Quote:
Originally Posted by burton
cable is alot more liquid than most the pairs I trade. it is the most volitile pairs out of the majors but it is usually very easy to predict which is why you will see so many systems based around GBPUSD. Day traders love that pair for its decent moves.
So howcome you say GBPUSD is not very liquid?
Best Regards,
Burton
|
According to the Daily FX SSI open interest numbers as well as internal numbers given by bank volumes, GBP/USD is less the the EUR/USD.
Here is an article taken from Currency Trader Magazine:
""GBP/USD (“Sterling” or “Cable”)
Trading the pound is not for the faint of heart. The British
currency
is traditionally among the most volatile and erratic
currencies because of its lower liquidity available and
larger point value. Prior to the introduction of the Euro in
1999, only the “Commonwealth” currencies (GBP, AUD,
and NZD) had values denominated in U.S. dollars.
Historically, this meant that movements in the pound were
among the most risky and expensive, which restrained market
interest and liquidity.
For example, option volatilities in the pound tend to run
about 10 to 20 percent higher than comparable EUR/USD or
USD/JPY volatilities. This is most evident in the pound’s
wider spot spreads, as well as its tendency to move in multiple-
point jumps — unlike the EUR/USD, which tends to
move pip by pip. This suggests traders are better off paying
offers or hitting bids to enter the market than waiting for the
market to “back and fill.”
Because of the lower liquidity and higher volatility, the
pound tends to act as a leader in major U.S. dollar moves,
frequently reaching or breaching coincidental technical levels
before EUR/USD does. As a result, even traders who are
not actively trading the pound still need to monitor its
behavior and technical levels for clues about what the
EUR/USD rate might do.
For instance, if negative U.S. news sends the dollar lower
and the pound and Euro higher, the pound is likely to test
identical resistance levels (say, recent daily highs) before the
Euro, because the depth of the Euro market will slow its
advance.
If the pound breaches those recent highs and follows
through, it is a strong signal the Euro will also breach its
recent highs and experience follow-through buying. By the
same token, if the pound stalls at those recent highs, it is
also a likely signal the Euro will fail in its up move.
In a highly directional market, the pound will tend to display
extreme one-way behavior, rarely pulling back more
than a few pips, while EUR/USD will offer greater corrective
opportunities to enter. This suggests traders who are caught
on the wrong side of a move need to react more aggressively
and not hold out hope for a pullback, while those who are
with the move can stay in longer with a trailing stop.
When it comes to technical levels in relatively calm markets,
the pound frequently exhibits false breaks, as stoploss
orders placed near technical levels make for tempting
targets for market players. It is not uncommon for the
pound to trade 15 to 20 points through a technical level,
and then reverse after associated stop-buying has run its
course. This suggests traders need to anticipate potential
false breaks and adjust their position size and order level
accordingly.
Following the London close, liquidity in the pound falls
precipitously, creating the risk for unexpected, positionrelated
moves in North American afternoon trading."
It certainly is a good idea to learn the characteristics of your favorite pairs."
