Cable Update (GBPUSD)

I have tried hedging with miserable results.

The results of the poll at the top of the page is a pin, right?

Forget about it. It's not a market-mover thing. He hasn't even prepared the speech for the remarks about China. You can see it yourself about an hour later.. Have to wait...

well ... i had one of them weeks... if only i could do it consistently !! i could have a subscription service and those who subscribed could do

'THE EXACT OPPOSITE'

of what i recommend. and they would be loaded ;D

good weekend all and happy trading..

-decca

heheeehee... so why the economic calendar put his schedule on the list
my 15mnt chart show suddent down movement on gbpusd at the same moment... if only i've already make a limit around 2.0005

Its nice to know other traders have had a crap Friday as I have. Makes me feel better.

My first week trading live and I have reduced my hard earned weekly profit by 70% in one day.

To distract our attentions maybe..: Hey, heard that London fixing could cause some ripples.. Yo guys! Does anyone know when the fixing will take place????

London fixing?? is it a market mover things too?
sorry I just get the news from you.. btw what fixing we're talking about?

shorting cable @ 2.0030. no set sl since this trade will be held through the weekend.

on second thought sl=2.0060.

Here's something that should help newbies and losing traders:

1. Put a big sign on your computer that reads: "I DON'T HAVE TO TAKE THIS TRADE!"

2. Before entering a trade, be sure that you know the reasons why you're making the trade, regardless of the direction or how quickly the price is moving. Don't fret about missing a trade. Look at all the trades you missed before you even started trading. Tomorrow's another day!

3. Set up Bollinger Bands (Close/20/2) on any time frame. If the price breaches the upper band, chances are that the price will reverse down. If the price breaches the lower band, chances are that the price will reverse up. Experience has shown that this is especially true when the Bollinger Bands are narrow.

Believe it or not, the easiest trades, especially for the newbie, are when the currency pair is consolidating (or ranging), which it does most of the time. Use the Bollinger Bands (which are narrow during consolidation). During consolidation, when the price breaches a band, take a trade in the opposite direction and be happy with 10-20 pip profits per trade.

4. Whether the pair is consolidating or trending, if the price breaches the upper band and you are about to buy, think twice. It may be better not to take the trade. If the price breaches the lower band and you are about to sell, think twice. It may be better not to take the trade. However, if the price breaches the band and continues to ride that band for the next few bars, that may indicate a strong trend and it may be safe to take the trade in the same direction.

5. Always, always, always trade in the direction of the trend after it has broken out of consolidation. If the trend is up, for example, and it starts to reverse down, don't sell (even if your indicators are also pointing down). A dip or price reversal doesn't necessarily mean that the trend has reversed. Instead, wait for it to continue dipping (it may even breach the lower Bollinger band), and then buy. Do this unless you see a confirmed trend reversal.

6. I am not implying that Bollinger bands, or any other indicator for that matter, should decide your trade. Simply use it to confirm a trade that you have already "carefully" planned.

7. Haste makes waste. Don't be too quick on the trigger. Don't worry that the price is moving quickly in the direction you want. If it was to be a good trade, you can take it as much as a half hour to an hour later, and you'll still make a profit.

8. Above all, don't let anyone else decide your trade for you. I know that there are some posters that you respect, but only use their assessments as confirmation of your "own" intentions.

I firmly believe that the above will help you more than 99% of the books and systems out there. Use this weekend to read this carefully, over and over again until you know it by heart, and even print it out to keep by your computer.

PS. A few other pointers that should be helpful:

1. If you enter a trade, and then you see the price go against you, don't get scared. Prices go up and down in waves just like the tide at the beach. Don't make the mistake of closing your trade too soon and settling for small profits. About the only time you'll see prices go straight up or down is during the few seconds (or minutes) after a major news release. Even then you'll probably see "spikes" instead of normal waves. It is best to avoid those times, and plan your trades so that they will not still be open during major news releases.

2. You've heard it repeated, "Always set your protective stops." The problem is how far away to avoid getting stopped out on what should have been a winning trade.

I solved that dilemma by never setting protective stops, BUT instead, I will set an audible alert on my chart just ahead of where I would have placed the stop.

I use CMS Forex: http://www.cmsfx.com/ (not to be taken as a recommendation, but I know someone will ask).

If and when I hear the alert, I can then reassess the situation and decide to either stay in or close the trade.

3. Get used to the fact that you will have losing trades. A losing trade is not a bad thing, nor does it necessarily mean that you did something wrong. Rather, it is a great time to reevaluate your trade decision and, if it was wrong, you can learn a great lesson from it. Use it make your own list of rules which can be added to the ones I gave you.

Losses are a normal part of the trading game. Just be sure that you have good money management and that your losses are not too big. Most losing traders are over-leveraged. You will find a lot of good information on money management by simply doing a Google search.

4. Finally, and this is probably the most important rule: Don't just focus on increasing your balance. Rather, your main focus should be on not losing your balance (both your money and your emotional balance).

Hi, RJF thank you for your post , very helpful,I want to ask you what number do you use to set up the bollinger band? now I set it 20/2 is that right?

Just to make sure it's going to be read

Thanks for the tips..

rjf, that was a great post that should be read by everyone and not just new traders. That was very helpful information to read for almost any circumstance, whether your coming off a hard loss or a great win. Thanks for posting that.

Yes, 20/2 Close is correct.

Sorry for the delay in replying. Early dinner in New York. I almost never post, but I am a frequent visitor, and... I do follow my own advice to the letter. It took me about a month to get "I don't have to take this trade" down pat, and from there I developed the other guidelines.

I sincerely hope that many visitors will profit from the post.

GBP/USD Overpriced?
Let's See if the GBP is Overpriced or Not:

We'll base it on interest rate differentials and what you'd be paying per basis point to capture the extra interest on 10 yr UK Gilt vs 10yr US T Bonds.

According to BB, the is a 38 basis point differential right now. The GBP is currently 2.039, so you're paying $2.04 to capture the 38 points. On a per point basis, that's around 5.4 cents/basis point.

Now I don't have the exact gilt and bond figures, but the the GBP hit 2.44 back in Nov 1981. UK interest rates were in the 17% area while the Fed rate was 15.85%. That's a 115 basis point difference and roughly 2 cents/basis point.

Costs a lot more to capture the difference now then it did back then. Note these are nominal figures, unadjusted for inflation.

Let's compare that to AUD rates. Right now, there's a 129 basis point advantage in 10yr Aud gov't notes compared to the equivilent US Treasury. I can buy AUD now for .8378-call it 84 cents. The cost per basis point is around 6/10ths of 1 penny-less then 1 cent/basis point to capture the difference. On the face of it, it seems like the better bargain.

From BB:

The pound rose as high as $2.0133 on April 18, the strongest since June 1981, as the fastest acceleration in U.K. inflation in a decade prompted investors to anticipate two more interest-rate increases from the Bank of England this year. Traders are also boosting bets the Federal Reserve will lower its target for overnight loans between banks, spurring demand for pounds.

IMO-these traders are wrong on 2 accounts. First, the BoE will not raise twice more. Why? Because they've said they won't, based on their own inflation projections. Be aware that they projected inflation to spike up-which it has-and then turn lower with rates going only to 5.5%. Second, the Fed will not lower interest rates this year. Why? They have an inflation bias, inflation has worsened so far this year, they've projected inflation to trend down later in the year and it will take months for it to trend down enough so that the Fed moves to even a neutral bias. Even at that point, growth will have to be anemic for them to lower the rate and by their own projection, growth looks to pick up by then.

While it's true that economists don't make good traders, it's also true that traders are not economists. What we're looking for is the time when the projections look to be correct AND traders start believing them. This is what happened back in November, when traders started to believe in what the Fed had been saying for several months, that inflation would trend lower (and therefore rates would not be going up). That info was worth about 900 pips.

So this doesn't mean to run out right now and short the GBP/USD pair. Traders are wrong and they may continue to be wrong for some time to come. There's alot of momentum against the $ so cable does figure to get stronger still. The BoE will be raising the rate to 5.5 at the next meeting.

The time to short the pound will come some time after the next UK inflation report IF inflation comes out lower AND we have further statements from the BoE that they continue with the same inflation projection as they had in Jan and Feb. Couple that with US data showing growth to be picking up and inflation trending down (if that happens) and a perfect chance to short the GBP will be set up.

When could all this be set up? Unknown right now, but i'll be following it closely. Fed and BoE projections figure things will play out like this in the second half of the year. I'm basing the future on what the economists at the BoE and Fed think, not on what traders think. I wouldn't venture even a guess on what the economy will do. Why should I, when I have the top economists in the world doing it for me?

Maybe we'll get lucky and the pound will look like 2.3 or 2.4 when it happens and it will be ready to return to a more normal 1.96-1.98 level.

If the projections of the best economists in the world are correct, a good chance to make some real pips will be there.

I have another thread in the News Trading Room if you're interested in reading about this and other things:

http://forexfactory.com/showthread.php?t=25943

3 Always............!

Just remember 3 always !!!!

I want to add : ALWAYS, ALWAYS, ALWAYS trade with your sense after you drink couple beer ......

Now that I've eaten well, several other thoughts came to mind and I added them to my initial post #11046 as a PS.

No its not, imo. I want everybody rich here....

And burning the week's profit on the Friday was what made me feel twice as careful on Fridays....

Fridays are days where too much profit takings take place, making sudden 10-20 pips moves pop out of nowhere. You think it's a move, jump in, the whipsaw comes and you money goes right to the guy cashing in for a nice weekend on his boat in the Mediterranean Sea, 50 supermodels + 300 bottles of champange on board, all partially funded with YOUR MONEY

Fridays get specially tricky when important announcements are in the data slate. Then you have the news move overlapped with the profit taking.

For weeks I've had 1 or 2 big trades catching the trend. The rest is consolidation and stop hunting. That's the bright side of trading the trend (or, better, the DIRECTION of the market on a given week - there are times that the whole WEEK is consolidative - you find that on poor data scheduled weeks)

Do not let yourself depending on Fridays to accomplish your target. Work hard, sleep badly, no lunch, whatever, from Mon/Thu.

Fridays are the days big boys take profit. Think like them if you want to make money... Take your profits on Thu/Fri morning tops and get out of the scene.

The boat + supermodels + champagne are waiting for you somewhere... Are you going to be scalping por 5 pips ??????

Are you using fibs, pivots, trendlines?