Short-Term Short on USD/JPY – Closed Open Orders

Closed Open Orders: 04-15-2012 23:10

Good evening! With the new trading week kicking off, I thought I’d close off last week’s orders in USD/JPY to look for new trading opportunities. Why stick with a market that’s not moving right?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

Well, many of the major themes I talked about in my original trade idea are still in play, with the European crisis story coming back into the forefront after weak Spanish and Italian debt auctions.

This has caused some pretty big moves in most of the major currency pairs on Friday, with the except of USD/JPY…lucky me?! Yup, USD/JPY consolidated for most of the week and never got up to my short entry orders at 81.30. With the new week starting up, I’ve decided to let this go and move onto the next opportunity. Closed entry orders to short USD/JPY at 81.30. No trade.

For this week, it looks like risk aversion is back on the table, but I may take a counter-trend trade as some pairs hit strong support and resistance levels. As always, stay tuned to new trade ideas and market observations by following me on Twitter and Facebook.

Thanks for checking out my blog; good luck and good trading! USD/JPY Forums
Setting Newbie Expectations
My Favorite Trading Books Forex Chatroom Pipcrawler’s Journal
Horn of Africa Hunger Crisis

Trade Idea: 2012-04-12 00:22 ET

Good morning Forex friends! I’m back to looking at the USD/JPY as the pair has continued to make a steady move lower from its highs a few weeks ago around 84.00. I’d like to try jump in this multi-week move–if the price is right!


On the 60m chart above of USD/JPY, we can see the tail end of a downward move formed over the last three weeks. Even with the trend lower slowing down, I still think it’s the right direction because some of the major themes pushing it are still in play:

All of these are major themes have different effects on currencies, pushing and pulling them in all sorts of directions, and for me, I see it pushing USD/JPY lower for the next few sessions. Of course, I like to get in at better prices than the current market likes to give, so if we see a pull back to the previous area of consolidation marked on the chart (which is also a Fib retracement area), I’ll go short there for a short term play (possibly hold for a day or two).

My stop will be half of the daily ATR and should be well above the consolidation area, and my profit target will be this week’s lows around 80.50, which is also a major area of interest back between mid-to-late February. Here’s what I am going to do:

Short USD/JPY at 81.30, stop at 81.70, pt at 80.50

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade structure gives me a potential return-on-risk of about 2:1, and because I plan to only hold onto this for a day or two, I have decided to only risk 0.50% of my account on this trade.

We still have major data this week on the Forex calendar, so I may get the volatility I need to trigger my orders. As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

  • Sunshine

    Hello Dear,
    I  have some confusion. Please, Clear it. What will be your stop loss level according to your trading system ?

    My another problem is that, I draw many support, resistance & trendline. For this I can not make clear in which level may be hold and will take entry. This problem is killing me. Please, Help me.

    • pipcrawler

      Hello Sunshine.  My stop loss level is written down in the trade idea at 81.70.  As I mentioned in the trade idea, I used the average volatility range for my stop, which puts it above the consolidation area marked on the chart above.  If it moves there, I feel the trade is invalidated.

      For your second question, you can NEVER know whether or not a market will hold at a support/resistance level.  It’s only a higher probability that it will because other traders may be looking at the same area and play the same levels. 

      There are no specific rules as to know which have a higher probability of holding or not–only guidelines–but you can get better at placing high probability trades with practice and experience. 

      As for your EUR/USD chart, we can see the pair is consolidating, so it’s likely that support area will hold…but only until there is a news or event catalyst to give it the fuel to break.  There are no guarantees in the market, which is why controlling risk is the No. 1 job for traders/asset managers. 

      I hope this helps!

      • Sunshine

        Hello Dear,
        I am now clear with my first question.

        About My second question, Should I avoid some support  and resistance level which made higher low or lower high ? Because According to the chart Which I mentioned earlier, I can not take entry for my risk:reward ratio which is 1:2. If I want to take 1:1, then also I can not take any entry. Please,
         Help me more.

        • Yithoe

          you can adjust your lots size to reach the risk & reward ratio you want..:)

        • pipcrawler

          As a newbie, you should be following the general rules that we provide throughout the School of Pipsology diligently as it provides a basic framework to trading the market.  As you gain more experience and get better, you’ll get a better feel for the market and how it behaves and that’s when you can make the judgement on whether or not a risk:reward ratio is worth taking.

          With that said, for me, anything less than 1:1 is not worth taking the trade. Now, this again, is a guideline I follow and sometimes break based on the situation.  Practice a lot and record everything you do, and you’ll start to figure out the best way to trade for YOU.

  • Sunshine

    For understanding you my problem clearly, I have added a picture. Please,  Help me.