20/04/2012 Part 1 – No love from GBPUSD…..

Traders,

A quick shot of a losing position (I say position because there were several elements to the trade) that closed out on Cable last week.

From its lows in the 2nd week of 2012 GBPUSD has ground its way north with all manner of false breakouts occurring on the weekly chart.

At point 1 back at the end of Feb the Pin Bar reversal offered me a short trade which I took and scaled out of. Thankfully this worked for me as price continued its grind north.

At point 2 back at the start of April whilst not an engulfing candle price did print one of my momentum reversal candle patterns with an element of divergence from the stochastic, a turn down of the weekly momentum and the gathering of the MA’s with a run-in to the 200 MA in particular.  I was happy to short again which I did with three elements:

– A short at the 50% retrace of the large weekly bar at 1.5965 (which was also in the same area of the 200 MA…but remember I didn’t know that at the time)

– A No Touch Binary Option for price not to touch 1.6100 before 30th April 2012

At point 3 you can see that the following week price retraced back to the 50% / 200MA region and my short was triggered.  Furthermore the weekly bar finished as an Inside Bar Hammer which gave me confidence in my trade direction.  I was looking to add to my position below the 1.5800 handle.

So at the end of the week before last I was sat quite happy that my trade plan was in a good position and looking to add if it continued in my direction.

Well as any traders knows anything can happen and the following week increased inflation report was enough to make people think that the UK BoE will increase rates faster than the US…which was enough to make people buy sterling and sell dollar. At point 4 you can see the resulting outcome of which was a strong move north in Cable for the remainder of the week!  Come Friday not only had my trade been taken out but my Binary Option No-Touch level of 1.6100 had been taken out. Check out the size and strength of that candle!

Thank-fully id been able to mitigate some of the risk of these two positions but it was a great example of how a plan is only good till first contact with the enemy! (The best laid plans of mice & men etc).

So there was no love from the Cable on that position. But that’s ok, its part of the game as always the important thing is that I planned my trade, traded my plan and managed my risk.

Until next time, trade well.

Paul