11 Dec This Week’s Swing Trading Round Up – 10th December 2011
The Week began with further uncertainty surrounding the Euro zone crisis and with many charts showing weak probability in breaking out in any particular direction so it became a case of scanning every FX chart, Indice chart and Commodities chart in order to find something giving a trading edge. The 2 charts that stood out for me were CAD:CHF and NZD:CHF, both showing nice potential.
Unfortunately, this potential was in opposite directions with the Canadian Dollar looking bullish and the New Zealand Dollar looking bearish against the Swiss Franc. This presented a dilemma, one of these trades must surely be wrong….What a nightmare!
So having taken a closer look at all CHF charts, I decided that CAD did appear to be the strongest and NZD appeared to be one of the less strong currencies Versus the Swiss Franc.
So, I took both trades. Hedging strategies are definitely not my strong point so I watched with caution. CAD:CHF long roared into profit whilst NZD:CHF short complete with it’s unfinished work and unfilled gaps below, stumbled into a loss. Nonetheless, stop losses were set and the profit on the CAD trade exceeded the loss on the NZD trade so I let them run.
The result? CAD:CHF was showing 120 pips profit quite quickly so I trailed the stop. At this point my main interest was to somehow ensure that the combination of both trades would return a profit and as NZD:CHF was only showing a 60 point loss, I tightened the CAD:CHF stop loss to +60 points (little Technical input was involved in coming to that stop placement).
As the week progressed, both pairs reversed their up trends quite hard and CAD:CHF was stopped out on the trailing stop loss for a 60 pip profit and NZD:CHF had gone from within 3 pips of my stop loss to a 60 pip profit. In fact at one point based on the data I had access to, it appeared NZD:CHF had actually gone through my stop loss level, but as the trade was still sitting in my account, now showing a profit, I wasn’t going to argue about that! I considered taking this profit but eventually chose to continue the trade using a 60 pip stoploss to ensure whatever happened, I could not take an overall loss on the combined hedge.
At the moment, NZD:CHF is showing around 10 pips profit so it will be interesting to see what next week brings and how this trade pans out.
Other than that much of the week was spent scalping here and there and there is absolutely no denying that it was an incredibly difficult week to day trade with trades showing losses when you least expected them and other trades flying into profit before the technicals really confirmed the move.
Thursday showed some massive bullish reversal patterns in the “risk off” currency pairs and some of these looked very attractive, but Friday messed those up.
I go into next week with a level of uncertainty as FX, Gold and Credit definitely did not confirm the low volume rallies we saw in Indices. I’m never comfortable in this situation because the stock market has a strange ability to rally on low volume for long periods of time whilst FX seemingly wants to go the opposite way but ends up meandering about and doing nothing.
I certainly don’t see how the result in Europe warranted Friday’s rally in stocks so I’m missing something there, but it is clear that the Euro hasn’t been fixed, the core issues have not been resolved, the debt has not been reduced and Italian Auction yields were higher on Friday. So rather than try and understand what’s going on I think it’s best to see how next week starts before making any big trading decisions…..though as always, I have my eye on some great trading set-ups, but don’t have the confidence to jump into these trades just yet.
Over the next few days I’ll post up a few of the things I’m watching and at the very least, I’ll be looking to quickly get into these trades once things start settling down as some of them do look rather tasty.
Have a great Weekend.