Trade Closed: 2012-4-26 00:10
I was correct in saying that Cable would breakout of its consolidation once the GDP report gets released. Unfortunately, I was on the wrong side!
As you can see, price broke out of its consolidation before the release of the report, triggering my long orders. But when the GDP came out, it was much worse than expected at -0.2% and showed that the U.K. has gone into recession (two quarters of negative growth), which led to a huge pound sell-off.
I actually don’t feel that bad about this trade. Although a lot of you would disagree with me, I still thought it was a good idea. I also risked only 0.5% as I wasn’t comfortable risking a whole 1% on a day trade!
Buy GBP/USD at 1.6160: Stopped out at 1.6120, -40 pips/-0.5%
Trade Idea: 2012-4-25 03:03
Looking at GBP/USD on the 15-minute chart, we see that the pair has just been consolidating in the Asian session. So I figured, why not play the break?!? After all, we do have the U.K. GDP report on tap.
The upcoming GDP report will be a big event because the last one came in negative. If it comes out with another negative figure, it will mean that the U.K. has hit a technical recession. Remember, economists deem a country in recession if it experiences two straight quarters of contraction.
If the actual figure later comes in as expected, or better yet, higher than forecast, we could see Cable rally strongly. If it doesn’t, then I suspect we’ll see sell-off.
While it could go either way, I opted to root for the bulls. I’m a firm believer that the trend is your friend and I think that the pound will continue trading higher. Do note that Cable has gained in the last seven days.
I’m going to be patient on this one and only enter after I see a break of the Tokyo session high at 1.6160. I plan to set my stop well below the Asian session low at 1.6120 and aim for 1.6200. I know a 1:1 return-on-risk ratio isn’t exactly something to be excited about, but I think it’s good enough for a day trade.
Once again, here’s my game plan:
Buy GBP/USD at 1.6160, SL at 1.6120, PT at 1.6200. Risk disclosure.