Cable (GBP/USD) trade idea: How to play the long term trend accelerating lower

Part 1) Introduction

Volatility Markets suggests trend-inspired trades that capitalize on market trends.

In the short term Cable(GBPUSD) has been negatively accelerating lower. In the long term Cable(GBPUSD) has been accelerating lower. With the long term trend being the stronger of the two, we propose a short trade idea with a one week time horizon.

Part 2) Trade idea details

Sell £ 55,831 GBP , or 0.56 lots of Cable(GBPUSD), take profit at £ 1.075 level with 25.0% odds for a £ 1,720 GBP gain, stop out at £ 1.129 with 50.0% odds for a £ 1,000 GBP loss through 1w time horizon

Part 3) GBP/USD trend analysis

GBPUSD last price was £ 1.109141 . The long term trend accelerating lower is stronger than the short term trend negatively accelerating lower. This trade goes short when the price was moving lower and accelerating over the past 20 days.

Part 4) GBP/USD value analysis

Over the past 20 days, the GBPUSD price increased 9 days and decreased 11 days. For every up day, there were 1.22 down days. The average return on days where the price increased is 0.6255% The average return on days where the price decreased is -0.901% Over the past 20 Days, the price has decreased by -4.34% percent. Over the past 20 days, the average return per day has been -0.217% percent.

Part 5) GBP/USD worst/best case scenario analysis

Within 1 week, our worst case scenario where we are 95% certain that this level won't trade for GBPUSD, is £ 1.050132, and the best case scenario overnight is £ 1.16815. levels outside of this range are unlikely, but still possible, to trade. We are 50% confident that £ 1.129 could trade and that £ 1.075 could trade. These levels are within statistical probability.

Expected range

Within 1 week, our worst case scenario where we are 95% certain that this level won't trade for GBPUSD, is £ 1.050132, and the best case scenario overnight is £ 1.16815. levels outside of this range are unlikely, but still possible, to trade.

We are 50% confident that £ 1.129 could trade and that £ 1.075 could trade. These levels are within statistical probability.

Probability vs payout chart

This graph contrasts the percentage payout of holding a position vs the probability that the payout occurs. The red and green columns represent the probability of stopping out and taking profit and their associated payouts.

Key takeaways

Price today £ 1.109141.

Over the past 20 days, the GBPUSD price increased 9 days and decreased 11 Days.

For every up day, there were 1.22 down days.

The average return on days where the price increased is 0.6255%.

The average return on days where the price decreased is -0.901%.

Over the past 20 Days, the price has decreased by -4.34% percent.

Over the past 20 days, the average return per day has been -0.217% percent.

Over the past 20 days, The price has on average been accelerating: 2.8605 pips per day lower.

Over the last session, the price decreased by -80.14 pips.

Over the last session, the price decreased by -0.7225 %.

Over the last session, the price decelerated by -260.06 pips.