Simple, short GBPJPY trade

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Simple, short GBP/JPY trade

Every so often, right when you get to your computer, you might actually see a quality trade setting up. This occurred for me during a simple glance at a GBP/JPY chart when I wasn’t even planning on trading at that particular time. I usually don’t trade nights (relative to Eastern Standard Time) because I’m familiar with how European mornings behave and usually trade some type of European currency that might move a bit more in the European hours as opposed to the Asian session.

In this case, price was moving up to the resistance 2 level of 174.880 on the 9:55PM (EST) candle and was showing signs of resistance there. Naturally, in a bit of a slower portion of the day this might be expected. With lower volatility in the market, pivot points tend to be respected a bit more.

Price rose above resistance 2 on the 9:55 candle before settling back down, suggesting that the little surge of buying here likely wasn’t strong enough to break this particular pivot point. A bearish candle ensued at the turn of the hour, closing around a pip under resistance 2. All things considered, this is a worthy indication that resistance 2 is likely to hold upon a subsequent re-touch and a put option would be a quality set-up. Nonetheless, you don’t always get the re-touch, and that’s okay. If trades set up the way you want them to, you take them; if not, they I’d never advise forcing things. To me, getting the entry at resistance 2 – of above if it ventured a bit over the line – is extremely important. In short-term binary trades, the winning margin is often determined by a matter of a fraction of a pip. Consequently, if your trade idea is well-considered yet your entry is poor, you can often end up with a losing trade despite essentially guessing correctly. And occasionally, you will lose trades solely for the fact that your fill was poor (i.e., the broker gets you into the trade at a price different from the one you wanted and often against your initial trade idea), but that’s largely something you can’t avoid unfortunately.

Upon the subsequent re-touch of 174.880 on the 10:05 candle, I got into a put option and the market receded back down from resistance 2 quite well following entry. This went in my favor the entire time and produced a winning trade.

But again, always make sure you’re smart with your trades by always sticking to a price that you want to get in at and not pulling the trigger early in fear of missing it. When trades are determined by these very small pip amounts, having lax standards when it comes to entries and getting into trades can make a drastic difference in your win percentage. Even assuming your general strategy/system is strong enough to consistently produce winning trades.

Simple, short GBP/JPY trade

GBP JPY (British Pound / Japanese Yen Spot)

The British Pound (GBP) vs. the Japanese Yen (JPY) is a highly volatile pair. JPY is often used as a funding currency of a trade because it’s historically a low yielding currency. Since UK is one of the larger economies in Europe, the GBPJPY pair can be considered as a proxy for worldwide economic health. On the other hand, this pair performs like a representer for market ‘risk-off’ moves as the carry trade gets reversed. As a result, GBPJPY is able to develop strong trends that exceed thousands of pips.

Trade Idea: GBP/JPY Short Play

Speculation is starting to rise on when we’ll get a rate cut from the Bank of England, prompting me to check out the price action in GBP/JPY.

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GBP/JPY Short Play

Word on the street is that the Bank of England might be making moves soon to follow the stimulative actions from other major central banks recently. There’s even talk that action may be taken as soon as this week, far ahead from the next scheduled BOE meeting on March 26th. As always, we won’t know if a surprise rate cut comes until it does, but given what we saw from the Fed and BOC (0.50% interest rate cuts) last week, I’m going to take action now for what could be pressure coming soon for Sterling.

So, I’m looking to short the British pound and I’m looking to do it against the Japanese yen, which I think will likely continue to find buyers for now as coronavirus fears aren’t likely to go away any time soon. Also, GBP/JPY is a highly volatile pair, so not only could I possibly get in at a great price, but I think the potential gains could come fast if everything goes my way.

On the one hour chart above of GBP/JPY, we can see the pair is bouncing higher once against from the strong support area around 134.00. If the pair makes it up to the broken support area, I’ll look to short Sterling there as the odds are pretty good traders will be watching that area for another opportunity to short. My stop will be wide given the huge pick up in volatility, and my target will be the recent swing lows for what is a pretty strong potential return-on-risk. Here’s what I’m going to do:

Short full position GBP/JPY at 136.95, max stop at 138.75 with 1.00% max risk, max target at 133.05

I’ll be risking 1.00% of my account with a max potential 2.16:1 return-on-risk. If triggered, I will look to cancel early if the risk environment shifts positive strongly, and I will look to add to the position if it does go my way and the argument for Sterling weakness and/or yen strength grows. If my open orders do not trigger by the end of the week, I will close them down to reassess the idea over the weekend.

That’s it for now. Stay tuned for updates and as always, 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 simply follow what I do.

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.

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