GBP/USD: Playing the Range – Trade Closed

Trade Update: 2012-3-28 2:20

GBP/USD 1-Hour Chart

Am I stubborn or what? Despite GBP/USD going my way TWO times, I chose to keep my position, hoping to see my profit targets get hit. Now I see that this was a terrible decision as price reversed and triggered my stop loss.

I clearly realize that this was a mistake on my part. My initial analysis had been correct, but when conditions changed, I failed to adjust. I should’ve closed my position as early as Friday when the pair climbed after it had dropped following the worse-than-expected BBA Mortgage Approvals report from the U.K.

Stopped out at 1.6000: -122 pips / -1.0%

Yes, I am feeling bad about this trade since I took a loss when I could’ve avoided it. I let my emotions get the better of me like a silly noob.

Trade Idea: 2012-3-21 3:01

GBP/USD 1-Hour Chart

Will you look at that! It appears that Cable has been trading within a very wide range. With price testing the top, will we see sellers start jumping in short again? I think we will, so I’m going to pull the trigger and sell this pair.

Here are my technical reasons:

1. A doji formed yesterday at the top of the range
2. The top of the range lines up nicely with the 1.5900 major psychological level
3. The Stochastic is moving down after crossing over in the overbought

I have to be honest though. I’m a bit scared of the events that we have scheduled from the U.K. today.

First, there’s the BOE MPC meeting minutes. Analysts are saying that it could reveal that the central bank is hesitant in providing the economy with more QE. MPC members Dale’s and Weale’s remarks about inflation possibly coming in higher than the bank’s forecasts might be shared by the rest of the committee members and could keep the bank from launching another stimulus package.

But then again, perhaps this has already been priced in and we could see a “buy the rumors, sell the news” move on GBP/USD. It’s possible. I mean, market participants may consider the headline CPI figure for February which printed at its lowest reading in over a year at 3.4% and re-adjust their monetary policy expectations.

Secondly, Chancellor of the Exchequer George Osborne is scheduled to present his annual budget plan later today. Pip Diddy says that upward revisions on GDP forecasts from the Office for Budget Responsibility could spur the pound into a rally.

However, I think the current market sentiment is working in favor of my trade. We can’t deny the dollar’s strength these past couple of weeks, rallying on the back of positive fundamentals as well as risk aversion. I’m expecting to see it post gains again in today’s trading as concerns about China’s growth linger in the markets.

So based on my fundamental and technical reasons, I have decided to short Cable. I sold at market and I’m ultimately aiming for the bottom of the range. I’ve split my 1% risk into two positions so I can manage my trade easier. I’ve placed my stop at 1.6000, above the most recent high.

(Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.)

What do you think of my trade idea? Hit me up on Meetpips, Twitter, Facebook, or Google+!

XOXO,

Huck

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  • Gmkar30

    I like this setup.I’m in too

  • alwjmonster

    Hi huck.. i suggest you wait for all the UK reports out first, before deciding..

    • huck

       I already sold the pair when I posted this report. Thanks for the tip though, I’ll consider that next time!

  • CloudyPips

    To add fuel to my own fire it’s also slapping around our S1 pivot :D What a shame I missed out on that 100 pip move! I was eye balling the H&S formation last night before bed and should have gone with my gut!

  • Muteenh

    The Uk will need some good news to break the 1.6 and upwards. Cable wants to go higher but doesnt have a reason for it so it has stayed around 1.58-1.59

  • Azhari Wassim

    I believe its time short as its a 4th wave most probably forming a Flat, then up for a 5th wave, forming a double zig zag, if you are into intraday trading :)

    • huck

       I see what you mean. While this is a swing trade, I’m glad that we came into the same conclusion!

  • CloudyPips

    If you check out a line chart there’s a very blatant declining head and shoulders with a) a major support (now resistance) at 1.5820, the obvious minor psych, plus this is also the neckline AND the 61.8 fib expansion from the prev days high/low! Waiting for that stop hunt up to the 1.5820 from the big banks to trigger my entry and off we go I think :P Nice trade.

  • herbert

    After so many days, the pair still at 1.59 with poential of a upward break thru. If I were u, better take small profit or loss and close the order. Obviously, your analyst was wrong.

  • Azhari Wassim

    Almost every single pair is going to fall against the US dollar…

    GBP/USD is forming a triangle on the monthly chart, if i were you i would short $100k for a $300k – $400k in  7 months period