Our trend for the day is GBP/USD
On 9/22/08, I pointed out that the GBP/USD was finding it tough going through the 1.8514 level which is the 78.6% retracement of the 1.8807-1.7435 swing high to swing low. The currency pair managed to push 130 pips higher in the form of a blow-off top before closing back near the fib level. A 480 pip decline ensued to the 1.8055 level. The long wick on the 9/25 would have taken out conservative stops just above this area.
Placing a higher stop just above 1.8799 would have shielded a trader from the volatile price swings that occurred before the actual drop. Sometimes we have to reduce position size in order to afford a wider stop in a volatile market to take advantage of a sizeable gain.
