Hey Tobus,

IMO, 5-10 points above the nearby support or resistance seems like far too little. While I can understand a stop of that kind of magnitude if you are trading very short term (on a 10 or 15 minute frequency chart), for anything above that volatility in GBPUSD is just too high for such tight stops.

Usually when I take stops I'm also cognizant of support or resistance levels that I can place my stop loss around, but depending on the pair I'm trading and the influence of the technical level, I will adjust the stop's spread over the tech level accordingly. So, if I'm looking at GBPJPY, I know my stop needs to be wide no matter the time frame b/c of the volatility. On the other hand, if I'm trading EURCHF, I can place it relatively close as the pair has very slow price action. Alternatively, if I'm coming on an 18-month old, major rising trendline, I'll place a wide stop as the market will no doubt take time to spill momentum and will very unlikely obey the level to the pip. Then again, if I'm looking at an hourly chart and coming to an intraday range low, I can reduce the stop spread below the hard support level.

Often times, when the market is coming up on big technical levels, individual traders will place stop and entry orders very close (either because they are inexperienced or they can't weather a large stop loss). Big money managers are aware of the tight grouping of orders and see it as easy money. All they have to do is give the pair an extra boost to push spot a little beyond a major technical level and then the automated orders will trigger and give the market a considerable move. From there, the money managers will ride out the momentum and then take profit after the orders are flushed out. This kind of situation is a big contributor to false breaks and messy technical levels; so it's certainly something to keep in mind.

It's go time for the GBPUSD short. The rising trendline from June of 2006 has fallen and now 2.0 is under pressure. I was triggered on my short order at 2.0045, though I am still hesitant on this break until we can get a daily close below 2.0.

Support has already come up following the trendline break in the form of a a 38.2% of the 6/29/06 - 11/12/07 bull wave, so I will be watching price action around this level for the rest of this day. My stop is relatively tight and I'll likely keep it that way until we see the daily bar close below 2.0 - after which I'll widen my stop to something on the order of 150-200 points.

Any one else taking a short? Does anyone think the holiday liquidity conditions will dry this move out and lead to a rebound?

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John can you expand on your last paragraph as this seems like a point that we retail traders could take advantage of. It seems like this is exactly what happened with the break of 2.0000 today as it dipped to .9927 but has now bounced back. What would be a "major technical level" where this condition takes place of stops triggered and subsequent "big money" orders being entered? Are you talking breaks in 200 SMA and 100% fib levels or other? Thanks.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.48 as nearly 60% of traders are long. Yesterday, the ratio was at 1.45 as 59% of open positions were long. In detail, long positions are 1.2% higher than yesterday and 69.5% stronger since last week. Short positions are 0.9% lower than yesterday and 10.8% weaker since last week. Open interest is 0.3% stronger than yesterday and 14.1% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

Source: FXCM Execution Desk

For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at: http://www.fxcmmanagedfunds.com/ or call +1 646-432-2968.

i live in dubai and the exchange here is closed till thursday and opens on friday., so i have to hold on to my 4 contracts long average at 203.70 and then if possible further average by adding 2 more contracts at the lowest possible level, @ 198 perhaps ???
bringing my average to 202 and hope to get out before march, hoping on some mega big good news and not avergae in the future and stick to stop losses
any suggestions ?

I'm interested in the what happens over the holiday period too... is it a good idea to just close everything and wait till it the new year? Sorry if this is basic stuff, but do we get charged/earn swap if the markets aren't open?... and where can I find out when the market is closed/reopens?

Ask your broker about hours. My broker sent a message out with holiday hours through New Years. I believe swap still happens.

Hey tonyk,

I have a different view on technical analysis than many other traders I have met. Many believe that t.a. works because because is a genuine, mathematical reflection of human behavior, while others have tried to explain their theories and it seemed like it essentially boiled down to magic. For me though, I consider a major technical level some level that many market participants have been watching and are aware of when the market approaches it. It seems reasonable that many ppl would be watching a 200-day SMA, a 50% fib (100% fibs are essentially double bottoms), clear areas of horizontal resistance and support, or big trendlines (like the one in GBPUSD that just fell). The more ppl I think are aware of this level, the greater significance I give it.

As for this GBPUSD move being a condition where big money is merely pushing the market for a false break, I don't think that is the case here. It has happened in the past that daily closes below big levels have still pulled back for false break, but this is not very frequent. What's more, I felt there was considerable interest in the rising trendline and the psychological, 2.0-level. Closing below these together is significant in my book.

Of course, with the holidays fast approaching and liquidity likely to dry up, we could get unusual price action as the skeleton crews rule volatility. This pair may very well jump back above 2.0 and 2.01, and as such, I'm remaining cautious on this move and will monitor my trades over the holiday.

although the temptation can be very strong to stay with a losing trade,from what i can see of the gbp/usd an 18month uptrend line was broken on daily chart yesterday and from what ive found in my own experience mostly will rally back up to the point where it broke down before accelerating down ,id say that point is around 2.0135 and if i was you id cut yr losses there.

fundamentally and on charts i cant see anyway for pound except down unless the usa economy suddenly got alot worse,i see usa data improving currently and uk data getting worse especially housing which the market is focussed on.
ive just sold pound at 1.9980 as i was waiting for daily close below major trend line and im expecting a rebound to 2.0135 before the big down move.Im looking at 1.86 2008 long term target.Of course id have liked to get in higher up but i wanted to follow the rules especially as this trend was so old.If i see a move to 2.0200 and close on daily id consider cutting my losses.What does anyone else think? perhaps gdp could give a slight reprieve but charts dont lie and the uptrend is broken for me.

What are I doing now? shopping... shopping... and shopping! OK. 2007 is gone!!

I stop here. Not more trading. The important thing is I have achieved the goal: get my own swing trading setup! (next year don't leave money in the table... I will take it!)

Merry Christmas and happy holidays to all!

pd. next week we are going to www.nalusuanisland.com and Cebu City. you are welcome!

I'm with you arodriguez, can't say that I'm too interested in trading right now. Over the past month or two, I've been watching GBPJPY more than anything else and it just looks like a drifter at this juncture.

Since I'll be watching the markets anyway, I want to use this opportunity to see where pairs like EURUSD, GBPUSD, and GBPJPY level out, as I think there will be big trades to play in the new year.

Enjoy the Philippines! I actually clicked the link..that place is so cheap! However, it's pretty pricey to fly out there...not to mention a long distance.

im living in philippines right now in bohol tagbilaran city,a rodriguez are you filipino?

pound to peso has dived 20percent last 6 weeks real nightmare ,im from uk but living here for the moment.

So I've gone short at 2.01 and am now sitting on 250 odd pips and it's still going lower, but can't see anywhere logical to place stops... there's no clear support/resistance I can see under 2.01... maybe a very slight pause in the run at ~2.00, but nothing clear-cut. How do you more experienced traders handle this situation? Just take profits at a certain number of pips? Set a trailing stop at 50%/61.8% retracement? Keep a wide, break-even stop and take profits on a bullish signal? I'm worried I'm going to leave my stop too wide and wake up tomorrow with a potential 300 pip trade turned into 20 (or worse).

If you are worried about it retracing, you can take some profit now and move the remaining stop up to break even or a little higher or lower than that level. It's best not to be so clear cut when trading, because market hardly ever are. I generally try to take a position and stagger profit targets so I can book profit on successful trades (though you have to be careful not to place them too close otherwise you will be taking profit fast and letting stops run - big no no). Of course this requires consideration before trying this method. A specific level needs to be determined for break even as your total reward is the aggregate of different points and it shouldn't have to depend on making your most aggressive target for profit, otherwise you are in no better shape then simply placing one stop and one target. Altogether this is good for swing trades that last a number of hours to long-term.

I also know people that will continue to add to a position as it goes their way and trail each additional lot's stop as they go, while still keeping them wide. This method is far too rich for my blood though.

Good trade by the way.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 1.49 as nearly 60% of traders are long. Yesterday, the ratio was at 1.45 as 59% of open positions were long. In detail, long positions are 0.9% higher than yesterday and 69.0% stronger since last week. Short positions are 1.6% lower than yesterday and 11.5% weaker since last week. Open interest is 0.1% weaker than yesterday and 13.6% above its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

Source: FXCM Execution Desk

For historical data and the latest charts based on the SSI please visit http://www.dailyfx.com/story/strateg...353412325.html

For information on an FXCM Managed Fund that takes advantage of the SSI, please review our Sentiment Fund at: http://www.fxcmmanagedfunds.com/ or call +1 646-432-2968.