Friday, November 18, 2011

Shame Shame 2 months no post - Old GBPUSD Chart updated - Nov 19, 2011

Pretty crazy, I've been extremely busy trying to transition to Asia. I think I'm getting used to the new structure and hopefully things start getting rolling again. In the mean time here is an old GBPUSD chart I found:

Originally this chart was drawn in June 2010. It was later tweaked some time in early NOV 2010. In general my long term read was quite good on the pound. I had targeted higher in the 1.70 range with a comfortable trading range developing with a strong return to growth. UK Austerity and the EU debt crisis has made this impossible in the short term. But the resilience of the pound remained. Despite a large drop in mid to late NOV 2010 the pound continued to rally on inflation hawkish fears all the way to 1.67 in early April 2011. Of course this over exuberance burst with slow growth and weak economic data. 

There was a strong correction to 1.60 with a strong bounce off support. With the first fail to break higher than 1.67 the move to support should have lead to move the stop to 1.60 on a long LT trade. The fail to break 1.67/1.65 higher on the second time should have been confirmation of the long term trend being over. 

Overall a pyramid trade on this chart would have been very successful theoretically. The main issue I had with my read of the markets was not understanding how long it would take my read to unfold. Risk certain was there, but only in the long term. The interim for risk was also very choppy and sticking to ones guns would have been very hard. Trading long term would require deep pockets of liquidity or very low leverage and the confidence to stick through the big drops or at least lighten the leverage load and pyramid back on strong moves up. 

Again, this is a classic case where I was right but not profitable. I believe my GBPUSD trades for 2011 mostly resulted in negative territory. Time to take a fresh look at the pound for 2012 and try and be consistent and read and trading. 

Alexander Le
Managing Partner
Analyze Captial LLC

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