GBP/USD trading strategy

Trading the British pound represents chaotic price movements, very sharp and unexpected. However these are some of the features short term traders look for. The UK economy is the second largest after Germany in the Euro zone. The pound accounts for 14% of daily global trading volume. Liquidity on this currency pair tends to be much lower compared to what the EUR/USD offers. This lack of high liquidity is what fuels short term price spikes that short term traders crave for. The GBP/USD pair is also greatly affected by major US economic data, but since cable lack the two way super liquidity of EUR/USD, volatility on the GBP/USD pair is very abrupt and vicious. For instance, if there is a 150 pip rally on the EUR/USD, the GBP/USD is partying heavier with a 200 pip rally. The Pound is highly sensitive to rate decision of the Bank of England more often than US economic data. Key economic factors that affect the GBP/USD pair are the British Consortium shop price index (BRC), retail sales, trade balance, Bank of England MPC minutes and the behemoth interest rate decision by the Bank of England.


Behavior

The Pound has very unreliable technical levels, there are a lot of false breaks that occur on the pair. Because of this behavior, traders tend to leave bigger margin of errors for entering a position on the currency pair. However, when looking at entering a position it should be placed way below the technical levels as this pair tends to overshoot the level before finally making a significant move.




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