In looking at the GBP/USD and EUR/USD charts to track my short position I noticed that the GBP/USD made a new low last night but the EUR/USD did not. These pairs trade pretty correlated to each other so when a divergence like this happens, it should be taken seriously. This divergence warns of a weakening downtrend and possible big reversal. So I want to tighten risk. The EUR/USD's structure is unclear and it's holding up better than the GBP/USD so I decided close half of my EUR/USD position at 1.3520, making a profit of 50 pips.
Now looking at the above 30min GBP/USD chart I see 2 five wave declines. Most likely it's waves (i) and (iii) that make up those 2 five wave drops. And we're currently in wave (iv). If correct, wave (iv) cannot enter into the territory of wave (i) per EWP rules, no exceptions. Seeing as that wave (i) ends at 1.5556, which is essentially right at my short entry level at 1.5555, I want to put a stop just above that at 1.5560 to get close to breakeven on this trade. If the pair rallies above that level it means a much larger correction is probably unfolding and I need to get out of the way anyway.
So to sum up my currency positions:
I exited half my EUR/USD short position at a 50 pip profit with my stop still at 1.5630 for the other 50% of my short position still in the market.
I lowered my GBP/USD stop to 1.5560 which is risking a total of 5 pips for the overall trade at this point.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
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