The British pound sterling had a significant dip in price early in the trading day on the morning of Monday, November 28th. The dip was visible against both the euro and the U.S. dollar. After a month of the pound gaining steam against the euro, this hasn’t yet become a major victory for the pound, but it is a step forward for those that desire a strong British currency. The euro had just recently seen its worst week against the pound in almost two years, so this kind of change shouldn’t have been a surprise. However, because of the strength that the ongoing trend had shown, for many it was a rude beginning to their week.
From a technical point of view, this creates great opportunity for short term traders on pairs involving the GBP. The USD rose by over 0.5 percent early in the trading day, and the EUR by 0.4 percent, both against the GBP. These are both big moves, and they signify that although the trends may have been ongoing for a while, this buck against what had been occurring might have been a bit too aggressive. Overcorrections do occur, and the vast majority of the time, they come back to Earth in the near future. These kinds of opportunities were running rampant on Monday, both in the Forex market and the binary options market. Depending upon your area of expertise and your available trading capital, either could have been quite lucrative.
Identifying an overcorrection and then profiting from it is a little bit harder than normal trading strategies tend to be. You cannot rely on the lines of support and resistance like most short term traders do, nor do Fibonacci lines work here. Instead, you need to look at momentum indicators, like MACD, and attempt to figure out when the correction is beginning to lose its strength. Volume can also help here. You don’t even need to be great at reading charts to use volume to your advantage here. As volume wanes, look for movement to slow down. Once a stall point has occurred, there is a reasonable chance that the correction will begin to reverse, especially if it is far outside of the preexisting range that had been established. Be sure to use other indicators to help time this, but volume alone can be a decent starting point so that you know when to start prepping for the execution signal.
These kinds of strategies don’t need to be used every day, but you should be familiar with them for when instances like this occur. Just because you don’t use a technique on a daily basis does not mean that it will not have great value to you when the time arises. Also, being able to recognize that a change in plans is a must will get you started in the right direction.
The pound rising in price is a good thing for the British economy as a whole, especially as Brexit concerns become more relevant. However, a small dip in price like this is not a concerning one. There are many international events currently moving currency prices, and although this stood out as a blip on the radar because it bucked the ongoing trend, it isn’t something that has any sort of lasting significance at this early point. However, many binary options traders and brokers were thrown off because it did go against the prevailing trend. As a trader, it’s important to keep up with other markets. The bulk of this movement occurred during the European trading day, and American based traders could have completely avoided the confusion if they had scoured the European charts before jumping in and picking up where they left off.