ECB Press Conference EUR/USD 09/06/2011
Thursday we had the ECB interest rate decision, and then the ECB Press Conference that follows at 8:30. As expected interest rates were left unchanged Thursday for the Euro zone, but then the press conference with Trichet that followed brought some interesting price action to say the least. Trichet is great at following ever negative statement with a positive one, and any positive statement with a negative comment. This is done in an effort to create price stability on the Euro while the speech is taking place.
Trichet has always used the words “strong vigilance” to signal a rate hike the following month, and this is exactly what was said on Thursday. In my 7 years of watching Trichet speeches, and trading them I have never seen the EUR/USD go down after he uses those words. Essentially the market hears those words and the price shoots up very similar to when they hike rates unexpected. This was the first time I have ever seen the EUR/USD move down after essentially they said rates will be raised next month.
In the forex market nothing is a “sure thing”, which is why an good forex trader plays probabilities. This is exactly what we did with this trade. As I mentioned before I have never seen the EUR/USD go down after the words “strong vigilance” are used, and therefore we went long upon hearing this. The market shot up as normal, however as quickly as it went up it fell. I got caught with my pants down on this one and we took a -55 pip loss on a half position. 90% of the time we use 20 pip stops, however this happened so quickly that it just plain got away from me. Fortunatly this day trade happened so fast that 40% or so of the room was not able to get, however we are still counting this one as a loss.
We have had a great start to the month and it was a shame to see freak price action take away some of that profit. These type of situations are what separate those who will make it in the forex market as a day trader from those who won’t. It would have been very easy after taking that loss to jump back in the market to try and “get back at it” but this would have simply lead to taking another big hit. As I said in the forex room yesterday….you have to keep your head down, don’t deviate from the forex trading strategy, and come back the next day with a clear head and trade smart. This is the way pro forex traders work through a loss and that is exactly what we did the following day. I will update today’s trade next!