How could I have taken advantage of the massive drop in the EURUSD last night?


So I placed a sell trade on EURUSD last night.

As can be seen on the diagram (the two blue dots are my entry and exit, the red line is my stop loss, green line my take profit), I picked my entry position really well this time. Almost as soon as it clipped the my entry position and executed the SELL order, the price plummetted.

Within 2.5 hours I was out of the trade, and made about 50 pips.

The problem is that whilst I’m happy with a profit, if you look at what happened, the EURUSD fell almost 200 pips last night! It dropped about 100 in the space of just an hour.

So I was able to take advantage of only 50 pips there. I was asleep when the Take Profit was executed. Had I been awake, I think seeing a massive fall like that, I would’ve definitely held on, and sold when the price stabilized.

So my question is, if I were to do that trade again, what strategies or indicators should I have used to set Take Profit so I could have gotten a better profit?

Looking at the chart, the drop was way too fast for my MA, the MA didn’t even indicate a fall until after the prices had plateau-ed.

You can’t catch em all, no matter what anyone tells you.

What rules are you using to set your TP? Have you considered using a trailing stop?

I basically just looked at past support levels. I’ve thought about trailing stops but I’m not sure how to use them yet.

Also, my profit was 50 pips, so even if I had a trailing stop of 10 pips (which would be 20% of my profit if it didn’t work out), 10 pips movement isn’t a lot and I probably would’ve been stamped out pretty quickly.

For me, if I were to Take Profit manually, I’d be looking at the momentum of the trade and if it plummeted like it did last night, to hold off on it until it stopped dropping. So ideally, if I was to set a Take Profit target that executed automatically, I would like to use some sort of indicator that took this momentum into account.

Yeah i dunno, does that even make sense? Maybe there wasn’t really a way I could’ve predicted such a big drop and I should just be happy with the trade?

Once your bias was reached(in this case short) you could use fibs to enter and exit at 161.8 extension.

Also, just to add to very good points already mentioned, keep in the know on the news…I already knew that Draghi disliked the EU being so high, and was already talking about it earlier, and when he started talking this morning, you could see the price just plummeting with every sentence of his. He really meant to talk it down, and down it went. I use the live “real news” feed on dailyFX…they post trade opinions, too, but when the news hits, it’s tweeted ASAP, and I knew exactly what was going to happen, and too bad I couldn’t get to a place to trade it!

Fundamentals is more than just hearing the NFP, you have to be aware of the general opinion of Central Bank leaders of their repective currencies, for instance, when Japan had recent election, everybody knew by who won where the Yen was going because the winner was already saying it was too strong, and everybody knew he wanted to print trillions of Yen to weaken it, so free ride the the top selling yen for the last month.

So without hindsight knowledge, when executing the trade, how would I have known to use 161.8 as opposed to any other fib level?

Also, I went to bed as soon as I made the trade. Is that a good idea? I was told that it was generally a good idea to plan exactly what you wanted to do prior to the trade and not change your mind at all as if you do, irrational emotion might creep in to your trading system.

Ah ok,

so you’re saying really, before I made the trade, I really should’ve understood the implication of the outcome of any news and understood that if my trade went the right way, it would’ve gone by about 200 pips and not 50 pips?

Yeah, I guess that’s probably one of the things I lack at the moment. I don’t really understand how news affects the prices yet. I guess that’ll have to only come with experience and reading as much as I can.

You’ll never know the results of the news qnd whst it will do to price. You can only guess.

The best thing for you to do is accept you can’t have it all. You got in. Got some pips. Got out. You won.
You will forever and always leave pips on the table.

yeah i know what you mean.

But I meant like I should’ve known that there was a big announcement coming and therefore there was a greater chance the prices could move swiftly in a certain direction which meant I could’ve justified widening my Take Profit to take advantage of that.

But yeah, that’s what demo trades are for, and it’s all about learning new things with each trade. :slight_smile:

I did not take advantage of the drop in Fiber last night, but should have using ICT methods. This question was answered in a live session he did tonight and I answered it a couple of times on his 2012 ICT Pro Taders club thread that was closed tonight.

This was a classic ICT set up and multiple tools would have tipped you off and should have tipped me off. If you cant find or if the answer does not seem clear, I’ll gladly comment more on what happened. This is a great trade for people to understand because similar types of trades come up frequently and if you know what to look for the pips are there.

Paying attention to news is how you will differentiate this short trade from a 20 pip drop to a 200 pip drop. If you don’t have a newsfeed start looking for one. You don’t have to trade on it, but it is very good to have so you always know what is floating around in the market.

This move was largely fueled by the gold that shoots out of draghis mouth

Yet there are like 8 different technical reasons / tools / measurements that have nothing to do Draghis mouth that one could have used to anticipate the move or forecast it’s stength

Trailing stop is a good option when you are not there to monitor trades closely. But during news time, it is really hard to identify entry and exit points due to extreme volatility. Be happy at least you took 50 pips.

Sure, you can continue doing your 100% technical analysis trading without ever looking at the news. If you try hard enough, hindsight trading can find signals for almost every single ‘big move’.

But you will never be able to know the outcome of the news or what price movement will result from it. You can only guess.

It’s not so much a particular single piece of news, although when it came out, the markets really moved, but it’s a general understanding of the current events surrounding that particular “news release.” It wasn’t really news, as much as Draghi talking and saying the EU was way too high. The reaction happened because him and others have been hinting at this for a whole month, ever since the Euro came above 1.3200. The uptrend the Euro had during January seemed a bit irrationally sustained to new 14 month+ highs, and there’s been talk about “currency wars” and each central bank is trying to “monetize” or cheapen their country’s debt, they all have the same problem, and think the solutionis the same. So, if you’re armed with this general knowledge, then when a central bank head speaks, you can have a good idea what will happen. And combining this with the techicals, which you can’t leave out, the Euro really was looking like it topped there before 1.37, and everybody was talking about how a significant retracement was due, so there was a chorus of voices, and Draghi just pushed it the rest of the way.
Now, since you understand this, when you see the Fed come out, which may be the next Fed guy, you’ll know that the USD is cheap already against the Euro. If the Euro continues to slide down to 1.25 or lower, and the Fed comes out, and if the other currencies have caused the dollar index to show significant increase in strength, then just know he will say something to try to bring the USD down again.
So, I’m just saying, in addition to necessary technical analysis, know what’s happening in the world in general, which means the UK, EU, Japan, and the US. These guys all have conflicting ideas on what the currency should be trading at, and all of their goals are to cheapen their currencies. And because of their overseeing politicians, they will do it.
When the Euro is trading at 1.28, there won’t be much talk from Fed or ECB about exchange rates.

I think ur trade should consist of two units. first unit should be based on structure and 2nd u should let it run and move ur stop loss on the basis of structure high/low. as soon as a new swing is created move ur stop 1 pip above/below the structure. this way u can squeeze maximum out of the trade.u can get an early profit and also 2nd unit runs to its maximum.

That sounds nice and all but it really just gives people something to talk about so they feel like their gamble has merit.

What if it reverses? There needs to be more math behind this is he’s going to double his risk and not fully benefit from the gains.