Partner Center Find a Broker

Forex Trade Idea: 2014-09-29

I’m going with a simple forex trade setup on USD/JPY, to try to grab a few pips before some potentially game changing events at the end of the week.

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

USD/JPY 1 Hour Forex Chart
USD/JPY 1 Hour Forex Chart

I had USD/JPY on my watchlist last week to potentially buy on a retest and the Fibs, but I didn’t jump in as I thought last week’s yen rally and risk aversion moves on geopolitical news might have been the start of a momentum move lower.  This week, I think volatility will most likely remain subdued ahead of the big economic events at the end of the week: the monthly U.S. employment report and the ECB monetary policy statement.

I actually don’t think we’ll get anything new from the ECB statement since they just took new action in September, but maybe there’s a tiny chance we will see something because of the weak LTRO event. As far as the U.S. employment data goes, it’s likely we’ll see an uptick to the Non-Farm Payrolls number given the jobs data trend (with exception to last month’s weak number) and the recent positive data trend from the U.S.  And if I do manage to get into my trade, I’ll most likely take it off ahead of the Friday reports anyways.

So, I look to go long to play the crazy strength we’ve seen in USD/JPY in the past month, but on a very short-term basis because the move might not have too much legs left in its current run…at least for another big move higher.  I’m setting my orders to buy at the psychological level and mid-range of the current consolidation level.  My stop will be a wide one of one weekly ATR, but i’ll most likely close it manually if it trades below last week’s lows.  And my short term target will be the major, major psychological level that i’m sure everyone is watching.  Here’s what I am doing:

Long full position USD/JPY at 109.00, stop at 107.70, profit target at 110.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 0.76:1 if my stop is hit.  I know it’s a less than 1 R:R ratio, but again, it’s a short-term forex trade and I’ll probably close early if USD/JPY starts to trade below the PWL.

Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.