Coming back to Friday trend analysis
Hi, everyone. Today I want to come back to yesterday market trend analysis and look a little at one more pair which reacted in a very volatile manner to news from Canada. I just want to remind you that there was Gross Domestic Product data from Canada, which caused Canadian dollar to collapse across the board. When I analyze potential pairs that are the best to trade news in Canadian dollar my favorite pairs are eur/cad and gbp/cad. Why? These are the most volatile loonie pairs. So let me look how one could have traded gbp/cad pair during and after Canadian news data release.
Preparation for news trading
Before trading any news event you need to identify breakout levels. I mean support resistance levels and when news pushes the price of a security beyond those levels your orders or one order should be opened and you would be moving with the market. Since gbp/cad is probably the most volatile loonie pair, one should have placed long and short orders further from the price than one would do for example with eur/chf or eur/gbp pair.
How one could trade gbp/cad pair on Friday
The most logical places (in my opinion) for placing long order(s) would have been at 1.5560 level and 1.5450 for placing short orders. Since market went upwards your long order would have been opened. This also means that you had to cancel your short order and then move your long order stop in the direction of the market. Since the move was very strong you could have used peaks and valleys principle by placing stop below valleys on 5 or 15 minute charts. This would have gotten you out at around 1.5660 level.
See also:
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.