The Great British Pound has really taken a beating over the past few months. I’m seeing relative strength in the currency across the board meaning – the GBP is making solid headway against a majority of other currencies. Looking for possible reversals against USD, CAD as well CHF could result in some decent trades.
I do caution however – the GBP is a wopper. It moves extremely fast and furious at times and demands tremendous respect. My suggestion would be to consider these trades with a very small position size – and allow for considerable volatility.
GBP Counter Trend Rally
All short USD trades are performing nicely here as of this morning, and I will look for further in USD/CHF as the day progresses. Otherwise I am nearly 100% out of JPY trades with a few small ones still hanging in profit.
I rarely trade GBP but do see it as an opportunity and will approach it purely as “a trade”.
I’m a big fan of this trade myself Kong, and as I mentioned before, going by seasonality, the GBP really perks up around mid-March, which is exaclty what it looks to be doing. I also like all the negative attention it’s been getting lately; usually, I’ve noticed that when certain currencies start really getting “dogged” on in the press that they tend to do the opposite (rise as opposed to fall; of course, this is after they have Already fallen so much).
Right on – I recall your mention of it previously. Looks like you’ve got it down. Great.
And yes – when a currency moves “so far” in one direction (I often think of them like corks floating on the ocean) – it’s only a matter of time til things change. The media certainly does it’s best (along with the brokers n bankers) to get as many on the wrong side as they can.
Hi Kong,
Thanks for all the great blogs. Just a question, what do you mean by “purely as a trade”? Whats the difference between this and your other trading?
Keep up the good work.
Deano – thanks for stopping in.
Absolutely fantastic question, awesome question – the best question!
If you’ve been reading here a while, you will already know that I am a “fundamental trader” at heart – meaning that I primarily frame my trade concepts/ideas around fundamentals such as monetary policy and the flow of cash on this planet as it pertains to risk “on or off” type sentiment.
Unfortunately the ol GBP doesn’t have a place in the majority of my fundamental analysis – as it is very difficult to pin down. Is it a “risk related currency”? Is it a “safe haven” currency? Where does the GBP fit in the “grand scheme of things”? The fact that GBP doesn’t fit into either category is reason enough for me to avoid it – fundamentally.
Now……we’ve got a situation here where a given currency (GBP) has qualified for “a trade” on a purely technical level – as my short term indicators have indicated that a move is in play. I approach this from a completely different mind set in that – I will trade it purely on a technical level, take profits as fast as I see them – cut my losses in a split second and not blink an eye – as currently GBP has no place in my macro upper level trade concept and plan.
Kong, got it and makes good sense. I’m with you, going long target at the multiple fibs at 1.5190-1.5200, stop below 1.50. Cheers.
Ideally I like having the fundamentals on my side FIRST – then approach the technicals. However when opportunity presents itself technically – I’m gonna move on it, only with a smaller position – and smaller expectation.
If the trade works out…great. If not…no thing.
Let me know how it goes.
Agree, set and forget, small lot tight stop, R:R>1, see what happens.
Everyone has there own comfort level – and the use of “stops” is an entire blog post / section unto itself.
Personally, I have an extremely high tolerance for risk (with considerable confidence in my short term tech/indictors) and am not a very large fan of “tight stops” when trading forex.
The volatility will get you more often than not – even if you where correct in placing the trade in the right direction. Stops need to be set “far enough above or below” the current price action to allow for this. Take a look at whatever time frame you are trading…and try to place stops “well out of the way” of the “squiggles”.
Kong, I would like to know what leverage you are using for forex. Thank you.
-Pal
No not really.
My account balance is such that I rarely use 25% of it – generating these kinds of profits.
At times (when I do step on the gas) I will expose more – but only for extremely short periods of time.
Mr. Kong .. i beg some questions here: what news sources you look at first besides price actions?
It seem you always on the right side at market direction and mostly at RIGHT TIME. While i keep gong long. long and USD/JPY and long Comodity pair and get suck again.
How to ‘dance’ the market like you do here ? geting short, reverse trade then take profit. Then wait .. enter again and so on.
How do you do that man .. how do you conect fundamental backdrop, global capital cahs flow and the news ?
I hold you in highest regard. Do keep up your very good effort. Free stuff is never taken for granted, not even the air we breathe
Tim
Hi Tim.
Great questions.
The “news” is always the one that can catch you – as it brings with it the unexpected. Or does it? – Could pure price action perhaps have given some indication “prior” to the news…..that something was going to change? – Well…..not like a “crystal ball” but to a certain degree – yes I believe so. “Price action” and the ability to “filter news”…….. then apply it to the current fundamental backdrop -yup.
Practice Tim….lots n lots of practice!