Large Risk/Reward Setup Off Support EUR/USD 11/05/2011
Today was a fairly boring day during our NY trading session. We only took one trade and it took a few hours for it to come together. Everything had been pushing towards USD strength when we came into the forex room, and had been for the last 3 days. As the market came into yesterday’s low on the EUR/USD at the 1.4270 area we were looking for a potential long setup.
The basis for this trade was similar to the trade taken on the EUR/USD from the 2nd of May. Essentially there was a very high risk/reward scenario, in addition to the market being very over extended coming into major support. The EUR/USD since today’s London session was down over 150 pips with no retracement. Because of this the most likely place for it to bounce was the major low from yesterday. When the market touched this level we looked for it to slow down and start to bounce. This is exactly what we saw, and therefore we went long from 1.4282
Had the market slipped through this support and closed below it we would have not taken the trade or exited it. Normally we would have waited for the market to meet the criteria of one of our forex trading strategies, but in situations like this where the risk/reward is the main cause for the trade, we take the entry as close to the proven support or resistance as possible to therefore give us the highest risk/reward as possible.
This trade went about +30 pips in our direction before closing us at break even. Going into this trade I said it would be something we would hold until tomorrow’s NY session. If you look at the daily chart on the EUR/USD there were two great reversal candles prior to today. Essentially there was a confirmation entry to go long on the EUR/USD daily chart, and therefore I wanted to hold this one for a day or longer. However the market wanted to slide more than therefore we were closed out at break even on this trade. Hopefully we will see more day trading opportunities tomorrow, as today was rather dull. Patience is key during days like this. The good setups are there on almost a daily basis and waiting for them is the key! See you all tomorrow with the next update.