What a wild week it's been in not only the Forex markets, but also in the equity, debt, and the commodity markets. Boy am I glad it's Friday, because I think we all could use a well-deserved break.

For those of you who have kept up with our plays for the week, you know that we have been trying to get long dollars all week. I have to look back at our trade sheets, but I think we have been long USD/JPY twice and short EUR/USD once in anticipation of the EUR/USD meltdown we just witnessed. We were all over the EUR/USD high last night before the 150+ point implosion, but unfortunately we placed our limits about 10-15 points too high. The technical reasons for wanting to be short EUR/USD are explained on the chart. We were looking to sell EUR/USD on our third attempt in the 1.2875-1.2995 zone for the move lower, but 1.2872 wound up being the high. I can promise you I won't soon forget that one.

Let's put it behind us and look for the next week's opportunities, because it's important to keep one thing mind. It's not the result of a particular day or week of trading that you should be concerned with, rather the results at the end of the month, quarter, and year. Ups and downs are all part of trading. If your methodology and discipline are strong, then the daily ups and downs will be smoothed out over the long term.

I receive many emails from readers and I always enjoy the feedback, both positive and negative. I'd like to address a common theme here today, which involves traders who overextend themselves on a trade. I know you've all probably heard this many times before, but trading discipline is critical. In order for you to advance to the next level as a trader, you need to apply your own personal risk/reward ratio to every single trade. In fact, I rarely place a trade without putting it in both writing and in chart-form. I keep my own trading disciplined by pinpointing the total risk I am willing to accept on each trade. While we often talk about how many pips we are willing to risk, we should be talking about how many dollars we are willing to risk.

A good rule of thumb is to not risk more than 3-6% of your account equity on any given trade. More aggressive traders might consider the proper risk to be as much as 8-10% of their account equity. But in the end, it's really up to each trader and his or her individual style and risk appetite.

Our focus level remains on the beautiful Fib zone 1.2600 EUR/USD. We will be back Sunday night on the Asian open to formulate our next play.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.