One of the harder aspects of trading is having the patience necessary to wait days or even weeks for a particular trade idea to fully materialize. A great example is that of the recent price action on GBPAUD following last week’s Brexit vote.
Any time a currency pair moves 1,600 pips in a single session, all of the “greed” receptors in the brain come alive while imagining all of the money that you could have made. Sure, a ton of money was lost too, but our brains don’t like to think about that.
Then the fear of missing out sets in – what if you miss the next 1,600-pip move?
But to profit consistently, especially in a market this volatile, greed and fear need to pipe down. These emotions have no business being in our head because everything we do is cold and calculated and is certainly not based on emotional triggers.
As for GBPAUD, a little patience could go a long way in allowing the pair to produce an opportunity worth the associated risk.
But three things need to happen first:
The new resistance level in question is 1.8350, which is a key pivot dating back to 2009 and is also the 50% Fibonacci retracement from the 2013 low at 1.4380 to the 2015 high at 2.2370.
With the right bearish signal, a retest of this area could trigger the next leg down toward the 1.7430 support level. This area played a critical role as resistance in the second half of 2013 and later served as support in 2014. It’s also the 61.8 Fibonacci level when measuring from the two points mentioned above.
In summary, GBPAUD needs a bit more time to digest the recent volatility, but any further recovery from current levels could falter at the 1.8350 handle.
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