Close Open Orders: 2008-10-27 18:31
Cable fell as hoped, but missed my short entry orders at 1.59 before doing so. Doh!
Since I missed the move on this blog, I have decided to close my entry orders to look for another opportunity.
Close open orders to short 1.59. No trade.
I had a question in the comments on scaling into positions and I realized we didn’t even have a lesson on that trading technique! So, I have decide to write a quick lesson on “Scaling in” in my next post and probably a full out lesson on the different scaling techniques for the School of Pipsology. Keep an eye out for those and stay tuned!
Trade Idea: 2008-10-26 19:55
What’s Up! Looks like Cable might be the play of the week as it looks like the pair is giving us another opportunity to jump in the downtrend.
Another simple technical play as the pair rallies after making a low last week just below 1.53 to the Fibonacci retracement levels drawn on the chart. In a downtrend, these levels tend to be used as potential entry points to re-enter short. Stochastics are in near overbought levels indicating we may see a swing lower.
Fundamentals are still bad for both the US and the UK, but it recent price action indicates the focus has now shifted from US weakness to UK weakness. This may continue especially as we continue to see institutions deleveraging out of riskier plays, like the carry trade, and into safe havens like the US Dollar. This week we have plenty of economic data to watch from both sides of the pond, most of which is forecasted to be weaker. I think the event of the week is the FOMC interest rate decision. Will the Fed cut rates again? Some think they will, possibly as much as 50 basis points. If we do see a cut, this may give Cable a short term boost higher. If not, we may see more Cable selling this week.
So, I’m going short based on the technical setup, trend lower, and the sentiment is the focus has shifted to UK weakness. My potential risk is the FOMC rate cuts this week and that sentiment may shift as the pair may be oversold in the short term. I’d like to scale into my overall position at the different Fibonacci levels, but to keep it simple for this blog, here’s what I’m going to do:
Short GBP/USD at 1.5900, stop at 1.6100, pt1 at 1.5700, pt2 at 1.5000
Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.
If my trade is triggered and my first profit target is hit, I will close out have of my position and trail my stop by 200 pips.
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