Here is a new article posted on the SFO Magazine website regarding the trading of cross-over pairs.
Last Night, I made a cross currency trade with the GBP/JPY. I shorted the pair because of resistance from a six year high on 12/6/2005. I considered the trade a low risk trade because I shorted at 211.05 with a stop right above the 12/6/2005 high of 211.43. I set my limit at the 50% fibonacci level plus minor support which was 210.45.
It turns out that my limit was right on but with 1 rookie mistake which was not taking the 9 pip spread into consideration. If I would have, I would have surely placed my limit at 210.54. It turns out the pair went as low as 210.40 but with the 9 pip spread, 210.49. So my limit was never triggered. When I woke up this morning, I realized this and closed the position at 210.83 for a 22 pip profit.
So although I did make 22 pips and just under $200, I could have realized an additional 29 pips for a 51 pip profit and more than double the $200. If only I would have accounted for the 9 pip spread.
Believe me, I’ve put this trade behind me but mention it here as a learning experience. I’m just glad I was able to get out of the trade with a profit because the pair is trading at 211.60 which is a high not seen since 1998. Correct me if I’m wrong but I’m assuming it must be the interest rate differential continuing to put pressure on the Yen.
This was originally posted on 10/20/2005. I’m putting it at the top again because a currency analyst at dailyfx mentions it today: EUR/GBP Large Triangle Setup
I’ve spotted what definately looks like a symmetrical triangle. I’m expecting a big breakout that could possible net 300+ pips.
It seems that technically I may be in a good position with my EUR/JPY trade even though I am currently on the losing end of it. In examining 3 hour charts, their is solid resistance at 140.03.