If this is the case, then the proposed wave '4' should hold above the Nov 19 wave '1' high of .6593. Therefore, that price can be used as a stop loss. Targets lie at .6730 (wave 5 = .382 * wave 1-3) and .6848 (wave 5 = .618* wave 1-3). This yields better than a 1:2 risk to reward ratio.
Sentiment on the Kiwi for the past couple of years has been consistent. I find it interesting how for the past 2 years there have been more buyers in NZDUSD yet price has fallen from nearly .85 to the current .66. Now, the number of long traders has dropped to nearly a 2 year low perhaps signaling a bottom is in or is nearby.
Kiwi's Speculative Sentiment Index currently sits near -1.3...this sentiment zone between -1.3 and -1.8 is the lowest in the past 2 years. Sentiment is a contrarian signal so as it falls, look for price patterns.
Follow real-time sentiment readings HERE.
1) Tighten stops - this doesn't help you much unless your stop loss was 300 pips wide and now it becomes 100 pips wide. If you tighten from 100 pips to 20 pips, you are still at risk of price gap and price slippage so tighten the stop doesn't help you much. You could still get filled several pips away from the stop loss.
2) Get out completely - the safest exposure in trading is to not be in a trade! Therefore, spreads widening doesn't impact you. Market illiquidity doesn't impact you. You might miss a trading opportunity but clearly there is more risk so the reward isn't as fruitful anyway. Trading is a marathon and not a sprint. These are just 2 of 52 weeks in a year.
3) Reduce exposure by closing down a portion of the trade - therefore, what is left is a small trade size in which a significant price gap in either direction doesn't affect your P/L by much. How much do you leave? Answer this question...if you didn't look at another chart or log into your account until January 4, how much trade size would you be willing to leave in the market? Essentially, a size so small it doesn't really matter what happens.
As for me, I would NOT do #1.
For my trading, I consider #2 or #3.