Here’s a quick adjustment to my EUR/GBP short position, ahead of the big U.K. election happening very soon.
It’s been so long since I entered this trade that a quick refresher might be in order. Back in mid-October, I decided to short EUR/GBP to play my fundamental bias in favor of Sterling over the euro as Brexit seemed to have turned a corner to the positive at the time (a deal was about to close or an extension were the likely scenarios over a no-deal Brexit). While there was no deal by the October 31st deadline, we did get an extension and avoided the dreaded “no-deal” Brexit scenario, a bullish Sterling outcome.
Since then, Sterling has continued to find support, recently on the odds of the Conservative Party winning the upcoming general election, again a bullish scenario for Sterling as a Labour party victory would likely mean higher taxes, possibly a socialization of companies, and prolonging the Brexit drama. Unfortunately for me, that support has materialized into a slow grind lower in EUR/GBP, which would be normally great except I got in with a starter position and no chance to get bigger. But still, a profit is still a profit, right?
And on that note, I’d like to lock in some of that small profit and reduce my risk ahead of next week’s election by adjusting my stop on my open position.
Rolled down stop on open short position from 0.8960 to 0.8520. Closed open orders to short at 0.8790
This locks in a small profit of 0.08% gain on the 0.25% risk taken. Tiny I know, but from a return-on-risk perspective, it’s not bad.
Going forward, I may close the trade down completely right before the U.K. election next week on December 12th as there could potential be a pullback. Profit taking is a possibility if the Conservative Party wins (the likely scenario at the moment), and if not, it’s highly likely Sterling would sell off with a surprise win by the Labour party. Either way, odds might be better than 50/50 of Sterling moving lower by the end of next week, all other things being equal. If that’s the case, I hope to book some profits and look to re-enter short at better prices.
What do you guys think? Good adjustment or should I be more aggressive and add to my position. Let me know in the comments section below!
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