Profit from Last Week’s “Buy the Dip” Opportunity

Last Week’s Trade

Last Sunday, I wrote about how the GBP/SEK currency cross was likely to rise over the coming week. It did, by 0.78%. It was up by a lot more than 0.78% on Friday morning, but it fell quite sharply when British GDP data was released showing that the U.K. economy had barely grown at all over the previous quarter. In any case, there was some profit to be made. These “buy the dip” weeks set up when there is a strong multi-month trend and then a week closes with a movement of more than 2% in value against the trend direction. Here are some statistics on how these have played out on the 3 major Forex currency pairs (EUR/USD, GBP/USD, USD/JPY) from July 2001 to date:

Currency Pair

No. of Trades

Win %

Average Result

Median Result

EUR/USD

28

57.14%

+0.17%

+0.14%

GBP/USD

22

63.64%

+0.53%

+0.87%

USD/JPY

40

52.20%

+0.19%

+0.11%

All

110

56.67%

+0.27%

+0.19%

It is an impressive strategy – it produces good results, with a relatively high win percentage, which is rare in Forex.

Korean News

Last week we saw the surprising spectacle and the leaders of North and South Korea having friendly talks, with the North committing to closing down its nuclear test site within days, cease all nuclear tests or otherwise warlike acts, and commit to working towards a peace treaty including the complete and irreversible denuclearization of the Korean peninsula. It is unclear just what the North sees as the end result here, but if a real peace treaty and denuclearization is arrived at, a major source of tension and political risk in Asia could be removed. Markets didn’t really react to the news, but it may be that if more concrete progress is made, it could provide a boost for equities and other risk assets, especially those located in Asia.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.