When trading any big event, simple is often best

When looking at trades for today’s BOE, I’m reminded of the opening line of a Rudyard Kipling piece;

“If you can keep your head when all about you are losing theirs…”

What I see today is confusion. Market commentators (myself included) are trying to jump through hoops to give us analysis on what will be hawkish or dovish and/or what will be bullish or bearish. When I get too many ingredients on my trading plate, I don’t want to trade, and my plate is overflowing today.

Today we have;

  1. The announcement
  2. The votes
  3. The statement
  4. The minutes
  5. GDP forecasts
  6. CPI forecasts
  7. Interest rate forecasts (or views thereof)
  8. Carney speaking

There are far to many variables, especially when you have analysts and a market that are running around like headless chickens trying to guess and second guess every outcome. We were into May, then not into May, now we’re into August and might be out of August (depending on what we get today) Carney is this and Carney is that. This isn’t a market thinking rationally, this is a market clutching at straws and that’s not one I want to get involved with. I like simple, I like clear information and I like to know what I’m getting myself into. None of us here are going to beat the robots to the headlines and comments. Anything big and prices will have moved before we’ve finished reading or listening to a comment. We can’t compete with that and so I’m not going to even try to. Unless, during the event, a trade jumps out and slaps me round the face with a wet cod and says “TRADE ME!”, I’m sticking to a simple trade opportunity that will be nice and clean and away from the noise.

If the BOE news is bearish, and the pound drops, I’ll look to sell a rally on a bad US CPI number. If the BOE news is bullish, I’ll look to buy a dip on a good US CPI number.

Here’s the reasoning. We should have all the information we need from the BOE and Carney before the US CPI numbers. We’ll know what the pound is doing and it’s likely to be longer lasting move than any sort of USD move over US CPI. So, if I know the lay of the land after the BOE, I can then look to trade any opportunities that upset that theme on a short-term basis. There’s no guessing, there’s no heavy analysis, just simple price action using the two events to lower the risk in my trading.

Obviously those scenarios need to happen exactly or there’s no trade. If both events move the price the same way (i.e bullish BOE, soft US CPI/bearish BOE, good CPI), I’ll leave it alone as to trade that will probably mean chasing highs or lows to get in, and I don’t like doing that. Anything outside of that and I’ll sit on my hands and wait until things settle down.

Remember, while this could be a big day for price moves, it doesn’t mean you have to increase your risk just to trade it. Don’t succumb to FOMO. Unless you have a long running strategy in play already, you’re risking a lot trying to guess a direction and can just as easily lose as you can win. For me, the GBP trade right now is a 50/50 gamble and I don’t do gambling.

So there we have it. I’m taking the simple option, it keeps me stress free and I can concentrate on the news and what comes of the meeting without having to stay glued to my trading account, or pull what litlte hair I have left out of my head. I’ll either get a trade or I won’t. That won’t bother me because there’s always another opportunity around the corner.

Good luck to you all.

Ryan Littlestone

Pin It on Pinterest