Trading the USD/CHF on August 1, 2013: 1/1 ITM

Thursday’s USD/CHF market was basically insipid the entire morning before U.S. jobless claims data were released. In total, I was only able to find one set-up that I felt was worth taking. Between the times I watched the market (3:00AM-8:30AM EST), the USD/CHF strictly traded in only about a twenty-pip range. It reminded me a bit of Tuesday’s market (July 30). I did not trade binaries that day, but it didn’t look like a very pleasant market to trade anyway, as price mostly hovered around the same level similar to today.

Regardless, I was happy to encounter the one trade set-up I did take. There’s really not a whole lot one can do in terms of taking trade set-ups if the market simply isn’t moving much. And, of course, one should never commit the common beginner’s mistake in trading out of boredom.

I had two main levels considered for today’s trading: the resistance 1 line at 0.93221 and the 78.6% Fibonacci retracement (applicable to the price move 0.91748-0.97500) at 0.92979. That same Fib level was also relevant in the previous day’s trading. During the times I traded, the resistance 1 level never came into play. But the 78.6% Fibonacci level certainly did and essentially created a longstanding shelf of support for the pair all morning.

I ended up taking my first and only trade of the day on the 4:45 candle. Based on the price action from the past hour-and-a-half it was clear that the market was showing some sensitivity to the 78.6% Fib as a support level and a call option on the touch of 0.92979 would likely produce a solid trade. The trend was truly irrelevant in the decision-making here as the pair was so lackluster there was no true market direction.

Even if you look at the daily chart below, you can see that even on a more macroscopic level there’s really not a lot of movement occurring. The overall trend had been down since reaching a summertime high of 0.97500 on July 9 and falling ever since. But at the moment the pair was encountering some expected support from the 61.8% retracement (price move: 0.70675-1.06387).

Going back to the 5-minute chart, once price hit the 78.6% Fib on the 4:40 candle and bounced off, it acted as a further confirmation signal that the Fibonacci line was acting as a robust level of support. Once it re-touched on the 4:45 candle I took a call option at 0.92979. The trade won by a fraction of a pip. That might seem like I got lucky in a way, but just by looking at the chart it’s fair to say that the pair never had any intention of breaching the 78.6 line.

The level held very well going forward and I could have taken additional call option trades at 0.92979. The main reason I chose not to was due to the tight trading range that had formed. Following my trade, price consolidated in about a five-pip trading range for nearly an hour. Of course, I avoid those types of call option set-ups if resistance is very nearby. My strategy is to usually wait for the pair to break in one direction or the other before looking for further trade opportunities.

Price eventually did break back in the upward direction and I had considered put option at 0.93081 (previous high for the day formed at 4:20AM), but nothing set up there. Once price came back down following the move up I considered call options back at the 78.6% Fibonacci retracement, but I only got a single bounce off the level and not a subsequent re-touch.

I stopped trading just before the release of U.S. jobless claims data at 8:30. I don’t trade the news ever for binary options, and only in a very limited sense with spot forex; namely, when I hear news of an event or policy change that could have macroeconomic ramifications for a country’s economy and hence its currency. A recent example might be the quantitative easing efforts on behalf of the Bank of Japan, which depreciated the yen and therefore made favorable buying opportunities on such currency pairs like the USD/JPY and GBP/JPY.

That was it for my trading for this week, and I went a very respectable 10/12 ITM! I did not get the chance to trade the non-farm payrolls day on Friday. But I never trade the news release anymore and I generally avoid the 8:30AM-9:00AM time window on NFP days in order to wait for the market to settle. So for me, NFP days are nothing to truly get excited about and simply just another trading day.