USD/JPY: Going Against the Trend – Stopped Out

Trade Closed: 2011-5-3 23:53

USD/JPY Daily Chart

After holding on to this trade for almost a week, I finally got stopped out yesterday. What a sad, sad day it is for little noobie Huck!

But don’t worry, I’m okay now. I’m an expert when it comes to moving on. Ha!

I really thought I was going to get a huge win on this one though. Heck, USD/JPY initially went almost 100 pips in the direction I wanted! Since I was trading daily chart, I decided that 100 pips wasn’t enough and that there was no reason to exit since it had looked like I had caught a bottom.

Then, in a surprising turn of events, the Osama Bin Laden was reported to have been captured and killed by the U.S. It triggered a wide-spread case of risk aversion as investors believed that Osama’s death would lead to terrorist groups launching attacks to avenge him.

Stopped out at 80.80 for -100 pips / -1.0%

As of now, I don’t have any trade. Boo! I need one that I can open and close before the week ends and is based on the 1-hour chart. Got any ideas I can work with? You can write your suggestions in the comment box below or you can hit me up on Twitter or Facebook.

Thank you guys! XOXO

Trade Idea: 2011-4-26 00:46

USD/JPY Daily Chart

I know buying the dollar is risky because I’m going against the trend. Gosh! I feel Blair Waldorf, breaking the status quo by falling in love with Dan Humphrey. But like love, what is trading without taking the risk?

Besides, it’s not like I took this trade on a whim. No sir!

On the fundamental side of things, I’ve read that market junkies are looking forward to the FOMC statement on Wednesday. It’s gonna be Fed Reserve Chairman Ben Bernanke‘s first post policy meeting press conference and he’s expected to talk about the end of QE2. Such a move will probably be bullish for USD/JPY as it would clean up the excess liquidity weighing down the dollar.

Of course, I also acknowledge the fact that Big Ben hasn’t always had a way with words to woo in bulls. However, I’m thinking that perhaps BOJ Governor Masaaki Shirakawa‘s dovish remarks will be enough to get traders selling yens.

The BOJ head honcho said yesterday that the central bank is ready to increase its stimulus program in order to support the economy as growth is expected to decline in the first two quarters.

I’m also seeing some technical signs that the pair may pop up!

First, yesterday’s candle was an inverted hammer. An inverted hammer forms after a looong downtrend, and suggests that the possibility of a reversal.

Second, the inverted hammer appeared right at February’s low. This could mean that USD/JPY has found support and is ready to at least retrace some of its losses.

The final confirmation I needed came in the form of a very obvious bullish divergence. As you can see, price has made “higher lows,” but the Stochastic has formed “lower lows.”

So, based on my fundamental and technical view, I have decided to buy at market (81.80). I’m ultimately aiming for 85.00 but this may change depending on how price moves in the next couple of days. As for my stop, I placed it 100 pips away at 80.80, roughly equal to the pair’s daily average true range.

To recap, here’s my game plan:

Bought at market (81.80), ultimately aiming for 85.00, stop loss at 80.80.

So what do you think of my trade? You can leave your comments below or you can hit me up on Twitter or Facebook.

21 comments

  1. snpfx

    hey huck, your trade was well planned it and execute, and that was the good part of the trade, so feel good about it!!, good luck on your next trade;)

    Reply
  2. Guest

    I myself pretty much ignore trend, but mostly because i have problems identifying it. So you can find me going with the trend in the morning, then against it in the afternoon and evening. But then, like I said, I don’t even know where the trend was! Btw, I’m a shorter term trader.

    I think Huck is trying to set the trend here after some thoughtful fundamental analysis. That is coool! Hope she gets it right and gets even cooler!

    Reply
  3. PipBandit

    The momentum traders have long abandoned USD/JPY since they had a field day after the earthquake. If it’s going to get to 85 it’s going to be a long, long grind. Kampo will be supporting around 81.50 for now but there doesn’t look much upside with the downtrend holding. Personally, I’d close and look elsewhere for opportunities. Those who are in long waiting for some kind of intervention are probably wasting their time at the moment – that would be more likely to kick in around 80.

    EUR/USD and GBP/USD have been offering nicer and far easier opportunities. Just wait for a pullback and trade in the direction of the trend. Today was another example for E/U. Pullback to 1.45 early on and then a 1-2-3 entry at 1.4543 or so with a 40 pip stop for a nice easy trade with a R:R of >2:1. Nobody wants the dollar right now and all pullbacks in the Euro have been bought up lately what with Middle East sovereign diversification and Asian Central Bank diversification, etc. out of USD. It’s made for some simple setups to hop aboard most days.

    Reply
  4. Guest

    That must have felt terrible! You know, coming up with the trade idea, getting excited when up 100pips but in the end losing 100pips, and it took almost a week to reach this conclusion.

    Or perhaps I’m just not looking at your trade in a proper time frame..

    Reply
    • Hucklekiwi Piphuck Post author

      It did! But I let go quite easily… After 1 year of trading, I think I’ve come to accept that losing is part of it!

      Reply
  5. Pankaj

    Hi,

    Funny I had done the same! Bought usd/jpy a while ago @ 81.71

    But i truly believe the japanese economy cannot survive for long with such a low currency rate for long (stronger jpy), as this hurts their exports. And with more positive usd news coming up (or expected to) I feel it is a great time to buy usd/jpy now and hold for some time!!!

    Cheers!

    Reply
  6. Gordon

    Your trade was already in the red when news broke of osama’s death. In fact, USD spike up because of that! So I do not think you lost because of this reason.Have you consider the fact that you lost because you go against the market, i.e. against the majority of the players in the who is dumping the USD?? It baffle me that despite the numerous advice from readers for you to follow the trend for this pair and also the EUR/USD pair (Which you had been burnt a couple of times), you continue to look for shorting opportunity against the trend )(Saw in your fb you are looking at triple top and waiting to short again EUR/USD).If you had follow the advice of one of your reader below to long the EUR/USD pair when it dip, you would have make a couple of hundreds of pips easily.

    Reply
    • Wiltons

      I’ve got to say I agree with Gordon’s (rather forward) remarks here! With USD getting hammered across the board it’s going to be difficult, if not impossible, to pick a proper point to go long on the greenback.

      Maybe for your next trade decide to go with, rather than buck (or Huck!) the trend!

      Reply
      • Hucklekiwi Piphuck Post author

        I like forward! Tee-hee! :) For this trade, I decided to risk it and go for a counter-trend trade because of the potential reward. I knew that the risk of the trade losing is high, but I thought the potential reward made up for it. I lost, and that’s okay! I always got my money management rules in place! :)

        I actually listened to the advice of the other readers, as my past three trades were wins. I traded with the trend and came with three straight wins. :)

        Thank you very much for your feedback Gordon and Wiltons. I appreciate them immensely!

        Reply
  7. Hucklekiwi Piphuck Post author

    Thanks for the comments folks. Since I’m looking at the daily chart, this will be a longer term trade. Hopefully, I’m able to catch the reversal. If I’m wrong… then I’m wrong! Hah! :)

    Reply
  8. PaddyB

    Ugh, sorry about the stop out. :( I was wondering, even though you were trading the daily chart and need to give it room to breath, would you have considered a break even stop once you were up 100 pips?

    Reply
    • Hucklekiwi Piphuck Post author

      In hindsight, yes, moving my stop to breakeven would’ve been a good idea. My risk was 100 pips, and since the trade already went 100 pips my way, moving it to breakeven would’ve been completely reasonable.

      Reply
  9. Michael

    Going with trend increases your chances for wining trades.

    There are several ways to indentify a trend. You can use Moving Averages to see if price is above or below. This is especially useful on the Daily Chart. You can also take a look at the RSI, if is over 50 for a longer period we have an uptrend.

    You can also draw trend lines or channels if possible, there are useful for finding support/resistance in trends. And sometimes, well, markets are range trading. :) Then you can draw support/resistance zones. A support zone is where price couldn’t move below a few times and R-zone is the opposite. Take a look at the H4 chart on EUR/GBP and you’ll see such zones.

    Reply
  10. Zjwierie

    I completely agree with Gordon, going against the trend is the worst thing to do. You should have taken those 100 pips, catching a bottom is almost impossible and I’d say this is the most you could have expected to win trading what indeed turned out to be a retracement. What I also do not understand is your explanation of why your trade went wrong, it had something to do with Osama and risk aversion, risk appetite, whatever. Many of your colleagues have written similar explanations for moves in their blogs, but you shouldn’t fool yourselves. Do not think you can understand what goes on in the heads of the people that trade with substantial volumes, we as amateurs can not know this. Your trade went wrong because you went long USD against the trend, risk appetite had nothing to do with it regardless of the fact that no one here knows how hedge funds and other professionals react to the news or under which circumstances there even is a reaction.

    Thanks for the blog though, I really like it.

    Reply

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