Updates: Week Ending Mar 7, 2025

The past week can be summed up with two words - tariff whiplash. The rest of the world is dealing with a "leader" who is spending more time acting like a bully on the playground. 

Instead of using big boy words and clearly communicating what he wants, Trump has more commitment issues than modern dating situationships. What is he hoping to get out of these tariffs? Nobody knows.

There has been a recent shift in market sentiment. This was observable through both the equity and currency markets.
Before I go into my trades, here's a quick overview on how the US equity markets are reacting. Below is a chart of the US S&P 500 Index.

US S&P 500 Index Daily

The uptrend since October 2023 has run its course. If you average out the past market selloffs, the index's recent cross below the trendline indicates a significant bearish sentiment.

Not only has the uptrend run its course, the recent liquidation of US equities was more impactful than prior selloffs. This might indicate that investors are parking their money in cash while they re-assess the investment potential of the United States under Trump.

On the other hand, the currency market was welcomed with a fresh wave of volatility. The demand for the euro spiked in a spectacular fashion.

EUR/USD Daily

For nearly four straight days, traders have been accumulating a rather large position in the euro. These four days wiped out 80 trading days of losses when this pair was in a downtrend.

This volatility was observed on several other currency pairs over the past week.

Trade Recap

Although we're just seven days into the month of March, I have placed close to 30 trades. Due to my time constraint this weekend, I'll highlight two trades placed on the EUR/NZD pair.

Before I post the chart, here is a small recap of my strategy. I still take a trend-following approach. At the time of entry, I look at the daily ATR and only 50% of it. 

Rather than tightening my stop loss, I keep it at 50% of the daily ATR as well. This has several benefits, which I observed last week:
  1. Less thinking - I don't risk over-optimizing my stop loss placement based on the visual breakout range on the hourly timeframe.
  2. Stats focused - rather than relying on visual pattern recognition, I'm using price statistics. If the ATR indicates an average daily price movement of 100 pips, there is a very high probability that I capture 50 pips if price moves in my favor. There's also a very high probability that price moves in my favor because I'm entering the trade in the direction of momentum.
  3. Positive expectancy - my EV is still positive because my win rate is above 50% even with a reward-to-risk ratio of 1:1.
EUR/NZD Daily

On the daily timeframe, the EUR/NZD pair captured my interest when price broke above the horizontal level I plotted. as price tried to cross above this level, I went to the 1-hour timeframe and plotted my intraday ranges to set up my entry rules.

EUR/NZD 1-Hour

When a pair is trending, I will scale in across multiple trades rather than riding the wave. There are pros and cons to each approach.

After price crossed above the daily level, I plotted my Darvas range box on the 1-hour timeframe. I entered a long position as price breached above the upper range boundary. Since the daily ATR was 112.5 pips, I set my take profit and stop loss at 60 pips respectively.

Since life got busy, I didn't scale into this pair until much later in the week. Same concept, I entered a long position as price breached above another intraday range boundary.

Volatility picked up as the ATR increased to 124.2 pips. I configured my take profit and stop loss at 70 pips.

One could argue that it's simpler to buy and hold, but there are a few considerations why I don't think this is worthwhile for me:
  1. You're holding through flat periods - depending on your broker, this might mean additional holding costs during the 5 PM EST rollover
  2. Strong trends are apparent in hindsight - holding trades for a longer period also means more losing or breakeven trades, which may impact the psychology of seeing consecutive losses
  3. Locking away margin - if a pair goes into a range-bound period, you're locking away free capital that could otherwise be used towards other momentum trades
That being said, your mileage may vary on your trend-trading approach.

Pairs-in-Play (PiP)

I don't have any particular currency pairs of interest for the week ahead. Given the abnormally high volatility observed last week, I think we need to keep our guard up as we may see a lot more pullbacks and retracements.

Depending on how trading goes next week, I may provide a mid-week update if my availability permits and key pairs of interest present themselves.