Last week ended on a very good note. The longer term trade in GBP-JPY reached a half way point. Half in a way that first objective was achieved. The second might take great deal longer. I took partial profits at 148.00, as was posted on Friday. Price moved somewhat higher and closed at about the high of the day, just under 149.00. There is an interesting correlation between Friday close and Sunday open, IF on Friday price closes strong (around daily high, or low.) Price has tendency to continue in the direction of a strong close. This lasts for about 4-5 hours after the open, assuming the open at 17:00 EST, and works best on Yen pairs. This is not a precise trading strategy, just a general observation to be used in conjunction with other analysis. Things like breaking news or large gaps can render it not valid, but it is a decent “clue provider”. For example, both EUR-JPY and GBP-JPY could be O.K. buys here at the open, with an objective of maybe 80-100 pips. I wouldn’t look for any more, because of potential conflict with higher time frame.
Daily chart, what I used for my longer term trade, suggest possible break in the up trend, before the move resumes.
Previous minor high of a little over 148 creates an obstacle, as well as general neighborhood of 150. This might prove to be important psychological area, like round numbers tend to be. On time scale this large we can’t look at precisely 150 to be a resistance, but rather a band around this number. For the beats it could be as wide as 100 pips above and below 150. Now, I will not be taking any trades to the downside but keep the balance of my long position. If pull back happens, I’ll ride it out and try to find additional entries for trades on smaller time frames.
Meanwhile, I placed couple of orders in GBP-AUD.
In principle, I think this cross will move up. Buy order is placed at 2.1025, with 400 pips objective. Should the price move down first, I’d like to get in at 2.0600. This trade will have a stop at just under 2.0400. Looks busy for me , with all the positions from last week and being on the lookout for gaps….
I received, well, have been receiving, fair number of questions about leverage, position sizing and so on. Some readers want to know how much money can one make, when very little leverage is used. I decided to disclose results one of my accounts where I take these kind of discretionary trades, with leverage no bigger than 2:1 , and most transactions at 1:1. Time span covered will be from beginning of this year until today, or about 3 months. I’ll probably post it next Saturday, but could be sooner. So, anybody who wants to know what kind of returns are possible trading Forex, without excessive leverage, and risk, keep checking these pages over coming days.
Mike, although I don’t really trade forex, I have to say I really appreciate your analysis, which strikes me as really pragmatic and realistic and an attitude which I strive for myself in my trading.
[...] Original post by fxmadness.com [...]
Nelson, thank you for your kind comment.
Thank you for sharing. I look forward to it.
Would you explain the thinking behind the 2.0600. Are you guessing it will be close enough to the next low? I’m used to people who either have the momentum strategy where they buy on breakouts or people who are bottom fishers. So you play both ends?
Mike, finally something I’ve been asking you about for months, what kind of returns can one realistically achieve not using much leverage. Looks like have to wait few more days.
Prudence, I do that rarely, but here it makes sense to me. On GBP-AUD 1H chart price tried to reverse at least twice and failed. By that I mean, it took out previous minor high(breakout) but failed to follow and made new lower low (failure of breakout). The more of these failures in the row, the higher probability that next one will be successfull. So, at this point chances are good, that we will not see another low, for this move. Not a guarantee, of course. With this in mind I could enter at the market and try to run it to just under breakout point. In case of failure, though, risks are bigger than potential rewards. If price falls to about 2.0600 it creates fairly nice symetrical reversal pattern, makes risks much smaller and gives me better objective. This is purely an opportunistic play. A bonus, if it happens. Breakout is the main trade here.
Thank you, Mike.
You are welcome.
Michelle, yes, few more days of waiting. Just remeber, patience builts character. Besides, I don’t know what it is you expect to find out, but will not be very exciting.
Patience builds character? I’ll try and remember this nugget of wisdom. Right now I’m patiently waiting for gaps.
early trading indicates possible YEN gaps to the downside, once the main platform oppens. With about 90 minute to go, this might change.
Can’t wait to see the rusults.
After giving it some thought, I bought GBP/JPY right after the open and held it for 5 hours. Took 112 pips. Thank you very much!
Congratulations, Andy. This is very good.
This ia an interesting concept of the follow up on Sunday. I think you wrote about it before, just can’t recall it now. Have you taken any of trades in Yen pairs for yourself?
Yen pairs moved up smartly after the open, just like suggested. Nice.
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