Get Back on the Horse – EURUSD Day Trades October 17

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Get Back on the Horse – EUR/USD Day Trades October 17

Losing trades happen–to everyone–so as long as you follow your strategy, and executed the losing trade according to your plan, that losing trade doesn’t matter. A good trade or bad trade should not be determined on the result of the trade, but on whether you executed your plan correctly.

As traders we need to learn to almost appreciate our losing trades, as they may show us something that sets us up for the next winning trade. After a losing trade we need to be able to “get back on the horse,” and sometimes very quickly. Just because we lost on a trade doesn’t mean we shouldn’t take the next signal that comes along.

Don’t Skip Signals

Many traders still fail when they implement a winning strategy because they skip trades after a loss. Since I mostly trade with trends I find I win two or three trades in a row, and then lose one (sometimes two if there is choppiness or a strong retracement) as the trend reverses, then win another two trades or so if the new trend direction continues.

If a loss discourages you enough to skip a couple trades (possibly winning ones), you may end up getting back in the market right when another reversal is due. A valid signal is not nullified just because of personal mood. Although, if you are very emotional about something it is probably best to step away from trading and take the day off, since it’s very hard to stay disciplined when emotions are running high.

Get Back on the Horse

Getting back on the horse after a fall (losing trade) isn’t easy, but doing so will force you to let go of the losing trade and refocus on the market. If it helps, you can think of your losing trades as market probes which help you find the next winning trade. Today provided a great example–lose $145 on one of the trades I really liked the look of, to make $425 several moments later on a trade in the opposite direction. Would you take this trade-off several times a day, if someone offered it to you? You better, because that’s what trading is. Accept the loser, as it is the just the cost of making winners (which should be bigger than the loss).

The EURUSD had been strong during the European session and was continuing to show strength as the US market opened (when bright yellow turns to pale yellow on the chart below). After two runs higher and some hesitation near the top, I expected a deeper pullback. It occurred, and was strong enough for me to start looking for a short trade. The basic strategy employed is outlined in Forex Day Trades – October 7, with additional details in other forex day trading posts.

Figure 1. EURUSD Day Trade Examples – October 17

Entered a short trade near the upper band, but was stopped out for a loss of 3.5 pips. This stop could have been reduced slightly, but I gave it room to move as my expectation was for another move lower after the strong fall.

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Instead, the EURUSD created a higher low, followed by a higher high, indicating a further decline was becoming remote, and instead the price could rally again, in alignment with the overall uptrend of the day.

Despite having just lost a trade, I took a trade in the opposite direction (went long near the lower band) based on the new evidence, and the uptrend did indeed continue.

My buy order was partially filled which gave me two positions in this case, so I exited the first at a Fibonacci level above the recent high for a 10.6 pip gain (had I not ended up with two positions I would have exited everything here), and then exited the rest for a 15.3 pip gain as the price consolidated a bit after the further run up.

There is an important distinction between getting back on the horse and “revenge trading”–where you try to find any trade you can to make your money back. Trading is about reading the market, and being able to adapt to new information. Losing trades occur, so don’t skip another valid signal just because you had a loss. If you are calm and willing to accept your loss, and another valid signal comes along, trade it. Only avoid trades if you are distressed, or, if you have multiple losses in a row you may want to step back and ask yourself why the losses occurred. Maybe it is just a choppy trading day and it is best not to trade, or you may not be executing your strategy as planned and therefore can rectify the situation.

EUR/USD News (Euro US Dollar)

EUR/USD edges higher amid encouraging coronavirus developments

EUR/USD is rising above 1.08 as Europe’s largest countries have reported slowdowns in the number of cases and deaths from coronavirus. The safe-haven dollar is on the back foot. German Factory Orders dropped by 1.4% in February.

Latest EURUSD News

EUR/USD: Bears remain in control

EUR/USD: Vulnerable to extend the downward trajectory

German Factory Orders drop 1.4% MoM in Feb vs. -1.9% exp, EUR/USD off highs

Technical Overview

Bears remain in control, with momentum on the four-hour chart pointing to the downside and the currency pair trades below the 50, 100, and 200 Simple Moving Averages. Moreover, the Relative Strength Index is above 30, outside oversold conditions.

Support awaits at around 1.0770, which is Friday’s low. The next support line is only at 1.0640, the 2020 trough. Further down, 1.0580 and 1.05 await EUR/USD.

Some resistance awaits at 1.0840, the daily high, and it is followed by 1.09, which was a cushion last week. The next level to watch is 1.0970, a resistance line from late March, and then 1.1050, which held euro/dollar down beforehand.

Fundamental Overview

Light at the end of the tunnel? All of the eurozone’s four large countries have reported encouraging COVID-19 statistics. However, the old continent faces a slow economic recovery and disagreements between leaders cast a dark cloud.

Germany, the largest economy, has reported the fourth consecutive drop in the daily rate of infections, rising by 3,677 or 4%, lower than in previous days. The death has risen by 92 to 1,434. France, the second-largest country, has confirmed 357 mortalities compared with 441 beforehand.

Italy, the third-largest economy and the country hardest hit by the pandemic, registered only 525 deaths on Sunday, the slowest since March 19. Spain, the fourth-largest economy and the country with the highest number of infections in the old continent, announced 674 new mortalities, the most depressed since March 26.

However, while the recent trends are unified, leaders remain at loggerheads over how to mitigate the economic fallout. Pedro Sánchez, Spain’s Prime Minister, has written that the survival of the European Union rests on the response to the crisis. Sánchez and his peers in Italy and France have demanded to mutualize the debt – issuing “coronabonds.” However, Germany refuses to support such a proposal and insists that hard-hit countries could use existing bailout mechanisms.

Another economic concern is the slow exit from the lockdowns. Spain extended its state of emergency through April 26 and clarified that the economy will not open up at once. Italy is mulling easing restrictions in mid-May. Health officials fear that a return to normal may trigger a second wave of infections. Without widespread testing of people sick with COVID-19 – or carrying antibodies – every step will be gradual.

The Sentix Investor Confidence for April is forecast to decline.

Safety of the US dollar

Another reason to doubt EUR/USD’s recovery comes from the other side of the pond. The US economy is also struggling and the dollar benefits from safe-haven flows. US surgeon general Jerome Adams said that the country is facing a “Pearl Harbor” moment in the upcoming week, which may be the peak.

US President Donald Trump has expressed some optimism amid stabilizing figures in New York and as he announced the buying of hydroxychloroquine – an anti-malaria drug that has yet to prove efficient against COVID-19.

The world’s largest economy has lost 701,000 jobs in March, far worse than expected, and while the Non-Farm Payrolls surveys have been taken in the middle of the month – before the latest lockdowns. The drop in America’s participation rate is an indication that fewer people are looking for jobs.

Later in the day, coronavirus headlines from both Europea and the US are of interest.

Currency Settlement Holidays

Currency holidays are days in which the there is no settlement of prior transactions. Standard settlement periods for most currencies is 2 business days, with some pairs such as CAD/USD settling next business day.

In order for a date to be a valid settlement date for an FX transaction, the central banks for both currencies must be open for settlements. If either currency has a ‘holiday’ on the target settlement date, settlement is deferred until the next valid business day for both currencies. In addition, intervening holidays, that is a holiday between trade date and the standard 2 days later may or may not defer settlement, depending on which currencies are involved. Most currency transactions will not settle on a USD settlement holiday. This treatment is regardless of whether USD is part of the transaction directly, i.e. a EUR.JPY currency transaction will not settle on a USD settlement holiday but will be deferred to the next valid business day for all three currencies.

Traders with large FX positions should familiarize themselves with the industry standards for FX settlement as this may have significant impact on their settled cash balances in the various currencies. Â Please note, if your FX transaction(s) involve currencies with different settlement dates, you could incur significant financing and/or carrying costs. The following table lists upcoming non-settlement dates for each currency and is offered as a service to FX traders. IB collects this information from third party distributors and cannot guarantee the accuracy or completeness of the information.

Currency Holiday Table

Examples of settlement day determination:

  • Assume that trade date is Tuesday July 1: a normal transaction executed prior to 17:00 EST in USD/EUR would settle in 2 business days, Thursday July 3. Transactions after 17:00 EST are deemed to be next day transactions with trade date July 2.
  • If trade date is Wednesday July 2, then 2 normal business days would indicate a Friday July 4 settlement date. However since July 4 is a US holiday, settlements will be deferred until the next valid business day in both USD and EUR, in this case Monday July 7. If Monday were also a holiday in EUR, then settlement would be again deferred until Tuesday.

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The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and fixed Income can be substantial.

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