Over the past 10 days EUR/USD has declined 1,000 pips from 1.45 to 1.35, which is considered the largest range of the currency pair. Whenever Euro climbed or dipped so many pips before, a retracement or correction took place short term. That is why my prediction about EUR/USD is a short term gain the following days and I am looking to trade long the forex pair. I predict a short-term uptrend up to about 1.40 level, the most recent and important support level. However as I am not comfortable in holding a trading position open for very long in forex, hour or 15-minute forex charts will provide the necessary signals to pinpoint entry points more efficiently. Such as today.
By using bracket orders I have already calculated my risk and the possible reward of my trade. My entry order is found at 1.3560 and I am willing to risk just 10 pips in this trade, which means a stop loss at 1.3550 as it is shown in the image above. At the same time, having set a profit target at 1.3690 leads to an unbelievable 13-1 reward-risk ratio! Granted the reward is set at the highest point at this time, given I am trading on the 15-minute chart. Still, there are no signals that EUR/USD will fail reaching that level once again and according to the expected gain I talked before, there’s a good chance it breaks it! It is obvious EUR/USD is currently trending inside a horizontal channel in the 15-minute chart and the lower part of that channel offers great support level to set my entry point.
Of course my entry order may never be executed and I may be left out of the market, while my general prediction proves correct. On the other hand I am not eager to enter the market at some irrelevant level, where setting a stop loss further below would increase my risk, or picking out a support level that simply isn’t there! Finally, I’m not sure if I can change the quantity in the bracket orders Interactive Brokers offer. If I figure out the way, I’m willing to trade out 75% of my position at 1.3690 and let the rest bring more profit. The probable breakout guarantees that.