If you guys were following me last week I wrote a blog post about “Chunnel” or the EUR/GBP currency pair and how I was watching it to set up for this week. Well lucky for me that time came around Wednesday morning and I was right there to snatch up and eat it like a ripe banana. It was a pretty sweet set up with about a 1:10 risk to reward, these are rare find so I was practically salivating in front of my computer screen. Right before taking the trade I had made sure that my overall analysis was on point,double,triple checked to look for anything that I missed on all the different timeframe charts and closely looked at my indicators to give me a good idea of where this was headed. Going into it I felt totally comfortable. I like to say to all my students that if your not comfortable with a trade then your in either way to big relative to your account or you need to hit the books a little more. Trust me theirs nothing worse then going to bed thinking about what your position is going to do in the morning especially on a 2-5 day swing… Besides maybe finding out another ape got your fruit stash! (beats chest)
This is the weekly chart on the EUR/GBP currency pair and as you can see I just barely missed the top with this one as I shorted the EUR. I like to use a variety of moving averages, multiple timeframes,RSI,MACD,and support and resistance analysis to tell me when a stock or currency pair is running out of gas or has enough push to keep on going up. Near the top on this chart all the indicator were telling me that this currency pair was being held up by a toothpick.
As some of you that follow my post know, I’m trading on $500 account and going to slowly trade it up to 3K and post all of my trades on here on this particular trade I went in with a 8% risk to my total account ,which was around $40 bucks which is a bit higher then my usual 5% total risk I usually allow myself. However the risk to reward was amazing on this chart so I went in with a $2 dollar lot. The Forex market has some major differences to the stock market and money is earned with interest on the money invested. Forex brokers allow leverage anywhere from 50:1 up to 1000:1.
Because the interest rate is so miniscule, to make any significant gain while trading Forex a trader has to “purchase” large chunks of cash and then he/she earns “PIPS” or price interest points either for the benefit or loss of the traders, hence the chart above just like stocks, it goes up, down and sideways. For example a standard lot is $10 per PIP in this case you would have used the leverage available in your account to purchase $100,000 worth of capital in the currency in which you have invested. In my case a $2 dollar lot was $20,000 worth of the British pound.
This is the Daily chart of EUR/GBP and it hit my first price target which is depicted by the blue line. The blue line is just my 21 period moving average. I expected a bit of a retracement as soon as it hit it today so I closed the position and will await for another opportunity to get back it for a few more pips. Total take home today was about 135 PIPS which netted me $269 in total profits @$2 dollars per PIP , about 50% gain to my tiny account which I closed out at about 1:5 risk reward. Along with the nice trade I once again learned the value of being patient and sitting on my hands until the chart sets up perfectly. Hit me up with any questions or remarks @ firstname.lastname@example.org Videos Coming soon!!