A Euro Buy – Not For The Weakhearted

I’ve been going on and on about the continued weakness in Europe, and how I feel that it will most certainly come to “bite us in the ass” again, and again in the coming year. Spain’s issues are much more serious than the current market action reflects – and the ECB has been doing a lot of talking with very little action. Yes bond yields are down across the board and for the time being it “appears” that things have steadied / leveled off however – bubbling there underneath the surface is a complete and total financial disaster. I guess….. for those who believe that now ” endless printing” (so far yet to be seen) by the ECB will magically paper over the holes – fair enough, as this seems to be the current “accepted course of action”.

But make no mistake  – the problems in Europe are far from over. Now…that being said ” lets go buy some Euro’s”!

In currency markets  – there are many instances when the “fundamentals” do not come close to lining up with the “technicals” – but short term trade set ups do ideed exist. I generally approach these trades with smaller position size, and pre-determined stops – in order to set my emotions aside, and just allow the trade to work. Another small suggestion would be to place orders “well above” the current price action, and let the trade come to you.

2 Responses

  1. DojiTrader November 5, 2012 / 11:41 pm

    Thanks Forex Kong.

    In the latter suggestion, where would you place the buy stop “well above” current prices – just above the most recent swing high (1.302? can’t read it of the chart). And where would you then place it’s stop – just below most recent low (e.g. couple of pips below 1.27673?). That would then be quite a high entry/stop distance of nearly 300 pips per unit traded – so the disadvantage would be that the reward/risk of this trade would not be so great? (less than 3? in fact would not be higher than ~0.5 – would you take this trade doing it the way you suggested?). Of course, the advantage is that if price does continue to drop, the trade would never get filled, and your loss would be zero.

    The other way of trading would be to go long now, after NY close, & place the stop just below the most recent low, for a much tighter entry/stop distance – then the reward/risk ratio would become a lot larger IF it worked out.

    Would one apply a smaller risk % of trading capital to this 2nd scenario, and a much larger % risk per capital on the first scenario, or would you keep the % risk of capital per trade (always) the same?

    Which of the two scenarios would you “normally” take in your trading?

    Thanks, DojiTrader

    • Forex Kong November 6, 2012 / 12:52 am

      Ill get through this the best I can DojiTrader….you’ve asked alot.

      When I suggest “well above” current price – it really depends on what time frame you are comfortable with trading.

      If its as small as a 15 minute entry for example….”well above” may only be 10 – 20 pips….to keep out of the “chop” at that particular time frame. If you choose to trade a daily chart – then “well above” may very well be “x number” of pips above the previous days high (and entry would then be on a “swing low” – daily).

      Stops are (again) very specific to your time frame as well to your “risk tolerence”. You need a stop that will not get hit through normal movement in a given pair ( at your chosen time frame ) ….but not too far away to blow your money management rules – should it get wacked….so….its going to be different for every trader based on their account balance, risk tolerence and trade time frame.

      I for one…. have an incredible “kong like risk tolerence” – which allows me to trade fairly “wide”… stops wise.

      Give me 5 minutes – Ill continue on this post or post it to the main page.

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