Trading the end of wave 4
USDMXN is a really volatile instrument that does tend to move in a trend, we traded it twice last year and the final trade from the (C) in the chart worked really well delivering a 4:1 risk reward. We are now considering another trade from what might be a reaction from the bottom of a triangle pattern (orange on the diagram). In Elliott wave language this might be the end of wave E from a contracting triangle and if so could lead to a significant rise to new all time highs, we are not looking for that just our more normal 3:1 risk reward. We will put our stop loss just below the rising wedge and the take profit below the black trend line showing the top of the triangle. As always we will monitor these levels and the price action and could exit the trade if we decide we do not like the look of the price action. In line with this we closed the Silver trade today for a small profit (only 2% of equity), the price action looks more and more like consolidation rather than a top forming and an alternative wave count suggesting this is just the first leg higher looks more likely.
Swap and roll
USDMXN long is an expensive trade to hold, the interest rate differential makes it loss making to hold it in this direction but the trend is pretty clear but, as a result, we will not hold it for months just days or at most a few weeks. We don't generally like trades like this one but the opportunity seems greater than the cost or the risk.
Please remember this is just our thoughts, it is not trading advice and a s a result you must do your own analysis before trading.
RetiredearlyFX is a trading name of the investment company Bagehotsway.
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We are not authorised to give investment advice.
We believe all figures quoted to be accurate but past performance in no way guarantees future performance
Trading FX is high risk and not suitable for everyone.