Shorting USD/JPY One Mo’ Time – Trade Closed

Trade Closed: 2012-09-19 00:30 ET

Good morning to all of you Asia session forex fiends! The Bank of Japan came out with their latest decision on monetary policy, and it looks like it wasn’t what I was expecting. Since it wasn’t what I hoped for, I took action and adjusted quickly.

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

PCDPOD20120918.review.png

Not much to say on this trade as the chart above says it all. The Bank of Japan added another 10T yen to its asset purchase program as the market speculated, and traders are now dumping more yen as I type this blog post out. As soon as I saw the news on Twitter, I immediately closed my position manually (78.99) as I had planned to earlier.

Total: -41 pips/ -0.37% loss

The good: I’m glad I kept the risk small and more importantly, that I acted immediately in closing the position. In the past, I’d usually let it ride, even if the data was obviously not in my trade’s favor. The bad: I’m reminded in the difficulty of playing individual events, no matter how convinced I am of what the outcome of data, or event, may be. This doesn’t mean I’ll stop doing smaller plays on individual events, it’s just that I have a lot more practice and learning to do.

For now, the yen may continue to sell off into the European and US session, so we may see 80.00 before the end of the day. Be safe and on the lookout for increased volatility when those sessions open. Good luck and good trading!

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Trade Idea: 2012-09-17 23:10 ET

Good evening forex friends! My boy Big Pippin spotted a nice channel on USD/JPY, so I broke it down to the lower timeframes and saw a nice setup to short again.

PCDPOD20120918.png

In today’s Daily Chart Art, Big Pippin highlighted a falling channel on the daily USD/JPY chart. Coupled with my fundamental reasons to short (which I’ll share in a sec), I drilled down to the one hour time frame as shown above and saw regular bearish divergence as well. This comes as the pair hits the top of that falling channel, which to me is a high probability setup that we may see a reversal.

On the fundamental side, we just saw the US Federal Reserve light up the markets with an unlimited quantitative easing program that should put pressure on the Greenback for the time being. On the other side of the currency pair, we have the Bank of Japan monetary policy meeting this week and speculation is afloat that we may get currency intervention from them as the Yen pushes back towards all time highs, levels that continue to hurt their export sector. Personally, I’m in the camp that thinks we won’t see action this week as it is too close to the actions just taken by the ECB and Fed. Would it do much good as those two monstrous programs take off? I’m thinking not…

So, I look to short the pair at market for a day/swing trade and target last week’s low just above 77.00. But since we still haven’t gotten past the Bank of Japan (BOJ) decision this week, I look to keep my position relatively small and adjust as soon as the BOJ event passes. Here’s what I am going to do:

Short half position USD/JPY at market (78.58), stop at 79.15, profit target at 77.15

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

With this trade structure, I have just over a potential 2.5:1 return-to-risk ratio, and depending on what the BOJ does decide, I may scale into the position to maximize the return if the market goes my way.

Of course, surprise events are always lurking around the corner, so I’ll be ready to adjust in case we see something unexpected. Stay in the loop by following me on Twitter and Facebook.

Thanks for checking out my blog…good luck and good trading!

6 comments

    • Pipcrawlerpipcrawler Post author

      It is… but it’ll all come down to what the BOJ does with monetary policy today. It looks like it’s still a toss up, but I’m still in the camp that thinks they most likely won’t do anything. If I’m wrong, that’s what stops are for, right? :)

      Reply
    • Pipcrawlerpipcrawler Post author

      You may be right, but that support may not hold the selling pressure if the BOJ fails to introduce currency intervention, as everyone is speculating. It could really go either way and it all depends on what the BOJ announces tomorrow.

      Reply
    • Pipcrawlerpipcrawler Post author

      I’m only ‘crazy’ sometimes ;p As I said in my post, I don’t think the BOJ will intervene just yet (maybe around 75.00 – 77.00), so I’m playing the downward trend and recent QE plan from the Fed. It’s good that we have opposing ideas. After all, that’s what makes a market :)

      Reply

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