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.