loss, but intead, the EURGBP skyrocketed in my favor. This was where the true double bottom was formed.
At 6, I woke up to find that two of my trades had already been closed out for a profit. Nice way to start the morning and end the week.
I can’t wait to see if the other two trades close at their take profits. Makes me wish I had put on one more order to see if I could let it ride.