Today we saw a reversal of a trend in gbp/usd pair. If you remember my yesterday post, I wrote about the uptrend that the pair was in for a few days. The short term trend was suddenly broken today. What caused the change? It was a fundamental factor that made the pair collapse. It was the bank of England minutes that sent the pair down. Any data that is released by any central bank is very important, especially the data that is connected to interest rates change. So, my experience shows that it is better to close all open orders when this kind of data is released. However, you do not have to stand aside and watch how the market moves and miss the move. No, you can trade a trend that is caused by various news events. How?
By placing buy stop or sell stop limit orders above or below most recent highs and lows. This is a technical trade, even though you try to catch a fundamentally driven move. Today, just a few minutes before the news was released you would have placed a sell stop order below 1.6338 level and when the news was released you would have gone with the market. At the time of writing the pair is still going down, so you could have easily made around 50 pips from the move. I hope the chart below explains better what I mean by this.
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Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.