Day Trade Short on Cable – Trade Closed

Trade Closed: 2012-05-08 3:45 ET

Good morning! My day trade idea was triggered just ahead of the US session open, and while the area did look good as resistance, Cable just kept treading on higher. Here’s how my trade played out.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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As we can see on the 15 minute chart above, Cable did trek higher into the consolidation area marked on the chart early Monday morning. 1.6160 did hold as resistance and it looked good as a reversal point for a bit, but we saw risk appetite grow throughout the rest of the session, pushing the pair up to the top of the consolidation range.

I decided to hold onto the position into the Tuesday morning Asia session as the market did not break above the consolidation area, making my trade still valid. But as the session moved along, and after a bit of pullback in my direction I decided to close my trade thinking that European and UK traders would take that momentum higher and break the top of that consolidation.

Total: -10 pips/ -0.05% loss

So, it was a tiny loss on the session, but maybe a wrong call on the close. Looking at an updated chart, it looks like UK traders, who were off during yesterday’s session, may be pricing in the weak NFP report and the uncertainty of the elections in France and Greece this past week. Cable shot down beyond my entry, making it profitable had I held on.

Do I feel bad about that one? Nah. We make the best decision we have with the information available to us at the moment. I’m not annoyed at the loss as much as I’m annoyed at myself for not taking the UK holiday into account more. On the bright side, I’m glad I didn’t buckle when the market was near the top of that range and cut my loss even though the trade was not invalidated yet.

Overall, it was not a bad trade and it’s still early in the week. There’s plenty of market left to trade and hopefully we’ll see some good stuff with all of the major data coming up on the forex calendar. Stay tuned by following me on Twitter and Facebook for updates. Thanks, good luck and good trading!

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Trade Idea: 2012-05-07 4:18 ET

Good morning Forex friends! I’ve been away for a hot minute, but I’m back with a potential day trade short on Cable. Will the recent consolidation area attract more traders to jump in the downtrend?

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The environment isn’t looking too good for risk-on traders as we got disappointing data from around the globe last week (most notably the weak US jobs report). The fun didn’t stop there as Francois Hollande was elected president of France this weekend. His desire to renegotiate the deficit limits could be a problem with the tough-austerity-attitude of German Chancellor Merkel, bringing new uncertainty to the fate of the EU. To top it all off, Greek voters may have done the euro in with their move towards electing anti-bailout parties, further putting in danger the chances of receiving another bailout to keep the country moving along.

This sparked big moves into the Greenback (as expected by Forex Gump) as soon as the market opened for trading this week, gapping most of the majors in favor of the safe haven currencies. There is a bit of pullback at the moment–which tends to be a normal behavioral pattern with gaps–and I think it may be an opportunity to jump into the Cable downtrend and renewed bearish sentiment on risk.

On the 15 minute chart above, we can see the pair found strong support last week as it consolidated between 1.6160 – 1.6200. My hunch is that if we see that area again, traders could jump back into the downtrend. There are no major news events for the day, so technicals may play out well for the rest of the Monday session. Here’s what I am going to do:

Short GBP/USD at 1.6165, stop at 1.6210, profit target at 1.6100

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

This trade structure gives me a potential return-on-risk of about 1.4:1, and since this is a day trade, I’ve decided to only risk 0.25% of my account. Also, I’ll be closing my open orders or position around the end of the US session/beginning of the Asia session. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

  • Sebastian

    I am still on a demo account but was holdign on and closed the trade a little later than you. (that was luck anyway and could have gone wrong. Anyway i like your trading style and have learnt a lot in the last weeks. Thanks

    • pipcrawler

      Thanks for the comment and for checking out my blog Sebastion!  Glad to hear you’ve learned a lot, just don’t stop learning; I’m still learning something new every single day :)

      Good luck and good trading buddy!