Stopping Forex Losses
Turning bad trades into good ones
Here is a look at my recent EUR/USD trade and how I am going to try to prevent losses and turn this bad trade into a good one. While I saw the break of the major price level on the EUR/USD on the but I did not expect the sudden worry about the European debt level being so high and talk of Portugal & Spain being the next Greece being a factor when I got into the trade along with the higher than expected job loss numbers in the States causing traders to pile into the dollar. Thankfully the Conquer did clean up on that volatility nicely. and it was a fantastic trading day by every measure. Not a 10% day but could be by tomorrow.
FOREX MARKET HIT BY CRISIS OF CONFIDENCE
A full-fledged meltdown in the forex markets is the best way to describe today’s price action as investors sought safety in the low yielding U.S. dollar. The greenback rose against every major currency except for the Japanese Yen which further indicates that risk aversion is behind today’s strong demand for dollars. Do not be mistaken – traders are not loading up on the buck because they believe that tomorrow’s non-farm payrolls report will be strong, but because they are unwinding high risk positions and reducing exposure ahead of NFPs. With credit default spreads for Greece, Portugal and Spain rising significantly, traders are nervous about how the situation in Europe will pan out. So far, the European Union has failed to calm investors by bailing out Greece or any other nations but they could easily end the euro’s crisis of confidence if did what the UAE did for Dubai. Nasdaq
The thing is the European Union will bailout Greece and any other EU country who needs it, it’s a union after all and they have to. The EUR/USD is falling hard and fast and here is where I am stepping in to buy.
I am willing to commit a third of my account into this trade, not risk a third of my account but the total position size of all my trades can total at most a third of my available margin. I also am willing to risk four times the average true range (ATR) of the pair. Putting that together I know how much ammo I have. Right now at the time of this post my average price is 1.3728 and I am -20 pips.
So far looks lke a good trade. Here is a better look at my stop losses.
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