Trade Review: CHF/JPY Long-Term Selloff

Nope, the trend wasn’t my friend on this one, as I seem to have gotten in just when the tide turned. Here’s why I decided to get out of this CHF/JPY trade early.

Short CHF/JPY Idea

In case you missed this trade setup since I entered it a long while back, don’t forget to take a look at my initial thoughts in my CHF/JPY trade idea blog post. More than a month ago, I thought I was able to catch a downside break of a triangle consolidation pattern when I shorted at 103.40 and add on a small pullback close to 104.00.

At that time, yen strength was the name of the game after the BOJ kept hesitating to add to its quantitative easing efforts. However, yen bulls eventually ran out of steam as economic reports from Japan continued to disappoint, possibly enough to convince the central bank to step on the gas when it comes to stimulus.

CHF/JPY Daily Forex Chart

CHF/JPY Daily Forex Chart

I noticed that the pair had been having trouble breaking past the lows around 103.00 so I figured that another test of the trend line was in order. But when price started moving past the falling resistance area, I decided to pull up the moving averages to check if a reversal might be due.

Eventually I decided to close early when CHF/JPY closed past the 100 SMA dynamic resistance, which has held as a pretty strong ceiling since August last year. Yen bears have been gaining more momentum these days and might be enough to spur a longer-term uptrend for the pair so I thought it best to cut losses right here.

Here’s what I ended up with:

P/L: -220 pips (average) / -0.43%

To be honest, I was really bummed out about how this trade turned out since I caught the downtrend at the very bottom, missing out on all those would’ve-been-profitable trend line bounces in the past. I probably shouldn’t have been too excited to hop in on that breakdown and waited for a trend line test instead, likely keeping my losses to a minimum had I decided to exit early anyway. Lesson learned!

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

Risk Disclosure
Pipcrawler’s Q3 2016 Blog Trading Performance