The trade is based on a high test bar on daily timeframe rejecting the 2.1000 level (Nice big psychological number) in anticipation of the continuation of the prevalent 'phase 1', in pursuit of a lower low...
Am planning on keeping this trade open for as long as possible as the reward to risk is staggeringly good (10:1+)
A lot of people have come to me asking why I've taken it short (the high test bar on 23rd) given the apparent uptrend with higher lows on the daily. However, when I invited those people to look at the weekly, GBPNZD's main characteristic is 'complex retracement'. This is evident throughout the past 3 years:
The weekly has lower highs and lower lows in cyclicity but the retracement on the daily (reflected by higher lows and higher highs) is merely a retracement...
In 2010 - the retracement (from May - Aug) gave higher highs and higher lows on the daily and people were thinking it was now in an 'uptrend' but as we can see...it was merely serving as a complex retracement with higher highs and higher lows before the continuation of phase 1.
Same again from December 2010- March 2011
...and again from July 2011 - November 2011
.........and again from Feb 2012 - May this year.
So in short, look to the higher timeframes for context such as the weekly or monthly as, unlike the daily, they can tell you a far more accurate story.
GBPNZD - Weekly:
Hi Rob, I am also in this trade as well as in two other reversal trades GBP/AUD short and AUD/NZD short. What's your view on trailing stops? Thanks, David.
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