08/05/2012 – Winners and losers from the weekend elections

Over the last couple of days I’ve had a few european centric Binary positions closing on me.  Whilst not necessarily taken with the French elections in mind they certainly played a part in their outcome.  One win and one loss.  Lets cover the losing position first:

EURUSD

After a wild start to 2012 where the price dropped down towards the 1.26 handle EURUSD has been above 1.30 and had demonstrated stubborn support of the 1.30 level.  With this in mind on the weekly chart after I saw a few bounces off the 1.30 level I decided to place a No-Touch Barrier trade at 1.2973 with a timeline of EOD Monday 7th May 2012. (Position 1 on the chart).  Due to the nature of the Eurozone I halved my normal risk and only took a half position size. Furthermore I also took out a No-Touch Barrier trade on the other side of the price action at 1.3310 to offset any possible loss.

The trade was playing out fine despite the backdrop of the French & Greek elections and standard Eurozone shenanigans.  Fridays NFP numbers did not help however when I looked at the position on Friday afternoon with a Trading Client the position was in a healthy state.  Whilst we discussed me closing the position I decided to hold on to Monday. Of course we now know that was a poor call on my part.

The market closed on Friday evening at 1.3081 which was 100 points above my barrier at 1.2973. On Sunday evening I sat down to watch the markets and the news to see that Hollande had won the election and that the EURUSD was being called down approximately 70 points on the open. The EURUSD gapped opened lower and then dropped lower still past the 1.3000 level and then past my barrier at 1.2973 bottoming out at 1.2953 20 pips past my barrier.

What did I learn:

1. 1.2973 is too tight a stop for the barrier – it should be about 50 points above / below levels of S&R as a minimum (remembering being stopped on $DJIA trade as well)

2. Taking a position into an election weekend was much too risky. Foolhardy Id say.  I would have been smarter to just close the position on Friday evening and take what the market offered me (It was in profit).

CAC = (Described as FRA40 by my broker)

This trade was quite simply a No-Touch barrier taken for the month of April into early May.  Doing some simple TA meant I formed a view that price was unlikely to get above 3300 for the month and so I took a No-Touch Barrier at 3318 to finish on 7th May. Despite the strong reversal candle in the 3rd week of April the CAC just went sideways. Presumably now we have a conclusion for the French election it will choose a new trend.

So two positions, 1 loss, 1 in profit.  The losing position on the EU was a half sized position and the CAC position was a full position. The offset EURUSD position is fully sized and is live until the 16th May – so we shall she how that position fares.There were plenty of learning points from the EURUSD trade which I’ll incorporate into positions going forward.

With Hollande in power, lets see what happens to the EURO and the CAC over the next few months!

Until next time, trade well.

Paul