So on GBPCHF, we survived the two news announcements yesterday and we are easing nicely downward, up 80 something odd pips now, as I type this.
Some relatively sharp moves overnight in other pairs, notably the JPY crosses. Seems as though the markets are actually beginning to take note of some of the risks that are about the place these days. After 5 years of the market ignoring bad news, traders have become very complacent. I see that long term trendline on the S&P I was referring to the other day has been broken pretty emphatically now....could be an interesting Friday.
The other thing is that if you are holding positions over the weekend, it's important to remember the risk involved with that too. A stop at breakeven will not necessarily activate at your chosen price if the market gaps over the weekend.
Just say for example Putin announces over the weekend that he is sending troops into Ukraine. Or new sanctions. Or airstrikes in Iraq, something in Gaza, anything. It's very difficult to predict where prices would open on Sunday night if something big happened. Normally your broker will only have to execute your stop at the best price available, and if the market gaps 200 pips past your stop, that's where the order will be executed.
From week to week, huge market-moving events rarely happen on weekends. But in this current environment, with geopolitical risks practically everywhere you look, well, who knows what is going to happen.
I remember back a few years ago, during one of those ridiculous EU summits that went on all night and into the weekend, a friend of mine was short EUR/USD, and decided to hold into the weekend, convinced that an agreement wasn't going to be reached on whatever rubbish they were trying to agree. Of course, in retrospect, he was correct, because they never really agree anything in the EU, but that didn't stop them announcing that they had agreed something and now everything was great again.
The algos that dominate the market don't care that EU leaders largely talk rubbish. All they are interested in is the headline. The long and short of it is that EUR/USD gapped something like 400 pips to the upside when the market opened that Sunday night. My friend had his stop in place alright, but due to the gap, it wasn't executed. Cue instant 50%+ drawdown. My friend closed his account and I'm fairly sure he has never traded since.
Needless to say, that entire gap was closed in fairly short order. People began to read between the lines and realised that the announcement was a fudge like everything else that comes out of the EU and prices continued to move to the downside. Ultimately my buddy was correct, but that didn't stop him from losing a whole chunk of his account.
Something to bear in mind...
