12/17/08 GBPCHF Trade

Written by Hugh, on December 17th, 2008

Arrrgh! No it’s not International Talk Like a Pirate Day yet but it’s the only thing I can say after exiting this trade.

Don’t get me wrong, I made money so I’m not complaining, but I could have made more, much more.

Short 1 (200 units) @ 7473.5
Stop @ 7615.0 (-143)
Target @ 6483 (+989)

Entered on a squeeze box trade, this is a great pair for the squeeze trade.

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Moved stop to 7549.0 (-76) when price started to move. Price started to move significantly and I exited at 7194, which was obviously too early. Price then went to a low of 6087 before retracing significantly. That would have been a grand total of 1,386 pips! Of course I wouldn’t have got all those pips, but I should have made much more than the 278 pips I did get.

How could I have made more while still minimizing the risk? One way would have been to stack positions. My current idea on how to stack positions involves dropping down to the 5 min chart and finding mini retracements to add positions. Here is where I could have potentially added positions on this GBPCHF trade.

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I will be testing this strategy on the GBPJPY and the GBPCHF to see how well it works. More to come…check out my previous GBPCHF trades:

My Best Trade Ever
GBPCHF is My Friend

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Tim

Hugh, Nice trade. Very nice trade! Two thoughts about the questions you ask: 1. The first thought of course is discipline! You had a profit target and just needed to stick to it. The profit target was as good as it could possibly be at the moment the trade was entered. 2. If you do not have a good idea of where the pair may go, it is sometimes useful to consider using a fairly short simple moving average and exiting when it touches or crosses the price line on the 1 hour chart. I find that a 20 period SMA works very well, but you should of course rely on your own backtests. 3. On stacking: My principle concern would be the money management aspect. Although you don't mention it, I expect you will move stops to at least break even for each trade before opening an additional trade. Best, Tim-

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Hugh

Hi Tim,Thanks for the comments! Well, in this case maybe target isn't the word I should use. It's more like best case scenario. From my testing, 1,000 pips is about the most that I can make on this trade.With regard to the stacking, I haven't found a good technique for this pair yet. On the GBPJPY (future post) backtesting, I found that after you open the initial trade and drop down to the 5min to take a maximum of 3 more mesa trades, it seems to work pretty well. I try to be up at least 20 pips before adding and usually take profit on the first two still toying with it though....Hope all is well!

Cindy

Oh, my. What a great trade! It's nice to have a "friend" in the FOREX market. Looks like your analysis was just right. 278 is awesome. One thought would be to take your profits and then add positions that are smaller as the pair continues to go down. That way there is little emotional attachment to what happens next. Good Trading. Cindy