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The numbers are in… and I’m out of this trade! Here are the reasons why I decided to exit this EUR/GBP position early.

Short EUR/GBP

In my initial trade idea, I’ve mentioned that I was looking at a long-term downtrend on EUR/GBP, mostly based on expectations that the ECB would take a very dovish stance in this week’s monetary policy statement. Of course that’s not how things turned out, as Doomsday Draghi seemed to be in a much better mood during the event.

I shorted EUR/GBP last week on a break of the head and shoulders neckline, thinking that it was the confirmation I needed for a short bias. Price pulled up to the broken neckline for a quick retest then resumed its slide but failed to break below the .8300 handle despite stronger-than-expected U.K. CPI and jobs data.

EUR/GBP 1-hour Forex Chart
EUR/GBP 1-hour Forex Chart

I probably should’ve closed a bit earlier when the U.K. retail sales missed expectations and showed a 0.9% slide but I was hoping to hear a few easing hints from the ECB then. By the time the U.K. printed a contraction for both the manufacturing and services sector PMIs, I finally decided it was time to jump ship. After all, these figures are for the month of July (post-Brexit vote) and are considered leading indicators, which means that they’re more likely to affect future pound action compared to the reports released earlier in the week.

With that, I ended up with a 50-pip loss on this trade or a tiny 0.07% dent on my account. As you’ve probably guessed, I’m keeping my GBP/USD short position open now that pound bears have more reason to push the currency lower.

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Risk Disclosure
Pipcrawler’s Q2 2016 Blog Trading Performance
Pipcrawler’s Favorite Trading Books

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This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.