After both short orders were triggered on my NZD/JPY idea, the pair quickly moved lower this week, once again on global risk aversion sentiment. With a nice gain so far and top tier Kiwi data coming soon, I decided to lock in some profits and reduce my risk.
NZD/JPY Channel Lower
On Monday, I decided to scale into a short position on NZD/JPY to play the hugely negative risk environment sparked by the coronavirus pandemic, and the broad trend lower on the lower time frames. After entering short at 63.93 and 64.95 (each with 0.50% risk) for an average sell price of 64.56, the risk-off environment accelerated on Tuesday as financial markets fears grew with the rising number of confirmed cases of coronavirus.
From my average entry I’ve already made over 1:1 return-on-risk, and while I think there is more downside, I think I’m going to take some profits off of the table ahead of NZ GDP coming up very soon in case we get a short-term bullish reaction to the numbers. Here’s my adjustment:
- Manually closed half position at 62.25 and rolled down stop on remaining position to 64.70.
This effectively adjusts my risk from a 1.00% max loss to a locked in gain of 0.63% if my remaining stop at 64.70 is triggered. If the market continues on to my max target at 60.05, then my total return would be 1.98:1 return-on-risk ( or 1.98% gain). That’s lower than my initial max risk, but that’s what I gave up to ensure this winner doesn’t turn into a loser.
So that’s it for now on this trade, but I will continue to monitor this trade’s progress. And if risk aversion / yen strength continues to remain strong, I’ll likely adjust my max target and roll down my stop further; maybe even add back into the trade if the outlook remains the same.
What do you guys think of my adjustment in NZD/JPY? Should have I added more and rolled my stop instead? Or how about just close out the entire position? Let me know in the comments section below!
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