No question about it, Thursday has been rough. Sharp direction changes on news of rates cuts. Sweden, EU, UK and New Zealand all cut rates. Of most interest to me today was the announcement from Great Britain and NZ. Once again, I don’t try to predict moves based on news releases, but existing positions might be altered depending on how the markets react to them. Not only did I trade my daily GBP-JPY long jumps, but also a short GBP-NZD position. This sounds confusing, but both crosses were traded on completely different time frames, seeking different magnitude of moves, so, in my mind, there was no conflict of interest. New Zealand financial authorities cut rates by 1,5% and BOE shed 1% to 2%. Here is how the interaction on GBP-NZD looked like.
My sell order was filled at 2.7420 and price swiftly moved towards the target of 2.7000, but came short at 2.7050. At this point my trade was up 370 pips. GBP rebounded on the news of rate cut and closed the trade at 2,7232, for a gain 188 pips. I was lucky I didn’t wait any longer. Even though, I consider this trade a success.
AUD-JPY trade was not as good. First, price just hit the buy level and I was in.
Right away things apart on my trade and I got stopped out for 50 pips loss. This pair has been moving in a range for last couple of days, so chances were, the range would hold. I zoomed in to smaller time frame, found another set up at just above 60.00 and managed to recover 50 pips. I still think there will be a breakout to the upside, so placed new buy order. It is marked on the chart.
Just to illustrate how things changed in Forex trading, think about how markets reacted to rate changes just one year ago. Currencies gained strength when central bank raised rates. Now it is exactly the opposite, slashing rates gets rewarded. Things are more convoluted than that, of course, nothing here is that simple. Riksbank (Sweden) cut rates today by more than consensus and the Krona lost ground. Go figure.
Tomorrow I’ll post my short term trades in GBP-JPY for Friday and update on AUD-JPY intended trade. Also, I’ll answer a question from comments posted couple of days ago. On a more inspiring note, those who trade reversals, and scalpers should have had nice couple last days. Strong, sharp and short duration moves, paradise for some people.
Mike K.
And I thought trading stocks was tough. Today made no sense to me at all. Looks like it is going to be a long learning curve…
Yes, it takes some time, just like anything else. And I’m not sure trading equities these days is any easier.
Not a bad job on GBP-NZD, mate, not bad at all. I wouldn’t dare trading it.
Thanks Alex. You are right, this pair is difficult. Thinly traded so a lot of spikes. But when it moves it really does so you can get a lot of pips fast. Not for everybody, that’s for sure.
You nailed it- thinly traded, that’s why the spikes on almost every bar. Couple it with wide spread and it is something else. Much more difficult that even GBP-JPY. That’s why it is fun to watch you operate. Few people can make money trading these things.
It is not often that I trade GBP-NZD, but this set up looked high probability, so I took it. And it still missed the objective. Most people are best sticking to the few major pairs.
Not a good day to be short Yen. I hope you didn’t get burnt too much.
Not bad. See next post.