Short EURUSD @ 1.3076, SL 1.3120

13.31 bst

Added short EURUSD $20/pip at 1.3076 just as the NFP data came out. Stop loss at 1.3120 – I don’t expect this pair to see 1.3100 today again.

Commentary on a retail trader’s dilemma:

All day today, I’ve been wrestling with the idea of going short this pair. I had a good look at the daily / weekly charts and I felt that the next move in this pair was a re-test of 1.2950.

I went short earlier today at 1.3102 with a tight stop but got out when it approached close to my stop. After that the pair touched a key level that I was looking at – 1.3138. I didn’t have the courage to pull the trigger since at that time all pairs were showing risk-on behaviour. A little later, I put in a limit order to go short at 1.3135. As the price nervously jumped about in the region of 1.3130, I canceled my order. I was nervous, thinking about the risk in case my bet went sour. If the NFP came in weaker, not only would I lose on this new order but my existing open shorts in GU and long UJ would also suffer. From the angle of risk exposure it was not a good idea so I deleted the order.  The irony is that the price hit exactly my short level for a couple of seconds and dropped. On my platform my short order would have been executed.

The god of forex loves to play mind-games with us little ones!

The forex market these days is essentially a bet on the strength or weakness of the dollar. Underlying all the pairs we trade is essentially a bet on the direction of the USD. Therefore the risk (and reward) gets added up across all the pairs we trade. In statistical jargon, all the pairs are very highly correlated.

Anyway, my decision was to not add to my overall risk exposure. I figured that I can enter AFTER the NFP data is out, if it is indeed as I expect it. If not, I should quickly exit my other USD bullish bets. That is why I entered short EU after the data. In hindsight, I am satisfied with my decision. Better a smaller 100% certain bet than 50% certain bet with 50 pips more.

Good luck to anybody trading the NFP!

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