Trade Closed: 2010-06-20 22:30
Oh, so I did jinx myself! To be honest though, I don’t feel so bad even if I got stopped out at breakeven because I believe it was the right thing to do. If I took profit too early and didn’t allow enough breathing room, I might have ended up closing the trade that could’ve made my year!
I was trading the daily charts, and if price went my way, I would’ve added to my positions and turn the initial 2:1 reward-to-risk ratio into as much as 10:1!
So what’s next for me? Should I continue shorting the pound? Or should I just shift my view and ride this retracement? Hmmm… Think Huck, think!
Trade Adjustment: 2010-06-16 22:48
I got triggered! I don’t want to jinx it but I just can’t help it… It looks like I caught a top. With price going more than 75% of my stop loss in pips already, I’m going to move my stop to breakeven (1.4850) in order to create a risk-free trade.
Cross your fingers guys! This could be the super swing lower that us bears have all been waiting for!
Trade Idea: 2010-06-15 23:51
The other day, Big Pippin showed a daily chart of the GBPUSD on his chart art. He highlighted the descending trend line connecting the pair’s lower highs and, at the same time, pointed out the area of interest around the 50% retracement level. That got me thinking about a possible trade idea…
I also noticed that the stochastics are in the overbought area, probably getting ready to move back down. I placed my short entry order near the 50% Fibonacci level, with my stop 190 pips away. I set my first profit target at the week open price of 1.4580 and my second profit target at 1.4250. Quite an ambitious target, don’t you think? Then again, we never know if this pair could fall back to its yearly lows!
Of course, what use is a trade idea without fundamental backing right? So, once again, let me stand on my soap box and tell you all about why I think the pound… well, sucks!
For one, inflation in the UK is waaaaaay over the Bank of England‘s target rate. Under normal economic conditions, this would probably warrant a rate hike but these aren’t normal times! The BOE simply cannot raise rates because it runs contrary to its expansionary policy.
Remember, whenever central banks tighten monetary policy, e.g. raising interest rates, it makes it more expensive for businesses and consumers to secure loans, which could temper economic growth. With the exorbitantly high unemployment rate and high inflation, UK might end up as a prime example of an economy experiencing “stagflation” – at least, according to Forex Gump.
I’m not saying the US is doing any better. One main difference between the two though is that the dollar has this unfair advantage of being the world’s reserve currency. Once “bad” economic data starts coming out again, we could see the dollar find a lot of buying support again!
Looking at the economic calendar, there are some economic data that could take price to my entry point. If these come out better-than-expected, particularly UK’s unemployment rate and the Claimant Count Change, we just may see the pound rally enough for me to hit my sell order.
Here’s what I’m gonna do:
Short GBPUSD at 1.4850, stop loss at 1.5040, pt1 at 1.4580, pt2 at 1.4250.
Wish me luck on this one! And don’t forget to follow me on MeetPips.com!