Live Trade – GBP/JPY (Update)

Filed under: Live Trades |

I just want to update you on the trade that I talked about yesterday on the GBP/JPY forex currency pair (the pair for the British pound and Japanese yen). The trade was entered at a 50% retracement of the pin bar, which as discussed, was at a significant area of support/resistance on the daily chart (see Figure 1). Following this entry, price did then start to move in our favour, and we got into profits of over an amount equal to our risk (the stop loss remember was placed just a few pips above the high of the pin bar). At one point yesterday, it was looking very likely that our target of two times the risk would be met. However, price has since moved against us, and at the close of yesterday’s daily candle, although it was still bearish and represented a bearish engulfing pattern, there was a long tail on the bearish candle, which tells us that the bulls are starting to wrestle some of the control back. As such, I had moved the stop loss to breakeven at this point to make it essentially a risk-free trade.

 

Figure 1.

Figure 1.

Although I do not really like to move my stop losses too much so as to let the market ‘breathe’ and do its thing, in this case, I think we really have to listen to what the candles are telling us and take heed of the ‘narrative’ that is unfolding.  In fact, having looked at this again and talking of the narrative of the candles, I now realise that moving the stop loss to breakeven is not really a logical level, so – I have now reconsidered and moved it to a few pips above the bearish candle (see Figure 2). If price were to break above here, then I would not want to be in the trade. This means that we are still risking just over 0.5% of our bank, but this in effect gives us a risk-reward scenario of 1:4 (with the target being a 2% gain on the bank) – and as such, this makes that risk worthwhile.

Figure 2.

Figure 2.

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