Trade review of ECB’s QE annoucement

I wouldn’t say this was a purely technical trade setup. Ever since the Swiss National Bank announced the peg removal of the Franc, this was an early warning sign that they anticipated a further devaluation of the Euro. Of course, they could have just removed the peg because it is too expensive to maintain it. Fortunately, the technical setup was present this morning.

This is the pre-ECN announcement trade holding that bearish bias. Rather than just showing winning trades, here is a loser. This is just to reflect my thought process. The close of this trade was at the end of the engulfing candlestick, which I exited the trade in case it turned out to be a bullish move.

Pre-ECB Trade
Pre-ECB Trade

During the announcement, my technical trend spotting setup came into effect. My setting is a 20 period exponential moving average plotted with a 60 period simple moving average. This is just my parameters to smooth out noise, but minimize the indicator signal lag.

First Scalp
First Scalp

This is the first scalp. During a news event, it is very difficult to spot when the price has bottomed out. One way is to look at the price behavior and watch for sharp pull backs. This could be a sign that sellers are closing out their trades and possibly buyers coming in to enter. Unfortunately, this was an early close.

Re-entering Sell
Re-entering Sell

Position size was reduced significantly in order to capture additional profits without sacrificing previously made gains. Again, looking at the chart pattern and spotting the pull back behavior was more successful this time. The close was optimized right at the bottom.

Finally, I took a longer term trade with a stop loss right above the fractal. Worst case scenario is break even. Momentum wise, it was another good selling opportunity with a high reward to risk ratio.

High R:R Opportunity
High R:R Opportunity

Overall, one might argue that it is possible to place one trade to avoid unnecessary commission charges. However, one thing to notice is that I have been reducing the volume over time. If the initial trade was a lost, I would double the volume to recoup the loss with half the movement necessary. The purpose of reducing volume over successful trades is to capture additional profits without missing out on continuation movements at the same time as protecting your account from major losses. The reason why a trailing stop loss is not used is because the intense price fluctuation will hit a loss before fully bottoming out. Widening the distance of the trail is not beneficial either as this just increases your risks and lowers the R:R ratio.


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