Pick of the Day: USD/JPY – Trade Closed

Trade Closed: 2007-11-30 14:07

Looks like our trade stopped out as traders return to risk by buying back into higher yielding assets and carry trades.

Total: -90 pips

We will probably see equities and USD/JPY continue to rally ahead of the Fed Interest Rate decision coming scheduled on Dec. 11th. The overall debate until then will be a 25 basis point cut or 50 basis point cut from the FOMC. Look for the overall currency markets to remain choppy until then.

So, we didn’t end the month on a good note, but we still ended up positive with +158 pips! Have a great weekend eveyone!

Trade Idea: 2007-11-28 19:24

PoD Chart

Greetings everyone! It looks like USD/JPY is giving us a nice setup for a swing trade after its counter trend correction today.

On the 4hr chart, it looks like sellers won out for now as we see an “almost” perfect doji candle at the psychologically significant level at 110.00. This also happens to line up with the 61% fibonacci retracement on the move from 111.71 to 107.19. One final confirmation is the stochastic oscillator in the overbought territory. This move may be overdone and we may see a return to the downtrend.

Now, my only concern for taking a short is the strong correlation the Yen has with US equities. We’ve seen a rally in US equities on speculation there will be another rate cut coming soon in the US, especially after Federal Reserve Vice Chairman Donald Kohn’s comments today supported such speculation. This brought risk hungry traders back into equities and into the carry trade.

In my view, I think the recent rally is just a correction. I think the outlook of a economic slowdown will continue to weigh on the markets and that risk aversion will return. So, I will short here with a wide stop and hope the trend lower will continue.

Short USD/JPY at market (109.95), stop at 110.85, pt1 at 109.25, pt2 at 108.50

Remember to never risk more than 1% of your account on any single trade. Adjust position sizes accordingly!

Stay tuned, good luck and good trading!

12 comments

  1. andyk

    I’m a little confused. In your track record, you take losses like today as 90pips, but profits you split into the two positions and total the pips separately. For example, 2 days ago profit was 50pips + 0pips = 50pips
    Surely today the loss should be 90pips + 90pips = -180pips

    I think what your doing is great, but the calculation of profit/loss seems inconsistent. Am I missing something here?
    Andy

    Reply
  2. zakwatt

    andyk – I agree. It’s not consistent to have losses at full pips and treat profits split into 2 parts as also full pips as they should be half pips. Perhaps pipcrawler can give us a detailed breakdown of the + 158 pips made in the month as surely the maths has been done properly. If we were all awarded ‘double’ pips for spliting our winners into two trades, then it is easy to make out we are profitable. I think this needs clarified.

    Reply
  3. andyk

    I’m a little confused. In your track record, you take losses like today as 90pips, but profits you split into the two positions and total the pips separately. For example, 2 days ago profit was 50pips + 0pips = 50pips
    Surely today the loss should be 90pips + 90pips = -180pips

    I think what your doing is great, but the calculation of profit/loss seems inconsistent. Am I missing something here?
    Andy

    Reply
  4. zakwatt

    andyk – I agree. It’s not consistent to have losses at full pips and treat profits split into 2 parts as also full pips as they should be half pips. Perhaps pipcrawler can give us a detailed breakdown of the + 158 pips made in the month as surely the maths has been done properly. If we were all awarded ‘double’ pips for spliting our winners into two trades, then it is easy to make out we are profitable. I think this needs clarified.

    Reply
  5. shebeisen

    50pips + 0pips correspond to the pt1 and pt2 respectively, and not the 2 lots. As you can see, there is only one stop pt. The pips correspond to how the price moved, and not your gain/loss as that would be depending on the size of your position. If you traded two lots, 50 pips would be 100 gain, and the 90 loss would be a 180 loss. In money terms, and not in pips

    Reply
  6. shebeisen

    50pips + 0pips correspond to the pt1 and pt2 respectively, and not the 2 lots. As you can see, there is only one stop pt. The pips correspond to how the price moved, and not your gain/loss as that would be depending on the size of your position. If you traded two lots, 50 pips would be 100 gain, and the 90 loss would be a 180 loss. In money terms, and not in pips

    Reply
  7. PipcrawlerPipcrawler

    Hey guys,

    The way shebeisen explained it is pretty much correct. Overall, I don’t count pips, I count percentage gain in the account because position size is different with every trade.

    If I had a trade with a 300 pip stop and another with a 50 pip stop, the risk is the same… 1% of my account as long as I set my position sizes correctly. Okay?

    If it makes it easier I will record losses in the way andyk and zawatt explained from here on out, but in Jan 08 I will begin recording with percantge gains/losses….

    Reply
  8. PipcrawlerPipcrawler

    Hey guys,

    The way shebeisen explained it is pretty much correct. Overall, I don’t count pips, I count percentage gain in the account because position size is different with every trade.

    If I had a trade with a 300 pip stop and another with a 50 pip stop, the risk is the same… 1% of my account as long as I set my position sizes correctly. Okay?

    If it makes it easier I will record losses in the way andyk and zawatt explained from here on out, but in Jan 08 I will begin recording with percantge gains/losses….

    Reply
  9. andyk

    Agreed. Percentage gain loss would be the best. I trade the same way (fixed risk per trade and adjust position size according to where my stop needs to be). This way each trade is worth the same regardless of the actual size of the target. Its just confusing having track records in pips so roll on 2008….

    Reply
  10. andyk

    Agreed. Percentage gain loss would be the best. I trade the same way (fixed risk per trade and adjust position size according to where my stop needs to be). This way each trade is worth the same regardless of the actual size of the target. Its just confusing having track records in pips so roll on 2008….

    Reply

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