Nearly all of my trades are intraday positions. Today, however, I established a medium-term, long GBP/USD trade at 1.9923. What’s the deal? Cable has already had a strong run on the upside and is now approaching historic highs (see chart), so I realise I may be more than a little late in trying to jump on the trend. Also, my personality is that of a contrarian, not a trend follower. So, what gives?
My thesis behind this trade is that if GBP/USD makes it to 2.00 handle, it could be pushed sharply higher as stops/option barriers around this level get taken out, forcing participants to cover their positions. So, this time around, the trend is my friend, not my enemy, and the momentum helps. Divergent rate expectations between the US and UK (and Europe) also lend support. But, ultimately, this is trade based on view that 2.0 will be the ultimate round number of importance. When and if the 2.00 barrier breaks, and the dust clears, I see scope for cable to come back down, so I’ll have to be quick on the trigger if I’m to capture a profit.
This is my first trade with Worldspreads, a new UK spread betting company with mixed reviews. However, they are offering to cover the first £250 loss for dormant account holders, so it’s really a free bet. My position size is just £1 a point (pip), equating to a nominal position of 10,000. My stop-loss is exactly £250 pips away.