The World of FX: Cross Over to a Better Trade

Here is a new article posted on the SFO Magazine website regarding the trading of cross-over pairs. 

Rookie Mistakes – forgetting to account for the spread

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.

EUR/GBP Symmetrical Triangle Formation

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.

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The EUR/JPY cross currency pair

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.

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