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Trade Closed: 2010-05-28 23:03

PoD Chart

It looks like risk appetite dominated the market yesterday when China went out with a statement saying that it has no plans of reevaluating their European debt holdings. I don’t know about you but this sounds like another chance for traders to sell at higher prices… The overall trend is obviously downwards, and, unless we see real positive news from the UK, I think we will continue to see the pound head lower.

Total Loss: -100 pips / -1.0%

It just sucks a little bit, as there was a point where I was up about 80 pips already! That’s almost a 1% gain! I could feel the money in veins! Not only that, but it seems that price dipped right after stopping me out! Was my stop loss too tight? Should I have put it a little bit higher? Should I have put my stop to break even when I was up already? What do you guys think?

Trade Idea: 2010-05-25 23:03

PoD Chart

While the GBPUSD has been ranging, I do believe that risk aversion is the prevailing market theme right now. On Monday, the pound dropped despite the European holiday, as a major bank in Spain got seized by the Spanish central bank. Apparently, this caused another run of risk aversion which led to losses to both the euro and pound.

Now, no major data has been released lately, but I think that there are some concerns regarding the issues between North and South Korea. I don’t think it was the main cause of strong drop in the euro and pound yesterday, but I think this could be a factor if tension continues to build up. If the situation continues to worsen, I think this will spook traders like the movie “A Nightmare on Elm’s Street” did to me!

Looking ahead, it looks like we’ve got a bunch of high impact reports coming out. From the UK, CBI realized sales and the Nationwide HPI report are both due to be released tomorrow. I read Pip Diddy’s economic roundup on the UK today, and it seems that despite the upward revision in their GDP figure, economic growth isn’t looking too good for the UK. Could we see some disappointing figures in these reports?

Now, on the stateside, we’ve got durable goods, unemployment claims, preliminary GDP data and the PCE report all coming out this week. That’s a whole bunch of reports! I think that with all these reports being top tier events, it could spark a lot of volatility that may help my trade get triggered.

Technically, I’m looking to play the range. As you can see from the chart I posted above, strong resistance could be found at the 1.4500 handle. Despite being tested numerous times in the past two weeks, this level has remained intact. Also, given the absence of hard-hitting economic data, I’m hoping that resistance would hold.

Since I am entering at the top of the range, I can set a nice reward-to-risk ratio. Instead of my usual large stop, I have set my stop loss 100 pips away, which is lower than the pair’s daily average true range. I will lock in profits once the pair falls to the middle of the range and again at the bottom of the range.

Here’s my plan:

Short GBPUSD 1.4500, pt1 at 1.4400, pt2 at 1.4270, stop loss at 1.4600. I will risk the usual 1% of my account.

Don’t forget to add me up on!

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