Welcome to my investing and trading journal. This is where I share my thoughts on financial markets and talk through the actual trades that I make. Today, I took a short trade in the Pound-Yen Forex pair. Read on to see how this trade played out.
GBP/JPY Short
Expected Entry – 187.23 Stop Level – 187.75 Target – 186.00 R:R – 2.37
Price had been strong here overall, and it was actually a pair I was bullish on after doing my weekly RSW on Monday. When I ultimately looked to trade it on Tuesday, though, I was less bullish. Price had gotten up to a pretty strong resistance area, and (on the daily chart) there were 2 Doji candles at that level with a 3rd one forming.
I actually thought about shorting this then, but since price had been strong, I didn’t want to counter-trend trade. This morning, though, price had pushed through the lows of those Doji candles, and more-sustained weakness looked like it was in price future here. The up move looked exhausted on the daily chart and there was a definite “rolling over” to the downside on the 4 hour chart. Today looked like the better day to short this.
Entry – 187.23
I ran numbers and liked them, so I started taking notes and screenshots to track the trade. Price started dropping, though, so I had to quickly hit the submit button, so my price would still be available. Very shortly after setting the order, price triggered and things looked good.
Exit – 187.754
It was the first chart I looked at on the day, so I moved on to the next charts, but kept my eye on the price. For the first hour or so, price was hovering around my entry, and I was optimistic. After analyzing another pair or two, though, I looked over at the price and it was a lot higher than I wanted it to be. I couldn’t recall off the top of my head my exact stop-loss price, so I just hoped it wasn’t there yet.
I finished analyzing the pairs that I called out this morning, went back to this chart to see how it was actually moving, and saw that I had been stopped out a few minutes earlier.
This was technically a counter-trend trade, and for that reason, maybe I shouldn’t have taken this trade in the first place. But I could argue definite lower highs and lower lows; coupled with the “rolling over” that price was doing and I was comfortable shorting this. Maybe that’s the exact thought process that’s holding me back. I don’t know.
Conclusion
Other than the counter-trend, I don’t see anything that I dislike about this trade. Maybe I should put more weight behind how each currency is doing overall? I.e. maintain my bias from what I see in the baskets? But I’ve been burned by that in the past as well.
I just have to keep reminding myself that I’m in the probabilities business, not the prediction business. There looked to me to be a high probability of a long run to the downside if price broke back to the lows, and it simply didn’t happen this time. I just need to keep my eye out for more opportunities, try to make the best decisions I can and just keep swimming.
Thanks for reading! What did you think about today’s trade? Were you able to capitalize on GBP/JPY in any way or any other pair? Let me know in the comments. And, as always, don’t forget to check back frequently for more analysis and trades!