Forex Trade Idea: 2014-11-17
In my GBP/USD short forex trade review last Friday, I mentioned that I’m still short bias on the pair. With a similar technical pattern forming, I just may take another shot!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
Now, I say I “just may take a shot” because there are major catalysts coming up from both the Bank of England and Federal Reserve in the form of their respective meeting minutes. Both events have big potential to kick up currency volatility this week as they give us insights to what policy makers are thinking, which is probably the biggest reason why I’m looking at Cable again. There doesn’t seem to be much chance for movement from the rest of the major currencies, other than the Japanese yen (which I’m staying away from for now because of the potential game changers for JPY this week).
In the past releases, volatility can kick up as much as 1 – 2 WATR, which is why I’m going with a conserve short entry by waiting for a retest of the broken support area/major psychological area, which also lines up with the Fibonacci retracement area and 100/200 simple moving averages that have served well as dynamic resistance. My stop will be above the previous swing high, hopefully giving the my trade room to breath if the market drivers still favor a down move. Here’s what I’m doing:
Short half position GBP/USD at 1.5790, max stop at 1.5970, initial target at 1.5600
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.05:1. I may cut this trade quickly if what we get from data this week shifts sentiment against me, and if I get 1.5600 with a position, I’ll re-assess the situation before deciding whether I should take profit or go for a bigger payout. Stay tuned by following me on Twitter and Facebook!