If you have a Forex trading account, you have probably received emails about trading the German elections. It’s a big thing since Germany is the heart of the EU. So any surprising result would cause big moves in the currency markets.
First of all, I don’t expect a surprise result
That’s right! I think Merkel will win the election easily. Just as she did the last couple times. So if there is no surprise then the banks and hedge funds will push and pull the price as they like, since there is no clear organic market direction. And that’s the market you get burn.
I am sure some people can trade in such market conditions, but I am not one of them. At least not yet.
What if there is a surprising result?
That’s not an ideal trade for me either. The price will be pulled in one direction or the other in a matter of seconds. By the time you would enter the trade you have already missed the big move. If you enter there, you will enter just before the retracement. So you will have to have an extra wide SL to keep you in the trade, because these retracements can go as much as 50% of the initial move.
If you have that wide Stop Loss, you risk a big loss. What is the retracement doesn’t stop at 50% and goes further? It’s possible if analysis comes out that the result is not that bad.
The only way I would trade the German Election
After writing that out, I would actually trade the election if Merkel didn’t win. I would wait for the big drop and the 50-61.8 Fibonacci retracement. I would look for other supporting signals in that area.
The deciding factor would be volume. Do I see higher volume in the 50-61.8 fib area or not? If I see high volume and I see confluence with the other signals, I will enter the trade with first target of the high/low of the initial move. I would probably exit a third of my trade there, move the SL to breakeven and let the rest run.
The Number One Rule of Trading: Don’t Lose Money
Trading it that way would minimize my loss since I would have a very tight SL. If the trade moves against me, I am out with minimal loss. If it goes in my direction, nice!
I have said in my first post, I have lost a third of my account already. I should be very careful since I have to make almost a 100% return from here. I haven’t made any trades last week since I had other things to take care of.
That’s the other thing with the german election. When will the results be out? Sometime in the night. I should either be up all night or set my alarm to wake up in the middle of the night. Since I have a mini account, that doesn’t justify this kind of effort.
Maybe that’s not the best way of learning to trade. But hey, that’s how I roll.