Hello,
First post on this forum so I hope someone can explain something for me so I can learn from it.
At exactly 16:28 GMT on Oct 3rd there was a major movement on the GBPUSD. It moved 90 or so pips in within one minute which completly contrasts to the surrounding candles.
I initially thought that it must me some kind of news but looking at the calendar there wasn’t anything that I could see that would cause this spike.
My question is;
Why would such a large move happen in short period of time and more importantly the High and low of the spike goes just beyond the last swing Hight and Swing low (from the 15min chart).
The reason why I am asking is that I can image myself putting stop losses or pending orders at these swing highs / lows but if a major spike like this could happen at any time while I’m not watching the chart then my trade would get stopped out or the order would execute which (by the look of it) could be a bad call.
I would love to know the reason why this has happened as I’ve seen this type of anomalies before but not so obvious. (IE a quick spike that just goes beyond an obvious stoploss point and retreats back just as quick)
Do I need to leave a buffer for my stoploss so I am less prone to these events (but in the meantime create more risk).
Here is the image screenshot to explain what I’m talking about.
There seems to have been a news event at this time, “CIPS Manufacturing PMI” for UK. At least that’s what the little news ticker thing at the bottom of my Oanda demo account says. There’s a little UK flag at the bottom right about then on the chart.
Edit: my chart on the screen here, not the one above.
If it makes you feel any better I was actually in a trade at that exact point in time. I trade Cable and Fiber at the same time, and as you most probably noticed, the spike was not present on Fiber. This means that it had to be something that happened on GBP.
16.23GMT is a strange time for a news headline, usually it is at 16.30GMT or slightly after this time, (Hence 16.30GMT is the earliest time the news announcement can be released) I had a stop loss in place prior to this spike which was moved to break-even so fortunately I did not make a loss or fall short to slippage. You also get these random spike when LARGE investment banks decide to move their funds about from time to time from currency to another. Also the liquidity at that exact time was 15% below the 30 day average, another reason for an extended spike.
As long as you employ money management skills, this is what is important. These types of spikes are, at the end of the day, very typical on Forex, especially on Cable and Fiber.
Thanks for the quick reply. Yes it does look like a news type event and the reaction to it on the currency and maybe I’m working out the time difference incorrectly but I’ve checked two Forex calendars and this news event (IE the CIPS Manufacturing PMI) was scheduled for 9:28 GMT.(7 Hours before 16:28gmt). Here is the babypips calendar configured to GMT.
Can anyone confirm the spike occured at the same time as the news “CIPS Manufacturing PMI” then at least there is a good reason. - Maybe it was delayed for a reason which the official calendar did not reflect??
Thankyou Jezzode. That’s very informative. I will do research in the Liquidity of a currencies as this is a new factor I have never focused on before.
I don’t like quickness of how it happened as there would have been no time for me to react but if it’s part of the game then it’s part of the game.
I know they say to watch out for major news events because of these typs of moves but I need to prepare for them and the calendar says that this information was due out on 9:28gmt not 16:28gmt. Maybe the fact that both were 28 minutes past the hour is a clue that I’ve stuffed up the calculations / calendar times somehow.
Yeah, I think I’ve got the time difference stuffed up. I thought I was just looking at GMT for both event and calendar but the spike was definitly caused by the news event - “CIPS Manufacturing PMI”. Here is an extract of a news website.
“[B]Manufacturing PMI Candle[/B]: Note that there was a [B]very volatile candle[/B] representing the 4-5AM EDT candle. The UK Manufacturing PMI came out at 51.1 for August, bettering forecast of 48.9. The previous reading was also revised up to 49.4 from 49.00. The candle was basically a sign of a failed bullish attempt. The battle line where GBP/USD retreated is 1.5588. Therefore, as we gear up for the US session, if the market breaks above 1.5590 and the 1.56 psychological pivot, the bearish continuation is shelved for further consolidation and correction to the upside.”
Thanks for your help and mystery solved (and learnt something as well) Win-Win
I’d just like to add that this kind of stuff can happen out of the blue for no apparent reason, usually it is intervention, and it’s just part of trading and something you have to take in your stride.
Generally there will always be a random element to the market, yes: there will generally be a reason behind any sudden or big move, but often not one that be predicted too far in advance, so it often presents as a random event at the time.
This area is one of the factors to take into account when deciding what sort of trader you are: longer-term traders, entering off the Daily/Weekly/Monthly charts, don’t place as many trades, but can tune out the news more than shorter term traders - when your target is hundreds of pips (or more!) then you are better able to survive the odd spike, then the market resets and the move you are trading resumes. Some who like this style almost ignore many news releases.
An intraday trader, whether entering off the Hourly or scalping off the five minute, one minute or whatever, will have a tighter Stop so will be taken out by more of these spikes, but will be placing many more trades, so can be sanguine about losing a few along the way.
Placing 100 trades a week, you can afford to have 20 losers and still be making a lot of money. Placing four or five trades a week, you might be aiming to have just one loser or even no losers at all. It’s all down to risk appetite and trading style. Personally, I don’t scalp as I prefer less ‘noise’ and a higher win rate - I noticed the spike yesterday, but of itself it did not affect my trading. I do trade intraday, but generally off the Hourly to limit my exposure to such blips. The much shorter-term trading works well, too, and I occasionally dabble in the five minute chart, where I find steady money but not big money, but it is more volatile.
Some people hurt when they take losses and prefer a high win rate, others can see ‘big picture’ and are happy accepting regular losses, knowing that overall they are doing well. This is why it is important to understand one’s own mindset before throwing a lot of money around.
Thanks ST. Your comments make a lot of sense to me. As a beginner trader it’s very important to look at the bigger picture and it’s all about risk management and accepting loses as part of the process whether they be hasty judgemtns or random events that manage to just stop you out before heading the oposite way. I’m finding that the hourly charts are getting to be my favourite due to the fact that I can’t be looking at the screen every 5 minutes but I use the 15min timeframe to execute my order.
I’m also getting my head around the fact that if I get stopped out then it’s not a big deal. Either learn from it and move on or just move on.
I apreciate the time you spent in replying to this topic and I will endeavour to read more on these forums as it seems a fantastic place to learn and share and communicate with other traders.
I expect it was a trader who knew there was going to be good news for GBP and hoped to convert a load of sterling (a few 100 lots) into USD on the buying spike.
No problem at all. I won’t pretend that occasionally the psychology is not tough - I was 5% down after the first week of August and was not happy at all lol - but as long as the strategy is sound and the execution mechanical, it will come good over time. In the early days I took some convincing of that, but it really does hold true.
I’m a big fan of the Hourly myself, just make sure that you take a quick look at something higher, too, in order to understand whether you might be looking at a retracement, a trend, a range, a consolidation etc. and see whether there might be some big S&R zones nearby that don’t necessarily present on the Hourly. Sounds easy when you say it fast…!
