No Crying in Trading

So, my EUR/USD trade from yesterday got stopped out for a 120 pip loss. That's ok, because this is a game where one needs to know how to lose as well as how to win. When I take a loss, I will be the first to admit it, but it doesn't mean I was wrong to do the trade. In fact, there is no right or wrong, just like there is no crying in trading. Right or wrong are moral distinctions. This is trading! Before every trade, I understand my risk and potential reward possibilities. I am well prepared to either take profit or take a loss at certain levels. The only thing that can go wrong is if one doesn't stick to those levels and begins to use their feelings to assess a trade. I do not do that, I stick to the plan. always!

Moving on, the EUR/USD still looks bullish to me (as does the EUR/JPY), but as I indicated in my piece on Monday, there is plenty of wiggle room to the downside here (about 500 pips until Daily support). So, I will sit back here and let the markets adapt to the latest rumors of U.S. bank trouble and get back in when I see things have stabilized somewhat - off the daily chart!

Enter the EUR/USD: A Short Tale

I just went long the EUR/USD at 1.4315 with a stop around the 1.4194 level. The chart below should speak for itself: a well defined hourly uptrend with an entry point near the 100 and 200 day EMAs.

I'm also keeping a close eye on the Yen, especially EUR/JPY. Based on the 2 time-frame chart below, EUR/JPY looks to be sitting right at some major support. I would be ready to risk a trade as long as it stays above the 132 level. So far, just keeping an eye and waiting for a nice entry point.

Appetite for... Good or Evil? Left or Right? Up or Down??

My long EUR/JPY position was stopped out Friday afternoon at the 133.97 level for a mere 30 pip gain. I was protecting my profits in the hopes that if the pair fell through my stop-level, I would have a chance to buy it back lower. So, here we are, Monday morning and I can buy the pair back almost 100 pips lower (see chart below). The question is should I??

The answer lies in defining global risk appetite, at least for the week ahead. If the USD should find real strength this week and the week ahead, it would mean that investors' appetite for risk is weakening and they will all flock to the USD like birds going south for the winter. And after just a few days, the momentum can build up so intensely that the US dollar may look like the L.I.E. on Labor Day - a parking lot. We saw this last year around this time (see EUR/USD chart below). Although the circumstances were a little different (the credit, housing and auto crisis was relatively fresh on the global scene), no one can say with outright certainty that momentum of that nature isn't again possible.

The US economic data out this week tells a mixed tale of good and evil. Chicago PMI came in significantly higher than expected, boosting the higher USD argument:

Mon Aug 31GMT 13:45 USD Chicago Purchasing Manager (AUG)

(actual) 50.0 (forecast) 48.0 (previous) 43.4

The remainder of the week includes improved vehicle sales expectations (which is a doomed figure, riding out the tale-end of the cash-for-clunkers momentum), higher ISM Manufacturing numbers, and lower pending home sales and construction spending figures. This mixed bag of cherries will be topped off with a worse-than-expected unemployment number, coming out Friday.

So, as GNR would say, "where do we go now?? ah ha ah ha ah ha ah haaaa...." Is the USD going up or down, left or right? The short answer is, I don't know. The better answer is most likely DOWN! there I said it...

From the charts below, support levels for the EUR/USD, Cable, USD/JPY and EUR/JPY are about 500 pips below the current market price. That's quite some wiggle room, so I would keep a fairly tight stop on any short USD or short JPY position (the safest play probably being long USD/JPY). I will look to get back into the EUR/JPY and possibly USD/JPY and/or EUR/USD once the hourly charts look a little more favorable from a risk/reward standpoint. I'll try to keep my positions posted...

Sorry for the long-winded article. I'll keep the rest short and sweet... child o' mine!