Cross-Eyeing: GBP/JPY Range Play – Taken and Closed!

Trade Idea: 2011-04-12 22:44

GBP/JPY Hourly Chart

Earlier this week, I tweeted about a setup I spotted on GBP/JPY. It was a simple technical play, based on a prior support level from the previous week.

I noticed that the pair was ranging and finding support around the 138.20 price area. The yen was rallying on Monday but I felt that it was just a natural pull back since yen crosses had been climbing up the charts like Sly Stallone in Cliffhanger (I don’t care what you say, I love that movie).

I set a limit order to buy at 138.20, and went with a tight stop of just 50 pips. I was aiming for the top of the range near 139.70. That’s about a 3:1 reward-to-risk ratio. Pretty sweet, eh?

Because my long EUR/JPY position was still open, I only risked half my normal exposure (0.50%) on the trade. I recognized that the two pairs were somewhat correlated, so I wanted to limit my exposure on short yen trades.

Midway through the New York session, I saw that I was up nearly 100 pips, so I moved my stop to breakeven (I also tweeted this) to avoid any crazy moves that might happen while I was away. It turned out to be a GREAT decision, as the pair dropped later in the day… then dropped another 200 pips on Tuesday during the Tokyo session!

Long GBP/JPY at 138.20, closed at 138.20 = 0 pips / 0%.

In any case, while I’m a little annoyed that I didn’t make any pips on this trade (I was up almost 100 pips already!), I’m happy that I adjusted quickly and didn’t take a hit! Now on to find another setup to take!

Like what you've read?
Join over 40,000 other traders who get our newsletter. Tutorials, EAs, chart setups, free forex trading systems, and more!


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>