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Trade Closed: 2013-04-18 5:45 ET

Don’t you hate it when you’re both right and wrong about a trade? That was essentially the case as my directional bias and UK data expectations were negated by a misadjusted stop and a lot of volatility.

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

This trade is probably one of the more frustrating ones I’ve had in a while as I feel my directional bias and expectations of what we would see from UK jobs data was on the money, but I just didn’t execute my stop adjustment properly. Here’s how it all played out…

The market did hold at the 50% Fibonacci and major psychological area of 150.00 for a bit after I entered, but it was expectations that the G-20 wouldn’t comment on the Bank of Japan’s newest monetary policy changes that pushed the Yen lower against most of the majors. I was nearly stopped out as the market tested the 151.00 area, but it never got any higher than 151.20ish. This was the 61% retracement area, so it looks like guppy bears decided to take control there.

As the market expected–and why I was in the trade–UK jobs data came in weaker than expected (unemployment rate ticked 0.1% higher to 7.9%) and wages were weaker than expected. GBP pairs fell on the news, and when paired with broad risk aversion through the European/US overlap, GBP/JPY fell all the way to just above 148.00.

I added to my position at 149.00 (average entry price now 149.47), and adjusted my total position stop to 150.00. Unfortunately for my trade, the pair rallied almost 200 pips higher during the afternoon US session, all the way into the Asia session and stopped me out at 150.00.

Total: – 53 pips/ -0.39% loss

So, the list of things I could have done differently on this one is long.

  1. Waited or entered another position at 151.00. But I thought my 150.00 entry was sound and my wide stop was correct. Plus I don’t usually add to losing positions.
  2. Took some profit off the table as the market approached 148.00. But since I was already up around 200 pips, and in the afternoon US session, I figured there wouldn’t be a strong rally higher. I stepped away from the market for a while.
  3. Closed my first position at the start of Asia to lock in some profits. I had a chance to get out of that half with 100+ gain.
  4. After a 300 pip drop from 151.00 to around 148.00, I could have adjusted my stop to 149.00. No new position and continue to go for 147.00.
  5. Adjusted my stop too tightly. The pair averages over 200+ pip moves a day.

Overall, a lot of those adjustments weren’t made because I was going for a big win–over 3:1 return-on-risk–and I thought UK retail sales would disappoint as well. So I thought holding it was worth it, especially since I reduced my risk to under 0.40%.

Am I sad that I lost? Nah, but it’s a little annoying to see your trade was up 200 pips and then you end up with a loss. I guess I can take comfort in the fact that I got to chat with other traders in the comment section below that took similar setups and made out pretty well for the week. Congrats guys!

As I scan the forex calendar, I think we won’t see big moves, especially ahead of the G20 meetings this week. You never know what may come out of it, so I’ll definitely stay away until Monday or Tuesday to see what comes out of it, if anything at all.

That’s if for me for now. Thanks for checking out my blog…good luck and good trading!

Trade Idea: 2013-04-16 10:25 ET

Good morning forex friends! This week I’m playing the strong downtrend momentum on Guppy. Will the market see the Fibonacci setup as an opportunity to short?


Technically, the chart setup is pretty text book as the Fibonacci retracement area lines up with a major psychological price area: 150.00. The stochastic indicator shows that the market may be overbought in the short term and poised for a reversal.

Fundamentally, we saw a strong rally in the Yen over the past session, most likely due to a liquidation of the Yen carry trade. Risk-off sentiment hit the markets big thanks to weak Chinese data and the story of Cyprus needing another 6B euros. Traders all over the globe were exiting positions in riskier, or higher-yielding assets (like gold, commodities and equities) and buying back the Yen and other Japanese assets used to fund their trades. I don’t know if the risk aversion move is over, but I like the odds of a swing lower with UK jobs and retail sales data up this week. Global economic data in these areas have been coming in weaker, and so the odds are that we may see this week’s reports from the UK disappoint expectations as well.

So, I shorted at market with my stop a bit above the next major psychological level, and my profit target around recent swing lows. Here’s what I did:

Shorted half position GBP/JPY at market (149.94), stop at 151.30, max profit target at 147.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

I’m only risking 0.50% of my account on this trade, and with this trade structure, my potential reward-to-risk is 2.16:1. Of course, Of course, I’ll look to add to my position if it goes my way, and if the story changes then I’ll adjust my position quickly. Stay tuned to my market thoughts and adjustments by following me on Twitter and Facebook.

Thanks for checking out my trading blog…Good luck and good trading!

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.