FXWW News/GBP crosses/Trade Ideas

Cable: Building a small long-term long position for 1.75+

I’ve come up with one of my long-term ‘wacky’ trade ideas which came about as I was doing all my analysis this morning. I’ve had a look at EUR/USD and EUR/AUD, EUR/GBP and AUD/USD, Gold, USD/JPY and EUR/JPY. After all of this, I came to the conclusion that the big ‘risk’ trade in the market is for cable to go a lot higher.

On these long-term plays, its impossible to simply pick a level and say it will go higher from here. Had I done exactly the same broad analysis earlier this week I would have reached exactly the same conclusion but I could have been going long at 1.5750 and watched it fall 300 pips! So generally speaking I will pick a wide 600 pip range and attempt to build my strategic position inside of this range.

The frustrating thing with these types of ideas is not getting it wrong; I do that all the time and can easily budget for any losses. The real frustration is when my analysis is correct but the market starts moving hard in my direction and I don’t get a chance to build a reasonable position. Then I watch a market move 20+ big figures and I have a 1 or 2 lot position rather than a 10 or 20 lot position. Big big difference.

The last time I had a similar idea was in EUR/AUD near 1.2350/1.2400 and that did develop into a very nice little earner. I could have run it further of course but no point in being greedy (or?). Time frame on this is months instead of days. so only for the hard core position traders.

  1. Hi Sean,

    Do you still maintain the view that EU banks will take a big hit beginning of next year? If so, combined with GBPUSD breaking out the 1.6x range, then EURGBP will be horrible (and a lot of fun to trade)?

  2. That wasn’t my theory Lam-Son, was just relaying what a very experienced and well-researched pro trader thought. But yes, EUR/GBP could be a lot of fun at some stage and I think the move will be to 75 rather than 90+

  3. >Then I watch a market move 20+ big figures and I have a 1 or 2 lot position rather than a 10 or 20 lot position

    I take great comfort in what one of the masters said in the 2nd Jack Schwager book – 90% of your profits are made from 10% of your trades. Most of the time you’re playing for small percentage wins and losses. Hopefully build up a 30-40% return for the year. And then, if you have strong conviction you go for a trade 20x your normal size and go for a 100% year.

    I think it might have been Druckenmiller that said that.

  4. Pound is a total mystery for me, but I start to really like your cable ideas (GBP/NZD from couple month back was brilliant). Will try to find a comfy spot to build something in cable. Thanx again for ideas. Cheers. Kirill

  5. I’d agree 100% Chngster and whilst I haven’t made anything like the money that those guys have, I have realised that 90/95% of my time is spent chopping around up a bit, down a bit, until the good trade happens. And you never know which trade will be the next good one so there’s no way to avoid the chopping phase

  6. Good evening Sean,

    Thanks for your insight on GBP/USD. Yesterday, I racked my brain to get some propositions on this cross to try to pick the right level !! Obviously, you have different view, you prefer to play on the longer term and with this method you eradicated my problem. I conclue if I want play this cross I have to shift on the longer term. Ok, let’s try at 1.5350 (my second proposition) with a wide stop ?

  7. Yes good idea Papillon, stick a ‘silly’ bid in somewhere and use that as your starting point. But keep looking for ‘swing’ trade opps anyway as they help to generate a good feel for overall mkt

  8. Looks like an outside WEEKLY (reversal) candle happened right below the former trendline dating back to 1/2009….i went short @ 15500 looking for much lower….mid to low 140’s will be nice..Good luck to you though sir!! 🙂

  9. Likewise Peter, thanks for that, does indeed look like outside week although these indicators are not so reliable in mainly sideways markets imho. But at least we have a market 🙂 Good luck

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