GBP/USD : Very Long Term View

• Take a look at the monthly chart of cable going back to 1984 (which is the furthest back I can get on Saxo). Chart low 1.0362, pre-Plaza Accord.
• The interesting chart point I want to highlight here is the subprime crisis low of 1.3501 at end 2008 (wholesale flight to quality USD+USTs). Brexit has taken us and kept us below that level for 2-3 months now. 
• To date, Brexit has been mostly just talk and actual permanent impact the UK economy has not even begun yet (eg what happens when all the financial institutions move to other parts of Europe, etc).  Chart suggests much much downside potential for cable and suggestive of serious economic weakness when actual Brexit implementation occurs.
• Ideal long term short trade location nearby.

GBP/USD : WTF ?

• Stopped out short cable. Bearish technical picture completely destroyed by strong price action. WTF?
• Monthly smashed through the strong ceiling at 1.4813.
• Weekly candle looks like going to be a key reversal tonight.
• Daily : Could not have imagined that this series of up-candles possible beforehand.
• Having given up shorts, would not be surprised if this now turns around and trades back down towards 1.4750.

Chart Updates

GBP/USD : Last Man Standing

• Back in Singapore. Not much by way of trades done past 2 weeks while away from blog access.
• Out of Copper before I left, the USD/CAD also died on 03Apr. A bit ill disciplined on the latter, should really have been out on re-entry of triangle below 1.26.
• Left only with short cable now. Running small risks everywhere was correct strategy. Still hanging on, and thankful to be alive given recent volatility and abrupt reversals after reversals. Even so, the various stop-outs is frustrating.
• Finally have a signal to increase the short cable position on the margin. Daily triangle consolidation breakout on the downside at 1.4800. Signal acted on. Deem this new additional position as non-core and exit if we close back inside triangle.
• Sell more on break of 1.4634.
• Oh, btw the downside objective of the triangle is 1.4269.

Change in Risk Management

• Last post before 2 week absence again.
• Change in risk management and trading approach here. Rather than running decent sized positions and run higher risk of getting stopped out due to capital inadequacy, am these days trading in much smaller sizes and giving trades plenty more leeway of success. Rather have better chance of making less but sure money than higher chance of making more but getting stopped out more often.
• Holding on firmly to the stronger USD view, technically and fundamentally, and thus cut back to very small risk and giving myself every chance of not getting squeezed out by flash crashes etc.
• Chart here to illustrate the firmer USD view is cable. Look at trading ranges on daily chart since FOMC (18Mar), characterized by wide ranges, and abrupt reversals after reversals. Am convinced that after shakeout, bear trend (cable) will resume. Maximize my chance of remaining engaged by reducing risk now and hope to ride out the volatility.

GBP/USD : FOMC Trading = Madness

• Cable range yesterday. Low before FOMC 1.4634. High after FOCM 1.5165. 5 big figure range on the day.
• How to survive with long/short position intact? Impossible. Either very very lucky or very very ill disciplined. Long die. Short also die.
• Will have to put unfortunate experience of being involved yesterday down to bad luck. Get over the trauma and start again. Shit happens. Stop feeling sorry for yourself and fight back.
• Nevertheless, big picture view remains the same. Fed will lead the world in rate hikes, bullish USD intact.

GBP/USD : Major Collapse

• Cable closed the week at 1.4735.
• This is below the 2 very significant lows at 1.4951 (daily) and 1.4812 (monthly/weekly).
• Thus, am looking for a major collapse in cable here, order of magnitude of tens of big figures.
• As always, vital not to get carried away with too large a position size. 

GBP/USD : Pyramid Short -1.4949

• Having survived the earlier squeeze to 1.5552 (by reducing position size on the way up and increasing again on the way down), the short cable trade is now looking very good. Deep in the money.
• Recent low at 1.4951 has now been breached. 
• Added to short position at 1.4949.
• Watching 1.4813 next significant low.

Chart Updates

USD/CAD

GBP/USD

Copper

EDZ6

Trades Backlog

Back in Singapore today. Trades done last 2 weeks while away :=

• 23Jan15 : Sold GBP/USD @ -1.5029
• 23Jan15 : Sold ESH5 @ -2055
• 26Jan15 : Bot ESH5 @ +2036
• 26Jan15 : Sold HGH5 @ -244
• 27Jan15 : Sold GBP/USD @ -1.5158

Outstanding open positions now = 1. Short HGH5 @ -249.50 and 2. Short GBP/USD @ -1.5156

Late start to trading in Jan, after the big moves had been made. Marginal up for the month.

Internet access in China now reached hair tearing vomit inducing nose bleed levels of inconvenience. VPNs now works very intermittently, perhaps 30% of the time. Arrrrrggghhhh !!!!

GBP/USD : Sell Signal below 1.5243

• Monthly : Broken wedge support below 1.5243. Forget how far down it's come, this is a fresh trade signal for a possible new phase in the sell-off. 
• Below here, 1.4813 is another very significant chart point.
• Pyramid in. Initial short established at 1.5188.
• Breaks like this should get to work quickly (eg EUR/USD break of 1.3515 in Aug14 or the recent Copper break at 2.9035), so the stop loss on this trade is clear.

GBP/USD : Long @ 1.6803

• New trade here. Cable cleared weekly and daily overhead resistances above 1.6800. Fresh long initiated at 1.6803, stop  close below 1.6750. For now, go with strength and see where it takes us.
• Size : 0.5 risk unit only. Testing waters.

GBP/USD : Long @ 1.6666

• Missed buying this on the first break of 1.6666 due to Copper and USD/CAD positions under water.
• Trade : Jan 2014 UK inflation data below BOE target = cable weakness. Taken the opportunity to establish fresh long position at 1.6666.
• Monthly : Upside triangle breakout of large consolidation zone (although not in the conventional continuation sense). Next significant chartpoints are 1.6746 and 1.7042. Increase long on break of 1.6746 (which would be 2nd time breaking).
• Weekly : Uptrend intact.
• Daily : As per weekly. Uptrend.

Ponder Ponder

• 1. US 10 year yields up from 1.60% to 1.96% now.
• 2. USDX trying to take out 2012 highs.
• 3. S&P500 at new high.
• 1+2+3 => Pricing for US recovery (without inflation). Don't fight the tape, even if I think the central banks are doing the wrong thing and it will all come crashing down hard eventually. DO NOT TRY TO SHORT S&P. Accept it.
• Recovery = Time to buy back balance of Copper short (still in the money). Trade : Bought HGN3 +325.70. Square now.
• Free up room for taking more risk in Gold and Cable; both charts look good. (Enough long USD/JPY already. In fact, am in risk excess at 35% vs limit 25%).

GBP/USD : Drill In

• Updated daily chart.
• Last night's close was below the bear flag resistance at around 1.5350. Another close today below should be good for a further strong push to the downside.
• Significant previous low from 01Jun12 at 1.5267. Break below = more bearish indication.

GBP/USD : Is it time?

• Monthly : Triangle downside break from Feb still valid.
• Weekly : Back into old sideways range, but do not rule out another stab at the downside.
• Daily : Bear flag price action since mid Mar. Looks like breaking down now for another leg down.
• Trade : Short at 1.5355. Cheap trade. Cut loss if bear flag break doesn't perform. This should be evident fairly quickly.

GBP/USD : Refine Trade Plan

• Huge recovery in P&L today following disappointing UK Mfg PMI. Unchanged futures positions but risk limits used now dropped from over 85% to around 59% now purely on higher equity. This allows me plenty of flexibility to get active again.
• Will trust my own judgment on GBP/USD. Calling the 2 tests of 1.5260 a potential double top on the daily chart. NL is at 1.5090; if this breaks I am going to stick my neck out and pyramid onto the existing elephant position some more (instead of being thankful for the chance to get out at only a small loss on the overall trade). DT objective would be around 1.4920.
• Will then run the entire elephant whale trade on the daily double top risk parameters ie if it fails at the 1.5090 NL, I will get out of the whole position and give up on the whole adventure.
• But first, the NL has to break. We wait.
• Aside : Just sold USD/JPY at -93.30, short term trade but consistent with overall Risk Off. The more I stare at the weekly chart, the more convinced I am we will see it near 90.00. [Cable and Copper risk 59%, USD/JPY 6%, so overall now 65% as indicated on the risk table on the right column].

GBP/USD : Downside Targets

• Thus far, I have only stated my bearish stance in cable without explicit downside objectives. Time to put that right.
• Monthly : 4 year triangle downside break at 1.5610. Expected magnitude of move is 1.7040-1.3810 = 3230 pips = 1.2380.
• Weekly : Rectangle consolidation range broken at 1.5230. Expected magnitude of move is 1.6310-1.5230 = 1080 pips = 1.4150.
• This is why I am willing to sit through a 250 pip adverse move against me (on max risk) this past month. The risk/reward makes sense.

GBP/USD : Daylight ?

• Preliminary signs of the rally running out of steam but still need confirmation (looking hopeful).
• Daily : A big red candle for today would be a good first sign. Another red candle tomorrow would be even better.
• Weekly : Between 1.5230/1.5260 is a band of strong resistance. Looks like first attempt (1.5266 high early today, on Cyprus "resolution") to penetrate has failed. Unsure how many more times we might yet try. Too early to sound the all clear yet.
• Monthly : Triangle still good. Stay long term bearish.
• One frustrating aspect of my trading thus far has been to consistently fail whenever I finally decide it is time "go for the jugular". I am all too familiar with the pattern of making money on regular sized positions or even decently out-sized ones (eg JPY in Jan, GBP in Feb), and then when I think the charts are aligned for me to go for broke, it fails me eg last week in cable (BOE stuck at 6-3). To date, I have not succeeded in a single go for jugular trade yet. Am I that bad?
• Improvement this time over previous is that I am managing my money and risk much better. Whilst in the past, I would have been cutting my positions this morning when I should be adding, this time I am holding instead of cutting. Have ensured that if I do get stopped out, I will be down to just exceeding ytd budget (from way above) instead of going below. So, some signs of progress in my trading, I guess.
• Gotten out of all my "frills" trades (eg ED). Potential trading crisis time so NO distractions. Just Copper and Cable only, the 2 best looking charts I see. Only outstanding order I have is to sell Apple (CFD) near the NL, and maybe do some day trading when good opportunities arise.

Core Book : No Frills

• Made some adjustments on the margin this morning. Cleaned up my book completely and left only with 3 core ideas now. P&L making new highs and I want to make sure I do not mess up with unnecessary distractions.
• Risk limits used trimmed back drastically from 80+% to 45%.
• 1. Performing : -GBP/+USD. Triangle downside break with strong momentum.
• 2. Prospecting : -Copper. Triangle right shoulder of SHS top. Breaking?
• 3. Protecting : -GEM4 at 0.44%, 15 months to expiry. Compare with 3 months Libor at 0.28%. So assuming unchanged conditions, expect 0.44% to decay to 0.28% in 15 months ie apx 1 bp per month insurance premium. Cheap relative to payoff in event of black swan eg market revises expectations of no Fed tightening forever. Happy to write off this premium.
• Will run with just these 3 ideas for now and watch their stops closely. Also restrict myself to sporadic day trading of cable from the long side only meanwhile (ie take profits intra-day and re-establish by close).
• Also need to think of a good hedge to help me ride this cable trend.