Currency Spotlight: British Pound /US Dollar
Forex Ticker: GBP/USD
About: This currency pair, often called the ‘Cable’, is one of the most widely traded currency pairs worldwide.
We talked to Dr Aram Kiani, trader and host of the Trade to Win Live Trading Room about his strategy with this instrument.
What’s been happening
While the pound has been declining against the dollar over the past century, September 2022 saw that intensify with a record-breaking drop.
The new British government’s announcement of a mini-budget on Friday 23rd Sept 2022, as a response to record levels of inflation and a cost of living crisis, meant that investors pulled out of the currency even more.
The pound dropped right after the announcement on Friday 23rd and then it dropped again to a record low on the morning of Monday the 26th, once Asian markets opened.
The pound plummeting as shown on a 15-minute chart
Aram’s strategy with the Cable
Why he likes it: ‘It always has movement, a lot of activity that is good for trading whether you buy or sell - it doesn’t really matter which,’ he says.
His strategy: Aram scalps this instrument since he looks at it in the Live Trading Room where, as host of the room, he needs to get in as many trades in as possible which a longer trading style wouldn’t allow.
And then, he explains, ‘I look at multiple time frames. If I am going to trade the lower time frames – the 5-minute or the 1-minute chart – I look at the longer time frames like the 30-minute, 1-hour, 4-hour, or daily charts and look at what is going on in the background: what principles have appeared in the higher time frames that will enable me to make a decision in the lower time frames as to which direction the market is probably going to go in the next half an hour, to an hour or so.‘
What he did: Having done that Aram continued watching the chart, waiting for VSA Lite signals to appear.
`When we get lower prices we seem to have a lot of strong principles appearing which might tell me this market is going to change,` he comments. `After the drop on Monday 26th September, the pound started to rally up and on Tuesday 27th it was still rallying up – the principle that appeared previously was a warning sign that the market was going to change.‘
Here is an example of a trade Aram took in the October 2022 on this currency pair:
Aram`s record of this trade
On the 14th October 2022, there was a Professional Selling signal at 11.28am, a No Demand signal at 12.17pm and again at 12.25pm. So Aram entered the trade at 12.27pm and it was filled at 12.56. He made 29 pips.
This is news-driven volatility – doesn`t Tradeguider say not to trade the news?
‘The news – especially if you have major news coming out – does influence the chart and I never trade in or around the news,` says Aram. `The majority of the thinking of the herd will be that they see the prices fall and think it is time to sell. But you don’t want to sell when the prices are very low – you want to buy.
So it’s important to be aware of the news but very important to follow your chart and look at which principles have appeared in the chart to guide you. For example, if a principle like Bag Holding appears, a major principle, then you know that this market is going to change, so be prepared.
Fifteen or 20 minutes before a news announcement, the market tends to go sideways. If the chart is low down, we’re in an Accumulation Phase so we need to wait for a spring to occur before we get a Breakout and can enter a trade on a long position. But if the trade is at the top you get a Distribution Phase and that will also have a spring which will suddenly go up and then go down below the level of the Accumulation Phase and you can set yourself up for a short trade.`
Summary: There will be more
‘From the current situation with the pound, with the way the British economy is, we will probably see it decline more and more,` says Aram.
But, if you missed this particular opportunity to capitalize on the volatility of the pound in September 2022, be patient and wait for the next few principles to appear on the chart to make a decision and plan on your trading strategy.
‘There are always opportunities in the market, he reminds us. `You just have to be patient and wait, analyze the charts and make a plan in regards to your trade.`
Tradeguider is the home of Wyckoff VSA. Dr Aram Kiani has been running the Trade to Win Live Trading Room since the beginning of 2022. Formerly a medical physician, Aram learnt to trade from scratch using Wyckoff VSA and trades consistently and profitably as you’ll see when you join the Live Trading Room. This is a great example of someone who switched career and became a full-time trader supported by the Tradeguider educational services.