Well hopefully you entered this Short EUR position when the candle appeared below the 50 day MA. If you did then you are ahead 600 pips. The next question is how do I know when to exit the trade and realize my PNL? This is a very important component of trading. Before you enter every trade you not only need to establish a stop loss but also a profit target and a contingency plan.
Originally, when we anticipated this potential EUR Short, we projected a long term take profit around 1.4150. That plac es our target range between the 200 day MA (currently at 1.4190) and the 38.2% Fibonacci Retrace level at 1.4118 (see chart below). At a handle of 1.4150 we expect to see the EUR hold some support. Given the Greenback's sharp rise against the EUR a minor retrace is anticipated.
This is where contingency trade management enters into the equation. The EUR at this point is likely to reach its target range of 1.4150. One can make the common mistake of saying “it’s close enough”, and close out their position, or one can continue to perform technical analysis as well as be cognizant of the fundamentals and reevaluate the target levels.
Obviously, we advise the second of the two options. The first order of business is to adjust your stop. For example, you need to define a new level which you view as a change of momentum. It might be a close back above the 100 day MA or a close above the 23.6% Fibonacci Retrace level etc.... This will ensure that your profits are locked in.
The second order of business is to define a new PNL target in the case where your existing target looks like it will be taken out handily. On our chart we would look to the next level where we see potential EUR support. In this case it is the Fibonacci 50% Retrace level at 1.3810. At this point into your trade you should also use additional indicators. One common indicator used by traders is the Relative Strength Index (RSI). Using additional predetermined indicators will help you manage your position more confidently.
Remember, the market as a whole determines where price will end up, not Fibonacci. You do not want to close a position before it matures but you also do not want to hold a position after it matures. Originating a target level based on sound technicals provides perspective on price action. Your objective is to make money. No one gets in at the high and out at the low, but getting as close as you can will help you complete your objective.