Thursday, 24 September 2015

Bullish EURUSD Trade

Another entry from my coursework.
Once again I am bullish on the EURUSD this morning, and have taken a  trade which is very high reward to risk, but somewhat bold. Essentially I am saying:
1. Last week saw a very wide range, from 1.1460 (high) to 1.1105 (low).
2. The pair has recovered from the low, and broken the 23.6% barrier
3. It will now reach the 38.2% barrier and even the 50% barrier.
4. There is also an upward trendline allowing for a tight stop
Here is the Fibonacci retracement on the H4 chart.

The price has slipped back below the 23.6%, for a better entry in my view, but the trend is still clear.
My long entry is at market, 1.11982. I have entered two contracts, one to target the 38.2% fib at 1.1240 and one to reach the 50% fib at 1.1280.
Where to put the stop. For this I took the M30 chart to see the upward trend clearly, as below


To rely solely on the red line holding would allow a very tight stop of 1.1180, which is where I would go with a day-trade. However, to add a little bit of safety, I decided to accommodate last nights Asian reversal (see yellow circle), and go under that low. It is only an extra 16 pips, and given my targets I can afford to be generous. I therefore set the stop at 1.1162.
So we have two trades:
Trade 1 : Entry 1.1198 Stop loss 1.1162 (36 pips) Take Profit 1.1240 (42 pips) R/R 1.17:1
Trade 2 : Entry 1.1198 Stop loss 1.1162 (36 pips) Take Profit 1.1280 (82 pips) R/R 2.28:1
Average trade return is (1.17+2.28)/1 = 1.725:1. However, when the first target is hit, I will move the stop loss on the second trade to break-even.

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