Euro Bear Market Rally
I think that Euro may bounce for a quick trade, which may last a few days to a week. I have been bearish on Euro for a while. It is widely known that Eurozone's debt problems are nowhere close to be solved. Greece continues to suffer and other peripheral countries in the union are following its footsteps. European economy has slowed to a grinding halt, and the threat of recession is looming on the doorstep. So with all of this negativity, why in the world am I looking for EUR/USD to rally? How about the fact that all of the problems above are now on the lips of many investors, who never traded a single lot of currency? They are all looking to get short EUR/USD, and many are doing it through leveraged ETFs like ProShares UltraShort Euro (EUO).
Forex market behaves in mysterious ways. It sucks in late comers, punishes the complacent ones, and reverses to disbelief of many trend followers. This indeed would be a trade against the well-developed downtrend. But as long as you know your entry, place your stop, and have an attainable target - you should have a good reward to risk ratio for this trade.
Let's look at my trade parameters:
1. Current quote: EUR/USD is trading at 1.3254 as I type
2. Entry: I will be buying a pullback to 1.3230
3. Risk: My stop will be just below the low at 1.3130
4. Reward: My targets are 1.3430, 1.3530, and 1.3630
5. Reward to risk ratio is a blended 3/1 on this trade - I am risking 100 pips to make 200, 300, and 400.
I am going to scale out in thirds on the way to 1.3630 and will move my stop to break-even once my first third target is reached, to reduce the risk further.
Please do your own research and do not follow this post as your only guideline.
Good luck with your trading!
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