Forex Trade Setup: AUD/JPY Head and Shoulders

Happy new year, forex friends! I’m starting 2016 off by revisiting my recent AUD/JPY short trade setup which still seems to be valid. You see, I decided to close my position on this one before the end of 2015 to avoid any exposure to event risks while I’m out enjoying the holidays.

With all the downbeat reports coming out of China and speculations of further PBOC easing, I think this pair might still have room to fall further. To top it off, the expiration of the short-selling ban on Chinese securities later this week could also spur another leg lower for equities, which might weigh on overall risk appetite.

AUD/JPY 4-hour Forex Chart

AUD/JPY 4-hour Forex Chart

As you can see from the pair’s 4-hour forex chart above, price also seems to have broken below the neckline of the head and shoulders reversal pattern. This adds confirmation that a longer-term decline is underway, possibly taking AUD/JPY down by an additional 400 pips or the same height as the chart formation.

I was able to enter at market (86.00) just below the neckline at 86.50, with a stop just past the right shoulder at 89.00 and an initial profit target at the 83.00 major psychological mark. I risked 0.5% of my account on this position so make sure you read our risk disclosure if you’re looking to hop in with me.

What do you guys think of this setup? As always I’d love to get your feedback on my ideas!


Happy time

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  • Thanks for the vote of confidence! Yeah I’m a bit bummed about missing the short entry at the top of the descending channel but I’m just happy to be able to catch a part of the drop. Did you short also?

  • Yikes, where is your stop loss now?

  • emis

    Happy Pips thank’s For aud/jpy setup i’ve earned 880 Pips
    88.20 TP 83.20
    87 To 83.20

    Unfortunately i’m a beginner And i was in demo account.

    But i like your long term strategy it’s more confortable For me.

    • Good to hear and congratulations! Just keep on practicing with your demo account until you make consistent returns before opening a live one. See you around!

  • Ahh I see…

  • Yep, good point about forex trading being unpredictable right there. Looks like your stop was already hit though. Any lessons you’ve learned from this trade?