Pick of the Day: GBP/USD – Trade Closed

Trade Closed: 2008-11-06 12:00

The MPC came to play today as they cut a whopping 150 basis points! That brings the interest rates in the UK down to 3.00 percent and a lot of volatility to Cable. The pair shot down shortly after and broke the trendline. Unfortunately for my trade, where I was entering short is where everyone else was taking profits and buying up Cable. My stop wasn’t wide enough to handle the whipsaw as the pair rallied back up to 1.6000 before dropping back to pre-announcement levels. Doh!

Total: -250 pips/ -1.0% loss

So, I took another small hit today, but I am still bearish in this pair as the world shifts the focus back to fighting a global recession. Stay tuned!

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Trade Idea: 2008-11-05 23:38

PoD Chart

Price action in Cable seems to be calming a bit, forming a symmetrical triangle pattern on the four hour chart. Traders are awaiting for the Monetary Policy Committee’s decision on UK interest rates later today. The question isn’t whether or not “if” the MPC will cut rates, rather than “by how much?”

Will they cut by the projected 50 basis points or will the MPC be more proactive in fighting the recession by cutting more? Either way, I think we may see more Sterling bearishness and possibly more volatility after the decision to cut, especially if the statement is dovish on the state of the UK economy.

I’d like to short on a break of the triangle to the downside and target the previous lows hit around 1.53. My stop will be a wide 250 pips as we are still in a highly volatile environment.

Here’s what I’m going to do:

Short GBP/USD at 1.5750, stop at 1.6000, pt1 at 1.5500, pt2 at 1.5250

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

If the trade works out my way, I will possibly target beyond the previous lows by using a trailing stop. Stay tuned for adjustments!

  • PipWolf

    Did you get stopped out as a result of the BoE rate cut? Is the technical analysis still valid now that the markets have taken it into account?

  • Pipcrawler

    Hey Pipwolf…yeah, I took a very quick hit as it looks like my entry point was everyone else’s Buy level!!!…haha. No biggie, I think the trend is still down and any staying power below 1.58 is bearish. I’m still looking to go short

  • afish999

    gotta love volatility, been watch this for a couple of days now. I still think short also! good luck

  • enochbenjamin

    Volitility is a beast – I have not traded my normal lot size since early September. If you catch one – just hang on for the ride.

    Good surfin dudes!

  • Jayala

    I’m really new to trading, but managed to follow this trade just now, and captured a few ‘baby’pips on my live acct. Just wanted to say thanks and keep ‘em comming

  • PipWolf

    Did you get stopped out as a result of the BoE rate cut? Is the technical analysis still valid now that the markets have taken it into account?

  • camelman

    Hey Pipcrawler, I got in after the report and sitting on a good profit right now. Thanks to you. I am looking at the chart 4:00 PM Eastern and I see a text book Head-and-Shoulder setup. Do you see a free fall? Again thanks for your post.

  • Pipcrawler

    Hey Pipwolf…yeah, I took a very quick hit as it looks like my entry point was everyone else’s Buy level!!!…haha. No biggie, I think the trend is still down and any staying power below 1.58 is bearish. I’m still looking to go short

  • Pipcrawler

    Haha…well, I’m glad to hear my posts has helped someone :) Camelman – I don’t know what is going to happen next, but the downtrend is the path of least resistance. Just stick to your money management strategy and don’t forget to lock in profits along the way…. good luck!

  • afish999

    gotta love volatility, been watch this for a couple of days now. I still think short also! good luck

  • PipWolf

    Hey Pipcraweler and camelman; ditto for me: got in right after the volatility had settled after then news because the chart didn’t look any different and if anything the huge rate cut by the BoE tells me that the British economy is in worse shape than Gordon Brown and chums are letting on. We’ll see.

  • enochbenjamin

    Volitility is a beast – I have not traded my normal lot size since early September. If you catch one – just hang on for the ride.

    Good surfin dudes!

  • Jayala

    I’m really new to trading, but managed to follow this trade just now, and captured a few ‘baby’pips on my live acct. Just wanted to say thanks and keep ‘em comming

  • camelman

    Hey Pipcrawler, I got in after the report and sitting on a good profit right now. Thanks to you. I am looking at the chart 4:00 PM Eastern and I see a text book Head-and-Shoulder setup. Do you see a free fall? Again thanks for your post.

  • Pipcrawler

    Haha…well, I’m glad to hear my posts has helped someone :) Camelman – I don’t know what is going to happen next, but the downtrend is the path of least resistance. Just stick to your money management strategy and don’t forget to lock in profits along the way…. good luck!

  • PipWolf

    Hey Pipcraweler and camelman; ditto for me: got in right after the volatility had settled after then news because the chart didn’t look any different and if anything the huge rate cut by the BoE tells me that the British economy is in worse shape than Gordon Brown and chums are letting on. We’ll see.