I’m an FX newb, but I had been shorting GBP on the euro pair for the last couple weeks with a lot of success. But I knew the bottom was coming and I had predicted correctly that it would be yesterday. Unfortunately, I misjudged just how bottom it was after missing my window initially at 0.7530 (i literally looked away for 30 seconds to find a sharp bullish run wen I looked back). And it hasn’t even thought about coming back. Now I’m extremely exposed because I didn’t stop out (there have been some wild swings the last couple weeks, and my stop-out strategy needs a lot of work). All forecasts before yesterday were for an ultimately bearish outlook on the pair, so I felt safe-ish. But now everyone is changing their minds or at least indecisive about the future of GBP in the short term (brexit is the biggest looming concern after seeing more dovish sentiment from the BoE than expected). At the moment, things are volatile and trendless, so nothing to really go on for a change in tack. I’ve been trying to ride it out but now, as EUR slowly and consistently gains on GBP, it’s looking like maybe that’s not the best strategy. I’m hoping that the experts here can shed some light on what to do in this situation (other than not being in it)? And even better, someone who’s following or trading the pair themselves to give their thoughts. Thanks so much.
(btw i tried to post this in analysis but i guess i’m not cool enough yet, as the site wouldn’t let me)
If you’re horribly over-exposed it might be best to just close out, take the loss, learn the lesson and move on. Looking to the medium term when you’re already very exposed and hoping that it’ll work out next month based on Elliot wave analysis is not a position you want to be in. Price could retrace from the 0.7755 yearly high or it could bust past that level - at the end of the day nobody can say for sure which way it’ll go.
If you can take a bit more exposure you could see how price reacts to the 0.7755 level if it gets there and if it looks to be continuing on up then close the trade. All depends how heavy you went in with the original short and how much your account is hurting right now.
Generally the best advice is not what you want to hear right now but is to avoid getting in these situations in the first place. And if you do start to see the situation develop close out and take the smaller loss quickly rather than let it grow to become a large loss. Can be tough to do if you’re going in with over-sized positions so I’d recommend lowering your position size if that’s what you’re doing.
My advice and it sounds simple but and might make any sense to some but does to me. Don’t try to tell it where its going sit back and let it tell u. In the start of my trading carer I fell into trap of saying its gonna do this or that and and for some reason it wouldn’t listen to me just like my kids lol. but be patient and a lot of times it will tell you.
I hope that didn’t make things more confusing. Maybe one of the guys who r better wordsmiths than me that get what I am trying to say can put it down better than me. Good thing I didn’t become a teacher like my mom wanted me to be id suck at it lol. ok just my thoughts.
The only option you have is to cut your losses and exit this trade as GBP is among the weakest currency in the market right now and EUR is among the strongest. GBP has been very weak for more than 2 months now, I wonder what made you trade GBP against the EUR. You need to go back to school and learn FX. EUR is stronger than GBP in the monthly time frame, weekly time frame and now daily time frame which means EUR will be bullish against GBP in weeks to come
Thanks everyone for your responses. I will be the first to admit that I fell into the trap of trading to win rather than trading to earn (first of all). Secondly, I failed to establish a more reliable risk management strategy going in. This is a deadly combo. Additionally, I relied too much on news of the day to support my feelings on the current trend, which is just plain wrong to do since trends change and it’s only your ass on the line. At the end you still need to cover your position with a stop, no matter how convinced you are about the trend. Let me say, I was right about what the price action was going to do and that the bottom was going to be when it was, as I had my finger on the ‘close’ button right before the Draghi announcement sent the pair into the terror zone for me. I just missed my window, having gotten distracted by something on another screen. To be sure, it almost worked for me. Key word being “almost”. Almost will send you to hell. You’d be hard pressed to find someone to tell you this is not a terrible position to be in, and I hope others can learn from my mistake. Whatever I lose, it will be a lesson paid for.
As to the specifics of this pair, yes sterling is struggling right now and the euro is cruising. But also, both are doing so against market sentiment, which usually indicates an impending correction. But that said, I think I’m going to set my close out at around 0.7800 and call it a day. Lesson learned either way. I have spent the last 4 days devouring anything I can find about risk assessment and management. All of this can be quantified, and so, moving forward after learning how, I will be able to make much more intelligent decisions based on quantified risk to gain calculations. And of course, religious use of S/L. It’s ok to lose a few bucks regularly than to lose nothing before losing everything.
To my fellow newbies, I have these hard lessons to impart to you:
Small losses are part of the process. Embrace them like a salesman embraces rejection.
It’s not about winning, it’s about consistency and safe, intelligent and calculated decisions.
If you’re gambling, you’re ****ing it up.
Your risk management strategy is 100,000 times more important than any other strategy you may be working on. Get that down before anything else.
Take it easy, better to miss out on an opportunity than to go in half-****ed.
EURGBP on watchlist
EURGBP has had a fine run since the end of November and as the weekly chart shows, is approaching previous strong resistance, with a series of nice long wicks to the candles on the weekly chart shown in yellow. Ideally, I’d like to see it test those highs, then I’ll be dropping down to a lower time frame to look for signs of a reversal, for a potential short this week.
My thoughts on the EURGBP. I use Fibonacci grid to determine significant levels. Now the price tends to level 50, which is the end point for wave 5 (according to the Elliott theory). Thus we can expect it to rebound from the level of Fib 50, and a correction to the support of 32.8 Fibo
