The AUD has continued to weaken since RBA Gov. Stevens comments at the beginning of the week. In an overall theme of USD strength, an opportunity to sell the AUD rallies – as mentioned earlier this week, has worked well. A look at the Daily chart gives us a very clear perspective.
The 2 wicky candles preceding the US open today signalled the entry. The stop was a modest 10 pips for a potential return of 60 pips to our Target 2. Getting to the Asian session low alone, was greater than 3:1 Reward to Risk. The wild card in this trade was the pending major US economic news release in 2 hours. A protective stop is placed in advance of the news and the worst case scenario is we get stopped out positively for a few pips.
The news reaction was USD positive and the majors continued their moves accordingly. As a long wick appears at the close of the second candle after the news, we look for signs of a reversal and profit taking. The subsequent candle is a wicky too and we close the trade to end the week.
Many traders focus on getting large pip gains while in a trade and are willing to give back a large amount of their pips in retracements and reversals because they feel certain of the pairs direction. I much prefer to read what price is telling me, take smaller gains with less risk and have a lot less stress. Trading is about consistency and finding what works best with your personality.
North America moves the clocks back this weekend.
Good luck with your trading.
Back next Wednesday.