End of month trades

End of month trades

1 August 2015, 05:05
Cameron Gill
0
147

Here is exactly why I do not trade at the end of the month. End of month trades are dangerous as there is usually a sell-off to close open positions, however the sell-off can be either the primary or the secondary currency, yesterday it was the USD being sold off which strengthened the EURUSD. I bet quite a few brave traders were caught out on this...



OK, so late week the downward movement on the EURUSD continued as per the yellow trend-line.  This move gained momentum on Thursday, however on Friday the price came up and hit the yellow trend-line only to bounce back down again and leave a pin. This is a common sign of bouncing off trend line and no doubt some traders would have seen this as an opportunity to take a short position. The blue circle indicates where traders would have jumped into their short positions.


From there the US markets opened and the dollar was sold off as well as a couple of sentiment based announcements came out. This broke the yellow trend-line, came back a couple of bars and then rocketed off 120+ pips. Would have been great to be riding that one with a long trade!


The next trap would have been the fact that the traders with their short trades would have had their stops just above the previous major high, which was the 1:1080 mark (orange line). So what then happened was the price came up and broke the previous major high and then would have stopped out these trades in the above orange circle area. Then look what happens - the price comes back down again.


The only reason I mention this and do not want to make out that I know everything and am a guru in any way shape or form. The reason I highlight this is because I have been in this situation an the exact same thing happened to me some time ago. I was furious, especially as if I would have not had the stop in place it would have come back down to a profit over time. However I also needed to be able to carry out the draw-down hit on my account and not be margin called. I learnt this the hard way and had the trades stopped only to see the market come back - and from memory it stopped out and then went only a matter of 2 or 3 pips before reversing.


Thus the reason why I do not trade end of month and restrict trades on Fridays to Asian and a little of the European session. I hope none of you were caught out on this last night.


The next interesting thing to contemplate will be what transpires next week. According to the 60m charts we have well and truly broken the bearish EURUSD movement, however my daily charts are saying we are still heading south. I think it will be a waiting game and next week will be interesting, plus there is the Non Farm Payrolls coming up next Friday. I have absolutely no idea as to where the EURUSD will be in a weeks time!



Risk disclaimer: I am not a licensed or regulated institution, nor do I offer any form of financial advice. We all know the risks associated with forex trading. All posts are in relation to historical results and no claims of future returns are made.


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