Pick of the Day: GBP/USD – Close Trade

Close Trade: 2009-01-30 10:50

Greetings! I’ve been in this trade for a few days and it’s been an up and down ride as I was down a bit, then Cable dropped my way to 1.41, and now it has shot back up above 1.43. So, Cable really hasn’t gone much of anywhere and with the end of the week approaching I am just going to cut this trade loose (don’t feel like holding this into the weekend) at a very small loss and move on to other opportunities next week.

Closed trade at market (1.4373)

Total: -68 pips/ -0.19% loss

A very minute loss to end the week. Looking back I made the mistake of letting a winning trade turn into a losing one. I was up over 200 pips at one point and probably should have taken profits even though my first profit target was not hit. There are times to follow your plan, and times when you need to be flexible. I should have been more flexible this time as sentiment began to change in the media on the British Pound that it may be oversold and that it was time to buy. This was evident as the US Dollar rallied against the rest of the majors (except Japanese Yen) while Cable stayed put. That’s the lesson learn from this trade – flexibility. It’s a lesson I’ve gone through before, but hopefully will not have to go through again. Thanks for checking out my blog, have a great weekend, and stay tuned for a new trade idea next week!

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Trade Update: 2009-01-28 18:39

What’s up! My trade was triggered during the morning European trading session, but Cable didn’t stop there as the pair continue higher. Luckily, more sellers jumped in at 1.4380 and pushed GBP/USD back down to my entry level. It wasn’t until after the FOMC interest rate decision to keep rates around 0.25% that we saw a push back below 1.4300.

So, I will continue to hold my short position for now. Again, unless economic conditions change for the better, I feel risk aversion will continue to dominate the trends. This sentiment may be for a little while longer and the Fed acknowledged it today in their statement on how bad conditions are and the extreme actions the they are going to continue to take. Stay tuned for updates and adjustments!

Trade Idea: 2009-01-27 15:35

PoD Chart

What’s up Forex Fanatics! Got a simple technical setup on Cable forming that may be another excellent opportunity to short the British Pound against the US Dollar…let’s check it out!

It is the usual setup using the Fibonacci retracement tool on the four hour chart. The pair is in a downtrend and currently retracing after hitting lows at 1.3500. Stochastics are in overbought territory, so we may see some steam running out around the current retracement levels of 50% before we see a possible swing lower.

Fundamentally, the market theme is that we are still in a global recession. The Federal Reserve in the US has already cut rates down to near zero, while the UK is currently cutting rates to battle the financial crisis and recession. There is more to be done by both governments and look for the BoE to catch up to the Fed’s efforts – in other words more rate cuts from the MPC even at rates this low (currently 1.50%). Unless we see banks lending, housing markets turn around, and job losses slowing sometime soon, I don’t see ‘risk tolerance’ staying afloat and Cable continue its rally.

I do think there is a bit more for this retracement to go, which is why I’m going to wait for a better price at 1.43 before jumping in short. I am using the average daily range of about 350 pips for my stop and ultimately target just above previous lows around 1.3600. Here’s what I’m going to do:

Short GBP/USD at 1.4305, stop at 1.4655, pt1 at 1.3965, pt2 at 1.3605

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

We’ve got the FOMC interest rate decision in the US tomorrow, but with rates at 0.25%, a cut to zero probably won’t make any difference. Markets are probably expecting no cut and I think only raising rates would cause any kind of major reaction to the US Dollar pairs. Stay tuned for updates and adjustments!

Don’t forget to check out our new blogger “Pipopatra” at her blog Chartology!

  • PipEater

    Good job. I really agree with but I`m trading GBPJPY only. I just posted a trade idea like yours a few hours ago

  • MaoriPip

    I would have to agree with you in that, I think this pair may go as high as 1.4347 where it will meet some resistance. I have a scalp line around this area to go long (probably only 50 pips or so) but in the medium term I would like to short this with you. I hope this one works for us PipCrawler.

  • MonsterTrader

    Sounds nice Pipcrawler, I’ll keep an eye on it!

    Can you explain what risk aversion and risk tolorance are? Isn’t one of them buying the USD, while another one is selling it?

    Thanks

  • cadarkitek

    I like the idea of going short. This level is also close to a past support which should act as resistance. I’m looking to short as well, but waiting on a reversal candle formation to get in.

  • volodja

    Pipcrawler, why did you decide to short the pair ABOVE the 50% retracement level? (“I do think there is a bit more for this retracement to go, which is why I’m going to wait for a better price at 1.43 before jumping in short.”)

  • PipEater

    Good job. I really agree with but I`m trading GBPJPY only. I just posted a trade idea like yours a few hours ago

  • MaoriPip

    I would have to agree with you in that, I think this pair may go as high as 1.4347 where it will meet some resistance. I have a scalp line around this area to go long (probably only 50 pips or so) but in the medium term I would like to short this with you. I hope this one works for us PipCrawler.

  • MonsterTrader

    Sounds nice Pipcrawler, I’ll keep an eye on it!

    Can you explain what risk aversion and risk tolorance are? Isn’t one of them buying the USD, while another one is selling it?

    Thanks

  • cadarkitek

    I like the idea of going short. This level is also close to a past support which should act as resistance. I’m looking to short as well, but waiting on a reversal candle formation to get in.

  • volodja

    Pipcrawler, why did you decide to short the pair ABOVE the 50% retracement level? (“I do think there is a bit more for this retracement to go, which is why I’m going to wait for a better price at 1.43 before jumping in short.”)

  • Bryan_Cass

    I’m with you on this trade… I’ll go in with just 2 lots, waiting for an entry at about 1.4280 since I’m a little late to the trade. But it looks like it peaked out at 1.4375 today and there’s not much more mojo left to push it higher.

    Thanks!
    Bryan

  • ThePhoenix

    I’m in this trade now. GPD/USD is all I trade. Waiting for it to blow through the 50 fib. I’ve got a sell stop set up a few pips below it. Wish me luck.

  • Pipcrawler

    Thanks for the comments everyone! Looks like we have consensus on the play on Cable, but I’m also interested to hear thoughts one why it’ll go the other way…let’s debate!!! volodja – I don’t know why i chose above 50% Fib. I just felt buyers are going to keep pushing up Cable and that sellers weren’t ready to jump in yet. Plus I like playing round numbers because a lot of attention is drawn to them. I’m in the trade now, so let’s see how the market reacts to the FOMC decision. Could be bad if we see a surprise cut, but I still don’t think another 0.25% will make much difference to market psychology. Let’s see what happens and be ready for anything!

  • Bryan_Cass

    I’m with you on this trade… I’ll go in with just 2 lots, waiting for an entry at about 1.4280 since I’m a little late to the trade. But it looks like it peaked out at 1.4375 today and there’s not much more mojo left to push it higher.

    Thanks!
    Bryan

  • ThePhoenix

    I’m in this trade now. GPD/USD is all I trade. Waiting for it to blow through the 50 fib. I’ve got a sell stop set up a few pips below it. Wish me luck.

  • ThePhoenix

    Well I got stopped out at breakeven. My set up was different than yours. My entry was about 3 pips below my 50 fib line.

    Trade went all the way to +41 pips, so I then set my SL to break even, since 41 was what I was risking. It then proceeded to go to +60. I thought about taking profit, but I wanted to give the trade room to maybe hit a home run. Came back up and got stopped out at Break Even. So, at least I didn’t lose any pips.

    Think I might try to get in if it starts to look like a bounce of off the bottom of the fib.

  • Pipcrawler

    Thanks for the comments everyone! Looks like we have consensus on the play on Cable, but I’m also interested to hear thoughts one why it’ll go the other way…let’s debate!!! volodja – I don’t know why i chose above 50% Fib. I just felt buyers are going to keep pushing up Cable and that sellers weren’t ready to jump in yet. Plus I like playing round numbers because a lot of attention is drawn to them. I’m in the trade now, so let’s see how the market reacts to the FOMC decision. Could be bad if we see a surprise cut, but I still don’t think another 0.25% will make much difference to market psychology. Let’s see what happens and be ready for anything!

  • anidar

    Hi everyone. What a great site! Since I’m new to forex and trading, I find it extremely helpful and filled with priceless information.

    My first question is: how long do you usually stay in a trade initiated on a 240 minute chart? Thanks in advance.

  • enochbenjamin

    Phoenix – almost the same thing happened to me. BE.

  • julian

    Hi pipcrawler.. how long do you anticipate this trade will take before it hits pt 1 ??
    Im in from 1.4316 but the main reason I ask is because I have to change up a fair bit of sterling into us dollars in the next couple of days and the banks give you a bad enough rate as it is !
    Thanks

  • chubspips

    Thanks for allowing us newbies to apply your wisdom. I appreciate any help I can get and look forward to your next pick. I am trading a Euro account and have been making remarkable steps thanks primarily to your insights and the help and mentoring of other seasoned traders from BabyPips. Hope the pips keep piling up and best wishes to you and all who find the wisdom in your words. All my best.

  • anidar

    Hi everyone. What a great site! Since I’m new to forex and trading, I find it extremely helpful and filled with priceless information.

    My first question is: how long do you usually stay in a trade initiated on a 240 minute chart? Thanks in advance.

  • enochbenjamin

    Phoenix – almost the same thing happened to me. BE.

  • julian

    Hi pipcrawler.. how long do you anticipate this trade will take before it hits pt 1 ??
    Im in from 1.4316 but the main reason I ask is because I have to change up a fair bit of sterling into us dollars in the next couple of days and the banks give you a bad enough rate as it is !
    Thanks

  • chubspips

    Thanks for allowing us newbies to apply your wisdom. I appreciate any help I can get and look forward to your next pick. I am trading a Euro account and have been making remarkable steps thanks primarily to your insights and the help and mentoring of other seasoned traders from BabyPips. Hope the pips keep piling up and best wishes to you and all who find the wisdom in your words. All my best.

  • Bryan_Cass

    I was stopped out on today’s runup. I was afraid of something like this, so I put in a protective stop at 1.4235, which gave me a 45 pip gain. I’ll take it! :-) I would wait to see if today’s rally runs into resistance again at 1.4375. If so, I might get back in again from the double top.

  • invinc

    was there any particular event/news that trigger the retracements from 1.4071 to 1.4400 this morning? that was a huge jump in 4 hours span.

  • bilal_shirazi

    Could it be because George Soros is no longer shorting the sterling?

  • Bryan_Cass

    I was stopped out on today’s runup. I was afraid of something like this, so I put in a protective stop at 1.4235, which gave me a 45 pip gain. I’ll take it! :-) I would wait to see if today’s rally runs into resistance again at 1.4375. If so, I might get back in again from the double top.

  • MonsterTrader

    Ya what happened this morning?!?! I paniced and closed :(

    I want to jump back in though…any thoughts?

    and who is this Soros guy? did he buy another billion dollars worth?

  • MonsterTrader

    is that a valid double top on the 1 and 4 hr?

  • gsbpipster

    I think it is going up further before going back down again. There was significant strength in the buying that occurred overnight. The retrace from that large move up has only been only around 50%, and significant support has come in around 1.4250. Moreover, most of the original breakout occurred when the US markets weren’t open, so it occurred on relatively low volume, and often these types of low volume breakouts retrace fully before continuing again.

    Anywya, there’s a contrarian viewpoint.

  • invinc

    was there any particular event/news that trigger the retracements from 1.4071 to 1.4400 this morning? that was a huge jump in 4 hours span.

  • barrooo

    well its bounced off the 61%fib of the swing beginning on the 16th jan, but doesn’t seem to have had much selling power. I’m a bit nervous and I may bail if it positively breaks the 61%. Looks like theres quite a bit of divergence between the pound and the euro against the dollar

  • bilal_shirazi

    Could it be because George Soros is no longer shorting the sterling?

  • Bryan_Cass

    I’m back in short again — looks like today’s rally was rebuffed. Daily chart shows downtrend still… I think the retrace from 1.49xx to 1.35xx is over. We shall soon see — although I would exit any positions before the rate meeting next week.

  • MonsterTrader

    Cool I’m in with you, out with the emotions :)

  • MonsterTrader

    Ya what happened this morning?!?! I paniced and closed :(

    I want to jump back in though…any thoughts?

    and who is this Soros guy? did he buy another billion dollars worth?

  • MonsterTrader

    is that a valid double top on the 1 and 4 hr?

  • gsbpipster

    I think it is going up further before going back down again. There was significant strength in the buying that occurred overnight. The retrace from that large move up has only been only around 50%, and significant support has come in around 1.4250. Moreover, most of the original breakout occurred when the US markets weren’t open, so it occurred on relatively low volume, and often these types of low volume breakouts retrace fully before continuing again.

    Anywya, there’s a contrarian viewpoint.

  • barrooo

    well its bounced off the 61%fib of the swing beginning on the 16th jan, but doesn’t seem to have had much selling power. I’m a bit nervous and I may bail if it positively breaks the 61%. Looks like theres quite a bit of divergence between the pound and the euro against the dollar

  • Bryan_Cass

    I just put a 35 pip trailing stop from the current bottom of 1.4204 on mine — so the stop is at 1.4239 and the current price is at 1.4220. 35 pips is a little more than the retraces are on the way down so far, so it should hold maybe for another couple steps down. I guess I don’t have the guts to stay in the game for the whole enchilada down to 1.3965… the market is just too choppy for me to risk losing what I’ve gained so far. What do you think about trailing stops, Pipcrawler?

  • Bryan_Cass

    I’m back in short again — looks like today’s rally was rebuffed. Daily chart shows downtrend still… I think the retrace from 1.49xx to 1.35xx is over. We shall soon see — although I would exit any positions before the rate meeting next week.

  • MonsterTrader

    Cool I’m in with you, out with the emotions :)

  • Bryan_Cass

    I just put a 35 pip trailing stop from the current bottom of 1.4204 on mine — so the stop is at 1.4239 and the current price is at 1.4220. 35 pips is a little more than the retraces are on the way down so far, so it should hold maybe for another couple steps down. I guess I don’t have the guts to stay in the game for the whole enchilada down to 1.3965… the market is just too choppy for me to risk losing what I’ve gained so far. What do you think about trailing stops, Pipcrawler?

  • barrooo

    Hey Pipcrawler, just wondered what you look for in a trade you post on babypips, I know you take other trades than those posted, so I wondered if they were more conservative or had to have some other criteria

  • Bryan_Cass

    Obviously I was stopped out at 1.4239 last night. Cable popped up again to 1.4345 overnight. The bulls just don’t want to give in, so I’m out of this trade… too volatile for me, sorry Pipcrawler. I hope you get your 1.3965 though. Let us know your thoughts on the trade so far.

  • barrooo

    Hey Pipcrawler, just wondered what you look for in a trade you post on babypips, I know you take other trades than those posted, so I wondered if they were more conservative or had to have some other criteria

  • Pipcrawler

    Thanks for the comments everyone! Looks like I couldn’t pull out a winner this week, but it was a very, very small hit for me. There were calls from institutions and gurus like Soros calling for buys on British Pound. Definitely held sellers back away from Cable. Barroo – I look for simple support and resistance plays, especially when it goes with a trend. Fundamentals are a factor, which is kinda easy now a days since the focus is on global recession. Cable will rally but I think it will be limited….watch 1.44 – 1.45 for possible resistance… who knows….i may just jump in then! Stay tuned and thanks again for the comments and checking out my blog!

  • Bryan_Cass

    Obviously I was stopped out at 1.4239 last night. Cable popped up again to 1.4345 overnight. The bulls just don’t want to give in, so I’m out of this trade… too volatile for me, sorry Pipcrawler. I hope you get your 1.3965 though. Let us know your thoughts on the trade so far.

  • Bryan_Cass

    Thanks, buddy. Let’s try a trailing stop on the next one… what do you think?

    I did get in with another short on GBPUSD today… my BE is right on the .236 retrace line from today’s rally, so I should be OK before the end of trading today.

  • pipsprof.

    Hi pipcrawler,I bought from 1.4305 and got 180pips before getting out today.I knew George Soros call was going to hav a great effect on the cable.Anyway,you win some and loose some, have you tried out gbpjpy cross b4? Its a great and stable pair of currency to trade.Its average daily range is over 280pips,and is less choppy,many pips might just be lurking in on that pair.I am out for this week,Lets see what happens nextweek,cheerio.

  • Pipcrawler

    Thanks for the comments everyone! Looks like I couldn’t pull out a winner this week, but it was a very, very small hit for me. There were calls from institutions and gurus like Soros calling for buys on British Pound. Definitely held sellers back away from Cable. Barroo – I look for simple support and resistance plays, especially when it goes with a trend. Fundamentals are a factor, which is kinda easy now a days since the focus is on global recession. Cable will rally but I think it will be limited….watch 1.44 – 1.45 for possible resistance… who knows….i may just jump in then! Stay tuned and thanks again for the comments and checking out my blog!

  • Bryan_Cass

    Thanks, buddy. Let’s try a trailing stop on the next one… what do you think?

    I did get in with another short on GBPUSD today… my BE is right on the .236 retrace line from today’s rally, so I should be OK before the end of trading today.

  • pipsprof.

    Hi pipcrawler,I bought from 1.4305 and got 180pips before getting out today.I knew George Soros call was going to hav a great effect on the cable.Anyway,you win some and loose some, have you tried out gbpjpy cross b4? Its a great and stable pair of currency to trade.Its average daily range is over 280pips,and is less choppy,many pips might just be lurking in on that pair.I am out for this week,Lets see what happens nextweek,cheerio.

  • chubspips

    IMO, because the Sterling is so readily still doing large amounts of business with the Euro, the two will tend to rise and fall at similar times, each in a different measure but it would appear that they are “joined at the hip” so to speak when it comes to actual direction and trend. This is not due to political situations as much as it appears to be as there is a definite and sizable influence from outside this pair that plays a roll. I doubt its the yen, but…

  • pipsprof.

    Happy weekend,just forgot to tell you that some of your updates fails to deliver in my email,especially when u are closing your trades,does this happen to anyone else or its just my problem.I had to get this update directly from the website instead of my box.Mr.Pipsurfer kindly check this out for me as it might be too late to adjust some of the trades.Thanks

  • chubspips

    IMO, because the Sterling is so readily still doing large amounts of business with the Euro, the two will tend to rise and fall at similar times, each in a different measure but it would appear that they are “joined at the hip” so to speak when it comes to actual direction and trend. This is not due to political situations as much as it appears to be as there is a definite and sizable influence from outside this pair that plays a roll. I doubt its the yen, but…

  • pipsprof.

    Happy weekend,just forgot to tell you that some of your updates fails to deliver in my email,especially when u are closing your trades,does this happen to anyone else or its just my problem.I had to get this update directly from the website instead of my box.Mr.Pipsurfer kindly check this out for me as it might be too late to adjust some of the trades.Thanks

  • mvaya1

    I closed my order this morning and made about 151 pips thanks a lot. I was sweating a little this weekend but had a gut instinct that I would be able to get out today with profit. Ps its only a dummy account but I am playing it as if its real.

  • julian

    im in for real and had that same gut instinct..closed half position for 204 pips and put stop for remainder at break even.. thanks PC for the original call..you da man !

  • mvaya1

    I closed my order this morning and made about 151 pips thanks a lot. I was sweating a little this weekend but had a gut instinct that I would be able to get out today with profit. Ps its only a dummy account but I am playing it as if its real.

  • julian

    im in for real and had that same gut instinct..closed half position for 204 pips and put stop for remainder at break even.. thanks PC for the original call..you da man !