Cable’s recent dip through strong support at 1.6740 and subsequent pause for breath around bids at 1.6720 lends itself to a quick post with regard to pulling bids and offers when stops are being triggered.
One of our readers asked if I could refresh the GBPUSD orderboard, but there was nothing to change. Strong bids were chewed through at 40, a few more at 30 before failing to penetrate the next lot at 20. His suggestion was that traders would pull bids if the price action got a bit rapid.
Think again. Sometimes/often you can only buy when it’s offered and sell when it’s bid, otherwise you end up chasing an inevitably lost, and more expensive,cause. An invaluable lesson taught to me at the outset of my interbank days when I thought I was being clever by pulling my bid when the market came down in a rush, only to be chasing the offers more than a few pips higher!
That example on cable earlier was a prime example with a bounce from 1.6720 to 1.6746 just as quickly as she came down.Ok, so it still looks a little offered overall this morning but the lesson is still valid. And even more so given the volatility post-NFPs for example.
So be warned, pull the bids and offers on occasion to re-appraise but don’t get greedy. And don’t forget that many stops are triggered just to create a better buying/selling area/opportunity. Similarly don’t be a dick for a tick on t/p’s or trade entries. Just because your orderboards and/or charts specify a precise level it doesn’t mean the price will exactly fulfull the prophecy.
Just thought I’d pass that reminder on.