“They call it trading, not money harvesting” is the battle cry of a friend of mine, and of course he’s correct. Unfortunately, having a reasonable investment thesis and a well-executed trade only guarantees a chance to make money. Which is another way of saying that the short GBP/USD trade that I outlined yesterday resulted in a loss of cash, as I was stopped out at 1.5488. That’s close enough to the high to be annoying, but it hasn’t backed off much.
My premise was that there would be significant resistance at or near 1.5450, and that the price action needed to remain below the 61.8% Fibo retracement level for my hypothesis to remain valid. As the appended charts indicate, that wasn’t the case. The fact that the move was due in part to decent selling of Â EUR/GBP (which tends to boost GBP against the Dollar, and everything else) doesn’t matter.
I haven’t quite given up on the idea, and will now watch for one of the price patterns that indicate a possible reversal, as taught by Todd in his courses. For the record, I put on half of the trade at 1.5452, the other half at 1.5478, for a average of 1.5465, so the net damage was 23 pips. There were times when the position was profitable, but I was reluctant to move my stop lower prior to a test of 1.54; if I’m not mistaken, the overnight low was 1.5419. Had I been at my desk, I might have approached it somewhat differently, but a good deal of movement in FX, a 24/6 Â market, is going to occur when we’re semi- or unconscious.
I continue to think that something in the 1.52s is likely once the current bounce has run its course, but the market cares not at all what I think. Sometimes things do reverse, and if we’re careful about where we place our entries and stops, we won’t get dinged too badly when those occur. If Cable continues to move higher and establishes an uptrend, I’ll be delighted to look to buy on dips. As the friend whom I quoted at the outset is also fond of saying, “I’d rather make money than be right.”
Best of luck.
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