As I hope you’ll expect from me, that title is complete rubbish, well mostly rubbish
Yesterday’s post Now comes the test for USD/JPY has become one of my favourite posts that I’ve ever written here.
It’s prompted great discussion and shown who actually knows what they are talking about and who doesn’t. It shows those who know how to read a market and those that understand trading.
Forget clowns like Deus/Stephanie. They add nothing to the discussion and certainly nothing to help inexperienced traders. It’s why we don’t give people like that the time of day usually.
I never feel the need to explain myself but I want to carry on this discussion as I feel it’s very important to help teach those who don’t have the trading experience that some of us do, and they are the ones who are likely to be more affected by various comments/posts from both you readers and us writers.
Here’s my posts from yesterday in order;
- USD/JPY through 113 as the dollar steamroller keeps rolling
- Here is what is standing in the way of further big gains in USD/JPY
- USD/JPY becoming a hit and hope trade
- USD/JPY has got to stop somewhere right?
- USD/JPY pops 114 then gets knocked back to 113.89
- Now comes the test for USD/JPY
There’s only one post where I mentioned a top and it wasn’t price definitive and would come as a result of certain factors playing out.
“If there is any talk of political shocks from Japan then that will mark the top in USD/JPY as it will likely mean the end of Abenomics and the possibility of Japan slumping back again.
So let’s put that into some tradeable terms.
Go with the flow and these upward moves if you can, but be prepared to hear the Fed become more proactive on the currency strength. If they start linking the currency with inflation and then link that to keeping rates low or unchanged then that will be the time to turn direction into shorts. There are plenty of factors on either side of the dollar balance board right now and the big money will be made in seeing when the balance tips one way or another.”
One of the biggest difficulties I face in doing this job is being able to try and translate my years of experience into worthy posts that I hope will help those who aren’t as knowledgeable. The difficulty is that I’m not a “black and white” trader. I read prices, I look at anomalies, at instant opportunities, at countless factors as to why I should or shouldn’t make a trade. Some of the things I do go against the grain of basic trading discipline but I do it because I’ve been in this game for over 20 years and I see things that inexperienced traders don’t. Therein lies the difficulty in that it would be dangerous to lay all that out in a post rather than the cautious and basic lessons we try to teach instead. I can’t convey 20 years of experience in a quick simple post about how I’m going to trade the 114 level, as much as I’d like to.
Even so, let me try and run through my thought process on that trade and the moves yesterday.
I sat down after a few days off and see USD/JPY continue to rise. We go though 113 then 113.50 pretty easily and so I’m thinking “I don’t want to touch this”. I don’t want to try and guess the top and I don’t want to just jump in and chase it, so I’ll sit and look at the next levels and see what happens. You can read exactly that in my first 4 posts above. So then we get close to 114. I’m still not interested at picking tops I’m just watching the price. We halt at 113.89 and then tread water.
We have data coming out and that stops the rise as longs don’t want to get overextended and caught out on any negative data. The market is now waiting.
I like a big figure trade sometimes. It does not matter if it’s at a top, a bottom or in the middle, if my conditions are right (and that’s the important part, my conditions, not yours or anyone elses), I’ll trade it.
So here we are with some upcoming data and the price pausing ahead of a big figure. Here’s what I think.
- We’ve run up 160 odd pips from Friday’s close, on top of a 300+ pip move last week. That naturally gets me looking for signs of the move getting stretched
- Japan has been shut, and the market is still front running/reacting to the BOJ and GPIF
- We have data from a sector that has disappointed all month
- There’s a barrier
- 114 is a big figure, a big fat round number which has support and resistance more often than not, in all the years I’ve been watching them
All my boxes are being ticked as to why I fancy a short. Not a big short, not a short expecting a 300 pips reversal, a small scalp from a big figure. Even so, I still wait until the data and I see a better than expected number. I then untick that box so now the trade has one less positive for it. Then I watch the price. We pop 114 half heartedly and not instantly on the number so now I tick another another box which says “Good data, price fails” and that’s my cue to go short. I stick my stop at 114.20 and watch. We drop down pretty quickly to 113.75 and I move my stop down to 114.10. We then break 113.70 (only by a pip) but I’m now thinking this move might get me a bit more. I’d already highlighted 113.50 as a possible dip point so I look at 113.55 as my profit point. At 113.70 odd I post “Now comes the test for USD/JPY” and I lay out what could happen from here. Do we carry on down or do we go back up? It’s down to the market to make the decision.
We go back up but 113.90/95 is looking good for resistance so I’m not that worried as 114 is building up to be a strong level, much more so than 113 was. We continue to push and push 114 and now I’m not liking the trade so much as I see the strength building. I now decide that if we trade through 114 I’m getting out. I’m also thinking that if we do break we could see another decent leg up. Then the price goes through to 114.07 and as I’m hitting the button it’s dropped back to 114.02 so I get out and go long. 10 pips loss. We then move up to the high and come back and I get stopped out at break even on the failure to cement the break.
What happened from then on? The price pivoted around 114. We went down to 113.80, back up to 114.00, up and down, going nowhere. That tells me that there’s indecision and things could go either way. My gut is telling me that after the run up, the failure to meaningfully take out 114 and hold it suggests that we’ve seen the highs. My gut feeling isn’t strong enough to get me to trade it but I’m seeing the signs.
And where are we now? 113.37 after touching a low at 113.17. The move at 114 has died (for now). So was I right in my assessment yesterday?
Yes and no.
Did I write and pick the top in the price? No.
Did I see the signs lining up that the day’s move was running out of steam? Yes.
That doesn’t change my 10 pip loss but to a certain extent that’s irrelevant. I made a trade on certain parameters that targeted one particular event. Whether it was the top, bottom or middle of a move is irrelevant too. I didn’t care if it went to 116 or 110 right then, I had my strat and I watched it. The conditions for the trade were there so I traded. I was 20 pips up on the short at one point and 15/18 up on the long at one point, yet still turned a 10 pip loss. That’s trading and that’s the grey area of trading that I spoke about earlier. That’s the risk I took on and played. I’d have told each and everyone of you to set your TP and SL and stick with it.
When I write about strategies I always say have a TP and SL point and be rigid. I wasn’t rigid because I’ve been doing this a long time and I can adjust to moves much quicker than others. I can’t teach that though, that comes with experience which is why we toe the party line in preaching discipline. It’s ‘do as I say not do as I do’. For those that are learning from the bottom you don’t have the luxury of stepping into the grey, you need to keep things black and white to protect yourselves and your money. I wish I could take my knowledge and put it in pill form so everyone could share it, even then my experience is only one of millions, like Mike, Adam, Greg and Eamonn. There is no single way to trade or look at prices. what one sees on an hourly chart, someone sees differently on a daily chart. I scalped a big figure because I saw an opportunity. That’s what I do each and every day whether it’s for 1 or 1000 pips.
All we want to do is make money, not lose money, and we all have to keep learning. I still do everyday. I’m not a the worlds best trader. I don’t even consider myself a good trader. I do though consider myself competent enough to step in the ring and make money. If I didn’t then I’d be doing something else to pay my mortgage and put food on my family’s table because that is my biggest reason for trading.
The only way to experience is learning. Never stop.
Thanks for reading.
