Time to Buy the Yen Again? – Close Trade

Closed Trade: 2009-12-06 21:52

PoD Chart

Apparently, yen weakness persisted causing the GBPJPY pair to rally furiously upwards in one direction throughout the entire week. Needless to say, I got stopped out. I’m not too sure now whether the trend is still downwards for the yen pairs as falling trend lines in have started to break. Oh well, I’m kinda sad this one didn’t work out but I’ll have to shake it off and find trading opportunities somewhere else…

If you can share your opinions on why I lost, please feel free to share. I thought it was such a good trade! :(

1st Half: -250 pips / -0.50% loss
2nd Half: -250 pips / -0.50% loss
Total: -1.00% loss

I lost a lot of pips right there but I’ve got my risk management controls in place to make sure I live to fight another day!

Trade Update: 2009-12-1

PoD Chart

Looks like the pound is on the rise. Will I get triggered today? What news could possibly bring price action closer to my desired entry point?

If you look at the chart above, notice that the pair is inching closer to my entry point. I don’t see any major resistance between the current price and 146.00 so I think it still has some room to move up. Also, it is currently trading on a mini uptrend which gives it a positive bias to move higher.

On the fundamental side, traders seem to have moved on from the risk aversion caused by Dubai’s debt problems as a slew of strong economic reports brought risk tolerance back into play. Also, the economic schedule for today contains a couple of reports that could carry the GBPJPY pair all the way up to my entry order at 146.00. Construction PMI for November could rise from 46.2 to 46.9, providing a boost for the pound. Later on, the US will release its ADP non-farm employment report which could show that net job losses fell to 149,000 in November. If the actual figure meets the consensus, risk-hungry investors might take this as a cue to buy up higher-yielding currencies.

Trade Idea: 2009-11-30

PoD Chart

Did you guys enjoy your weekend? I know I did… I can’t say the same for my wallet though. Black Friday proved to be, well, bearish for my dollars! Ha-ha. Anyway, start of a brand new trading so I’m going to get right on it. I’m going to buy the yen again… but this time, against the pound.

UK, as Pip Diddy keeps mentioning, is the only G7 nation stuck in the recession pool. According to its most recent GDP report, its economy shrank 0.3% during the third quarter of 2009, which is putting some pressure on the BOE to stimulate growth… Hah! Another expansion of their QE program perhaps? Hmmm…

Several top tier reports, however, are due first before the BOE enters the scene. UK’s nationwide and Halifax HPI, manufacturing, construction and services PMIs are all projected to post gains during the recent month. Positive results could propel the guppy (GBPJPY) higher towards my desired entry point! On Friday, the most awaited NFP report will be due in the US. For the last two occasions, I noticed that the number of people who lost their jobs came in worse than expected. The JPY could get a huge boost if the same thing happens again.

On the technical side, I noticed that the 61.8% Fibonacci retracement level is located just around a previous broken support level. With stochastics not yet at overbought territory, price could possibly make it all the way there. The trend (at least to me) is downwards and I suspect a lot of sellers are just waiting to short the pair at a much better price. I want to give my trade enough breathing room so I will place my stop at 250 pips away, roughly equal to the average pip movement of the pair in one day. This would place my stop beyond 147.74, the 72.4% Fib and 148.00, a recent high.

Here’s what I’m going to do:

Short GBPJPY at 146.00, pt1 at 144.00, pt2 at 141.00 and stop at 148.50. As always, I’ll be risking 1% of my account on this trade.

8 comments

  1. PipWolf

    Hey, I’m enjoying your blog so far. I have a very similar set up in mind, hopefully many more traders will be on the same page too. Good luck!

    Reply
  2. PipWolf

    Hey, I’m enjoying your blog so far. I have a very similar set up in mind, hopefully many more traders will be on the same page too. Good luck!

    Reply
  3. PipWolf

    @TalonD: Because then you’re buying against the trend, which is inherently risky. We’re expecting the Guppy to head south, and Huck has a pretty good logical framework for when she expects that to happen (she just got triggered at the time of writing in fact), but you can never be sure. What if you bought at 144.5 expecting it to go up to 146, then down, but the pair tops out a little sooner than expected at 145? What is sure is that you will lose money in the long run if you insist on trying to make every possible pip, especially when buying against the trend.

    Reply
  4. PipWolf

    @TalonD: Because then you’re buying against the trend, which is inherently risky. We’re expecting the Guppy to head south, and Huck has a pretty good logical framework for when she expects that to happen (she just got triggered at the time of writing in fact), but you can never be sure. What if you bought at 144.5 expecting it to go up to 146, then down, but the pair tops out a little sooner than expected at 145? What is sure is that you will lose money in the long run if you insist on trying to make every possible pip, especially when buying against the trend.

    Reply
  5. Aragorn123

    I dont think anything was wrong with your setup. However, it would have been better if you had closed the trade before NFP came out. Thanks to the better than expected numbers, your trade got stopped out.

    Like you said, you live to fight another day. All the best.

    Reply
  6. Aragorn123

    I dont think anything was wrong with your setup. However, it would have been better if you had closed the trade before NFP came out. Thanks to the better than expected numbers, your trade got stopped out.

    Like you said, you live to fight another day. All the best.

    Reply

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>