UK Rate Decision-Feb 4th-News Trade Analysis

Earlier today, we spoke of how important the rate decision news coming out of UK and Eur will be and how we can trade it effectively. For our earlier analysis, please visit this post

We paid more specific attention to the UK Minimum Bid Rate news and the news out of Eur wasn’t a market mover so i shall be ignoring that for now.

As we had hoped, the stimulus programs were not completely withdrawn and that helped the Gbp to sink back into its normal slide downwards against the USD. However, with regards to the actual news release and what exactly unfolded, here is what happened;

1) We placed our market limit orders of where we think there could be breakout.

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2) The market broke out on the upside when initial reaction that the QE/APF facilities might end caused immediate demand.

However this was short lived and the buy order being filled, soon retraced and took out our stop loss. At this point, we are down 30 pips.

Then again, after listening to the news, it is evident that BOE/MPC council do not completely want to eradicate the program and there are chances of them extending the program to promote more economic growth.

This therefore was a message to me that GBP weakness is going to continue and amidst the current trend with USD strength, the Gbp/Usd downtrend will continue and that was the kind of position i wanted to get into as per my earlier post.

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2) Therefore, when the market formed an immediate high and retraced back down, i went for a sell. Notice how i picked right at the top of the spike. When most people will be jumping in for a buy, i went for a sell. This i could do only because i understood the news and what might be ahead.

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3) After almost about 10-15 mins of ranging activity, the price retraced back up and re-tested exactly the same resistance point before heading downwards. I therefore knew that the current weak uptrend had trouble getting past that zone and placed another sell order, almost exactly at the same price.

4) Placing my stoploss above my immediate psych high, .5920 i let the trade take shape and moved away from my computer.

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5) Almost an hour-hour and a half later, the trade had worked out very nicely in our favour. Both traders were profitable for about 160 pips in total.

6) As i saw a decent retracement off the last bar and it is also well past my bedtime, i decided to manage my trade.

I closed one order, leaving the other running. Then for the current order open, i moved my stop loss just above resistance caused by the 50% mark off the previous long candle and also placed it just above the immediate psych high.

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Total Loss – 30 pips
Total Profit secured – 80 pips(closed) + 53 (stop loss)
Total Profit floating – 34 pips
Worst case – we have 103 pips at least.

Most importantly, i would like to stress 2 things. Notice how;
1) You can analyze news and see what is coming ahead and trade it with confidence
2) Manage your open positions efficiently so that you can get good profits while still leaving the rest to “maximize” trade potential.

Hope this helped,
Seeni

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