October 10 to 14, 2011 Weekly Winner: Gigantic Moves on GBP/JPY

Before you check out these two piptastic setups on GBP/JPY, read my introductory post on the Weekly Winner to acquaint yourself with my trading framework. Done? Awesome! Let’s roll!

October 10 to October 14, 2011: GBP/JPY Price Action Review

GBP/JPY Hourly Chart

Risk was on last week, and boy, did GBP/JPY show it! The pair ended almost 300 pips higher as risk appetite pushed traders to sell the pound and ditch the safe haven Japanese yen.

Weirdly enough, the week actually started out quite dully. I can’t even remember the number of times I fell asleep while watching GBP/JPY crawl sideways. But when price revisited the weekly open (WO), things began to get a bit more interesting.

Positive U.K. claimant count data and a sudden improvement in risk appetite fueled a pound bull run, resulting in a massive 300-pip move. You read that right, fellas. 300 pips!!! Thanks to news that Slovakian leaders reached a deal regarding their EFSF voting, a risk rally ensued and the pound strengthened against the yen.

Price eventually found itself retracing its footsteps and falling to the previous week high (PWH). However, this proved to be nothing more than a retracement as price rose to retest the former high at around 122.00.

By now you probably already have an idea of how you could’ve banked truckloads of pips last week.

The first setup was the clean bounce off the WO on Wednesday. The best way to have approached this strong rally was to act aggressively. As a matter of fact, a 50-pip stop would’ve sufficed. If we had added to our position and moved our stop losses every 50 pips, we would’ve gone home with a ridiculous return on risk of 14:1!

Employing the same strategy the following day would’ve also been quite fruitful. When price was stalling right above the PWH, which was in the same area as the 61.8% Fibonacci retracement level, we could’ve bought GBP/JPY and bagged another big winner. By adding to our position and moving our stops every 50 pips, we could’ve increased our potential reward-to-risk ratio to about 6:1, assuming we had aimed for Wednesday’s high. Money in the bank, son!

So basically, if you had risked 1% of your account on these big moves last week, you could’ve gotten up to 20% in return. Not bad, eh?

Did any of you catch these moneymakers?