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Trade Idea Update: 2011-1-31 03:53:16

GBP/JPY Daily Chart

What a way to end this trade! On Thursday, Standard and Poor’s downgraded Japanese debt, sending yen pairs flying up the charts and stopping out my trade at my original entry point at 131.50.

Still, the pair failed to close above the resistance of the falling channel, and only traded as high as 132.50. Later on, the pair shot back down to the 130.00 level, after the recent news from Egypt sparked a run of risk aversion.

If only I had given my trade a little more space after adding that second position, my trade would still be open and in the green. Perhaps I should have stuck with a 300 pip trailing stop instead of cutting it down to 150 pips.

Here’s a recap of what happened.

1st position – Short at 131.50, stopped out at 131.50 – 0 pips/ 0%.
2nd position – Short at 130.00, stopped out at 131.50 – -150 pips / -0.50%.

Not exactly the start I wanted to the year, but at least my loss was minimal. I just need to make some adjustments, and learn from this unfortunate mistake.

I’m still going through the BabyPips forums and, reading up on potential mechanical systems. Remember, there’s always room to grow and improve, and reading is one way to contribute to growth and improvement.

Thanks for reading my blog fellas!

Trade Idea Update: 2011-1-25 21:16

GBP/JPY Daily chart

Apparently, the number of hawks in the MPC has doubled! In the MPC’s meeting last January 13, two members voted for tighter monetary policy. Andrew Sentance, who was formerly a lone hawk, has been joined by Martin Weale in his campaign for a rate hike.

Now that the MPC has two members supporting an increase in interest rates, investors believe the BOE is more likely to give in to calls to curb inflation with a rate hike. This showed on the charts, too. GBP/JPY practically erased half of its losses from the previous day!

I ain’t letting this trouble me though. My first position is still in the positive while my second position is in the red. But even though my trade is basically back to breakeven, the downtrend on GBP/JPY is still intact. I’m holding on to this baby!

Trade Idea Update: 2011-1-25 21:16

GBP/JPY Daily chart

Ha! After ignoring the disappointing retail sales figures last Friday, it seems that yesterday’s GDP was the last straw for all them pound bulls. The U.K. economy contracted by 0.5%, which was the complete opposite of forecasts which were calling for growth of 0.5%. Naturally, this caused the pound to nosedive, as it brought up the possibility of a double-dip recession.

It seems that the upper-bound resistance of the descending channel held well, and with the pair now below 130.00, my second position has been triggered. I have my moved my stop to 131.50 (my original entry), which makes my total stop just 150 pips. This effectively cuts my risk in half, but as I mentioned before, there is a lot of potential to make a killing on this trade.

So far so good! Let’s see if this pound selling continues for the rest of the week. There are a bunch of red flags (FOMC, U.S. housing data, and MPC minutes) coming up, so I may have to be flexible with this trade.

Trade Idea Update: 2011-1-24 00:15

GBP/JPY Daily chart

Well, that descending channel on GBP/JPY is still intact… for now! After I had sold at 131.50, things went pretty well. Price actually hit a low of 130.68, which put my trade 82 pips in the green.

After that, things started to go awry. The weird thing is, the U.K. retail sales report proved to be a huge disappointment, just as I had called! I was expecting the pound to sink like a rock, but for some reason, it just kept rising! Oh well, that’s forex for ya!

I ain’t gonna lose my cool over this though. Like I said, the descending channel seems to be holding well, and my stop is wide enough so that only a real break out will end this trade. Let’s hope sellers can get a bit of momentum on their side with tomorrow’s GDP results and Wednesday’s MPC meeting minutes release!

Trade Idea: 2011-1-18 23:15

GBP/JPY Daily chart

Big Pippin tipped me off on this setup on GBP/JPY a couple days ago. That brotha knows my style! The pair has been trending down on the daily chart, staying within a nice descending channel. After zooming up the charts in the past couple of weeks, it looks about ready to change its course and head south now that the falling resistance is just inches away.

And Stochastic is practically screaming “SELL!!!” It’s showing a bearish divergence deep into overbought territory with its lines crossed over. The setup looked pretty solid to me, so I jumped in at market and got filled in at 131.50. I based my initial stop on the pair’s weekly average true range, which is about 300 pips.

On the fundamental side, there are is one high impact report from the U.K. coming out on Friday that I’m keeping my one and only eye on, and that’s the retail sales report. Word is that sales dropped by 0.1% in November, which is a little odd considering that this comes right before the holiday season.

Could it be that consumers really held back on spending back in 2010? If they have, then it could mean good news for my trade, as traders may become bearish on the pound.

Now, if price does shoot down lower, I plan to take full advantage of the move and scale into an open winning position if things go my way. If price falls 150 pips below my entry point, I’ll move my initial stop to my original entry point (131.50), and will be adding to my position every 150 pips and moving my stop accordingly.

In a nutshell, this is what I plan to do:

Short GBP/JPY at market (131.50), stop loss at 134.50, take profit at 127.00, scale in and move my stop every 150 pips.

Keep in mind that I am initially risking 1% on this trade. When I add at 130.00, my risk will be cut to .50% and when I add the final position at 128.50, I will have a risk-free trade. If things go perfectly, this trade could turn into a 3:1 trade.

Don’t worry, Big Pippin… Drinks are on me if this turns out to be a big winner!

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