Mar.14 to Mar. 18, 2011 Weekly Winner: GBP/JPY!

Sorry for the delay, fellas! Had to put off doing my Weekly Winner price action review today because I got caught up with my GBP/JPY trade! I’ll fill you in on that later on… For now, let’s check in on what GBP/JPY presented last week!

In case you’re new here, you might want to check out my introductory post to read up on my framework.

March 14- March 18, 2011: GBP/JPY Price Action Review

GBP/JPY chart

Price action this week was dictated mostly by general market sentiment rather than economic data. Since the earthquake was still very fresh on everyone’s minds and remained the dominant market theme, the pair began the week sliding slowly down. Disappointing economic data from the U.K. on Tuesday (DCLG HPI and CB leading index) could have also contributed to the selloff since GBP/JPY really dropped around the hours those reports were released.

But Wednesday is when things got really crazy… The pair fell over 700 pips in a matter of a few hours! Risk aversion was the key catalyst for the big move as the market was struck by concerns about a nuclear meltdown in Japan. Apparently, many stops were triggered under 130.00 as speculative bets magnified the move, causing the pair to take a massive dive.

In addition, this happened during the wee hours of the morning, right as the New York session was ending and the Tokyo session was about to begin. Thanks to thin liquidity, it became one huge move!

What’s surprising is that the move down was just as quickly undone. It took about the same time for the pair to erase all its losses as it did for it to record them. Risk appetite improved as news broke out that Japan was making progress in containing its nuclear facilities’ problems, and the G7 helped curb the yen’s strength by agreeing to intervene in the markets.

The way I see it, we could have made mad money if we had shorted at the break of the lower WATR. Price was clearly consolidating then, and the first bearish close below WATR could have served as our signal to get short. Selling GBP/JPY with an initial stop of 100 pips while adding to our position after every 100 pips could have given us a – wait for it because it’s gonna be LEGEN – and I hope you ain’t lactose intolerant like Happy Pip cause the next word is – DARY 20:1 risk-reward ratio!

We would’ve basically caught the entire spike down if we had let the market stop us out at around 123.77, and we’d be laughing straight to the bank at this very moment!

But I don’t think we should feel bad about missing that opportunity. After all, that earthquake that struck Japan was a once in a lifetime event. And the wild swings we saw could have also easily worked against us. But if you were lucky enough to catch it, kudos bro! That could have been the trade of the year!

Anyway, that’s alright, cause I still have another trade of the year setup on EUR/JPY bwhahaha. I’m feeling pretty good about this one – just need to wait for price to break past that key resistnace area! That’s all for now my fellow traders! Make sure you hit me up on Twitter or at MeetPips.com and lemme know what you guys think of that setup. Hasta La Vista Playazzz!

  • felix.khafx

    Can you please explain to me how do you count the ATR practically with example ??

    thanks allot

  • felix.khafx

    Can you please explain to me how do you count the ATR practically with example ??

    thanks allot