Selling GBP/JPY on a Retracement – Trade Closed

Trade Closed: 2012-03-09 00:18

GBP/JPY 1-hour Chart

We got a lot of volatility, alright. It just didn’t work my way!

Yesterday turned out to be an extremely bullish day for GBP/JPY as risk appetite shifted in favor of risk takers. The BOE rate statement, which saw the central bank sit on its hands, didn’t really do much to move the pound since no one was expecting the central bank to make changes to its monetary policy in the first place.

Instead, price action on GBP/JPY was mostly driven by news that the Greek bond-swap offer attracted a lot of interest from Greece’s creditors. High-yielding currencies and risk takers had a field day with the rallies that took place yesterday! Unfortunately, I was on the other side of the fence. Bummer, dude.

It didn’t take long for the pair to break above the Fib levels. After a quick (and tiny!) bounce off the 128.00 handle, it proceeded to rally past my stop loss, and it hasn’t shown signs of weakness yet!

Stopped out at 128.60: -60 pips / -0.75%

Looking at the charts now, it seems like I missed a golden opportunity to try out a stop-and-reverse play by trading the breakout. I could’ve bagged enough pips to make up for my loss and then some! The silver lining in this dark cloud is that I decided to cut back my risk exposure and lost only 0.75% of my account.

That’s all for this week, folks. We’ll bounce back from this! Peace and thanks for following!

Trade Idea: 2012-03-07 03:15

GBP/JPY 1-hour Chart

What a crazy week in the markets and we ain’t even halfway through yet! Risk aversion has taken over, as concerns about the Greek debt swap deal have weighed heavily on the markets. Word on the street is that while some major banks are pledging to participate, some pension funds are saying that they don’t want to swap their old Greek bonds for new ones.

This has sent the market into a mini-crisis mode, as a low participation rate will trigger a Greek default! As a result, many fund managers and traders are running back to the safe havens, allowing the dollar and yen to rally.

For now, I think we should see risk aversion continue to dominate the trading landscape and I’ll be looking for opportunities to short higher yielding currencies!

Going through my charts, there is a pretty nice setup emerging on GBP/JPY. The pair has already dropped over 200 pips from its weekly opening price and I feel that a small retracement is due. I’ve popped up the Fib tool and I see that the 50.0% Fib level lines up nicely with the 128.00 MaPs. Looking back, this also served as a support level last week, so I think we could see some interest at that level.

Here’s what I plan to do:

Short GBP/JPY at 128.00, stop loss at 128.60, take profit at 126.70.

I decided to go with a stop of 60 pips, putting it just past the 61.8% Fib level. As for my profit target, I’m aiming for the recent lows at around 126.70. This should give me a nice reward-to-risk ratio of just over 2:1.

Now, with all the uncertainty in the markets, I think we’re bound to see a lot of volatility. This could lead to some ridiculous moves in the market, so I decided to scale down my risk to just 0.75% of my account.

What do you guys think? Will we see the yen rally continue this week?

Weekly Watch: March 5 to 9, 2012

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  • obie

    “Now, with all the uncertainty in the markets, I think we’re bound to see a lot of volatility. This could lead to some ridiculous moves in the market, so I decided to scale down my risk to just 0.75% of my account”Nice job in not allowing yourself to get greedy and spotting the current volatility in the market. I think this was a good trade. It retraced so nicely. All the pairs are showing similar big moves, for example the USDCHF moved 126%.

  • obie

    That bar is massive, over 200 pips as you said. Will the price be able to retrace all the way back up to the 1.28 area? I’m biting my nails in anticipation (yuk), lol. Good luck, as always, will be interesting to see what happens.

    • cyclopip

       Retracement achieved! Haven’t been triggered yet though as price is lurking just below my entry. Let’s see how this goes. Good luck with your trading as well, bud!

      • MaxiV

        Got in with this too

  • Granticus_Maximus

    I spotted a hidden bearish divergence on the 4HR chart right as it headed to around 1.80 so I decided to enter with a short trade. The entry looked perfect with a downtrend beginning with strong candles so I changed my stop loss to near the entry. As it headed to 1.75 I moved my stop loss down a little more, even though I knew chances were it’d retrace a little again. EPIC fail. It retraced more than I expected, right back to where I entered. I should’ve kept my stop-loss up and moved it down after the first retracement. Because of it I only got 17pips instead of 100+ :’( …worst part was that I was in bed as all of this happened… If only there was a way to not sleep (>_>)…

    This image shows how the moving averages along with the ADX on the 30min chart would’ve shown the perfect entry for a 100+pip gain.