Week in Review: 2 May to 8 May 2016

This week's a little busier than usual. I'd entered four trades and finished the week up.

NZDUSD

Late last week, I saw an upward trend channel and spotted a two-candle reversal off the bottom of the channel. This was going to be a longer-term trade, and I saw myself holding this for a week or two. I went long at the break of the bounce's high, and aimed for a reward of between 0.75R and 1R.

Unfortunately, the Reserve Bank of Australia reduced interest rates on the 3rd May. Since the AUDUSD and NZDUSD are highly correlated. the NZDUSD began crashing. Central banks are the biggest players in the forex market, so I thought it was prudent to move out of the way, and exited the trade at breakeven. Price continued to fall and would've triggered my stop loss.

Profit: 0R 

GBPUSD

I felt that resistance between 1.45000 and 1.46000 was going to break. This resistance area had been tested twice in the last few months, and every test usually weakens resistance/support. My trigger for the trade was seeing a bullish two-candle reversal pattern. 

I aimed for a reward of 1.5R. Price did break and reached 1R, but then reversed on the 3rd May after the RBA decision. I guess the RBA's decision triggered a flight towards the USD. I got stopped out a day later.

Profit: -1R

CHFJPY

This was a standard pinbar trade. I saw a bearish pinbar in line with the trend, and saw scope for a 1R reward. 

Profit: 1R

AUDNZD

This was a tricky trade. Volatility had shrunk significantly on the AUDNZD, but after the RBA's decision to reduce interest rates, I felt bias was in favour of the NZD. The candle on 5th May was extremely small, so I felt a downward breakout was imminent (in favour of the NZD), and went short at the break of the low.

I initially aimed for a reward of 2R, but price didn't quite reach it in time. Since this was the first Friday of the month, NFP was going to come out. Also, the AUDNZD is quite exotic, and I've seen the spread widen to 30 pips before and after the weekend. I decided to take profit at 1R to play it safe. I probably should've aimed for a smaller reward in the beginning if I was planning to get out before the release of NFP and the weekend. The good thing is that I had reduced my position size for this trade to 0.5%, so even if I did hold the trade over the weekend, a loss wouldn't have been big. 

Profit: 1R

THOUGHTS

- If planning to close trades before the weekend, aim for a more modest reward. Alternatively, reduce the position size for the trade.

- Major news can cause correlation between multiple currency pairs, and should be taken into account (especially anything related to central banks).

- Don't stand in the way of a central bank.