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Eur-Gbp and some important considerations

On Thursday, Eur-Gbp also reached its second target. If you have no idea what I am talking about, here is my analysis of 7 February “Euro and British Pound, what has emerged from the meetings”. I am not writing this article to self-congratulate, to tell you how good I am. I do so because I want to make a few considerations that you should not underestimate if you care about success in trading.

The first consideration is that if you do a complete and correct analysis you will have the exact situation in front of you that you can use to your advantage. You have an example of this with Eur-Gbp. Despite the fact that since my article the war in Ukraine has broken out (the euro has been the currency most affected), despite Lagarde's continued immobility on interest rates (although it seems in recent weeks that something may be moving), the operation is going as analysed.

This was possible because, thanks in part to Hannah who had done most of the analysis, I had before my eyes the real situation in which the two currencies, and consequently the two economies, found themselves. I knew what would happen if conditions did not change. And conditions have changed, but if on the one hand the euro has had its negative events, on the other hand, the British economy has deteriorated further.

By following the unfolding of events and macroeconomic data over the coming weeks, I was able to keep an eye on the trade and make a profit, however, which was far from easy. As I always say the only thing easy about trading is losing money.

I try to convey with my books and articles the correct and clear way to analyse a market, be it a commodity or a currency pair. Only then will you know the real situation that the market is in and how, most likely, it will move in the coming weeks. You will then have the odds on your side. You will not close every trade in profit (nobody does that, not even me), but if you use proper money management, you can make trading a source of profit.

That is the only way to become profitable in trading, you have to get that into your head.

The second consideration is that you have to know the market you trade very well. You have to know how it moves, what the important levels are, and what it is most influenced by. I could give you many examples to explain this, I take Eur-Gbp only because it is the last in order of time.

I do not trade with all currency pairs, there are about fifteen that I use, the others I do not take into consideration. One of them, as you may have guessed, is Eur-Gbp. By following the currency pair over the years, I have become aware not only of its important levels but also of the movements it usually makes.

One characteristic is the (very often) strong retracements that Eur-Gbp makes once it reaches the most important levels, such as 0.85100 (first target) and the 0.85950/0.86300 area (second target) and which you can see highlighted in the chart below.

This led me on Thursday to momentarily close the long trade and open a short one. The same strategy I used previously when Eur-Gbp reached the first target. In this way, I can take advantage of the retracement and re-enter long at a more profitable level.

This type of operation is only possible if you know the market you are working with very well. That is why it is important to work, in this case, with a small number of currency pairs so that you can concentrate only on what you know well. Of course, this applies to any asset, from stocks to commodities.

On Thursday, Eur-Gbp also reached its second target. I am not writing this article to self-congratulate, to tell you how good I am. I do so because I want to make a few considerations that you should not

David Carli
David Carli
David is a financial analyst with over 27 years of experience (two years as a fund manager) in currencies and commodities. He collaborates with a major European commodity investment company and is the author of several successful books about trading and financial markets.

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