The forex gods have smiled upon me as my GBP/JPY short idea quickly moved in my favor in a short amount of time.
With Guppy bears breaking another technical hurdle, I decided to adjust my trade to lower my risk and increase my max profit potential.
Long-term Short on GBP/JPY
Nearly two weeks ago, I decided to short GBP/JPY on both fundamental drivers (increasing Brexit drama, rising negative global risk sentiment) and technical factors (overbought stochastic signal, falling highs pattern on weekly chart).
And it looks like it’s paid off so far as the pair has fallen quickly since my market entry at 138.006, getting as low as 133.60 in today’s trading session (an over 400 pip gain so far). The Brexit uncertainty is still running strong, and we’ve also got speculation that we may see negative rates from the Bank of England now in play likely bringing pressure to Sterling.
And broad negative global risk sentiment is on the rise as markets fear that rising coronavirus cases in Europe and the U.K. will bring an economy busting second lockdown to reality. The Japanese yen seems to benefiting from this latest development as traders move into safe haven assets.
With the market breaking the rising ‘lows’ pattern on the daily chart above, and these negative environment and themes going strong (and not looking to change anytime soon in the next few weeks), I decided to adjust my trade to reduce my risk and increase my max profit potential. Here’s what I did:
Increased my position sized by 60% at market (134.06) giving me a new average entry price of 136.55. Rolled down my stop to 138.06.
This adjustment decreases my max risk from 1.00% to 0.45%, and increase my max potential gain at my target (124.00) from 2.51% to around 3.8%.
Going forward, if the pair is able to break below the June swing lows (around 132.00) I’ll look to reduce my risk once more and possibly add to the position if the environment and themes still makes sense to do so.
What do you guys think? Does GBP/JPY have more room to drop? Would you have done different adjustments? Let me know in the comments section below!
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