Locked in Profits: USD/JPY Long-Term Correction

USD/JPY has made quite the run this week so I think it’s time for me to book profits for now while staying on the lookout for a chance to buy again on dips. In case you’re wondering what I’m talking about, make sure you check out my latest blog update first.

USD/JPY Trade Idea

In my initial trade idea, I was looking to catch a bounce off the broken long-term descending trend line and the Fib retracement levels. I was able to hop in on a break of the short-term consolidation around 107.75 with 0.25% risk, thinking that I could still add on a larger correction.

However, the pair barely looked back from its climb and made it all the way up to the 109.50 minor psychological mark, which seemed to hold as a ceiling. After all, this level marks the pair’s full weekly average true range, which means that a lot of traders are hoping to book profits right there. I’ve already rolled my stop up to lock in gains slighly above breakeven, but I eventually decided to exit early at 109.25.

USD/JPY Weekly Forex Chart

USD/JPY Weekly Forex Chart

I know, I know… If I’m basing my trade on a weekly chart then I should’ve aimed higher. But given that it’s almost the end of the week and a major catalyst is on deck, the prudent choice would be for me to just take whatever profits I have for now. Fed Chairperson Yellen is set to give a testimony today and market analysts are speculating that her remarks could cover a variety of topics like her view of the Trump presidency or the impact of rising yields and the strong dollar on Fed policy.

Besides, the dollar index has retreated off its record highs yesterday and U.S. equity indices seem to be having trouble sustaining their gains, signaling that traders are trimming their long positions in anticipation of potential reversals or major corrections. I’m still maintaining a bullish bias on this pair, though, but I’d rather wait for pullbacks or an upside breakout from 110.00 before hopping back in.

Here’s what I ended up with:

P/L: +150 pips / +0.21%

In hindsight, I do wish I risked my usual 0.50% on this trade so that I could’ve made more profits but at that time, I wasn’t so certain that the post-election rallies could continue. Still, a win is a win, and I’m just happy that this setup yielded profits.

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


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