Live Trade Update – GBP/JPY

Filed under: Live Trades |

I currently have a live trade on the GBP/JPY forex currency pair, and have locked in some profits.

 

Figure 1.

If you take a look at Figure 1, you will see the setup for this trade. It is essentially a contrarian trade, as we are going against the current trend and momentum. This is something that I do not like to do too often, as it is always better to trade with the trend. However, there were a number of factors that I felt made this trade a strong one. To begin with, price is struggling to break through a very significant and long term area of support/resistance. Price recently failed to break through this level once again, so when a pin bar followed by a bearish engulfing pattern formed right at this level, I took a good, long look at it.

 

To add further confluence to these two factors; I also found that the RSI indicator was showing a negative divergence with price. As price had been moving up, the RSI indicator had been moving down. This also tipped me off that price may be losing some of that bullish momentum.

 

In light of these three confluent signals (the support/resistance level, the price action signals, and the RSI divergence), I put an order in to go short at a 50% retracement of the bearish engulfing candle, with a stop loss placed just a few pips above the high of the move, and a target of two times our risk. I took 70% of the lots off of the table at the 1R level, locking in some profits, and I am now letting the other 30% of the lots run to either the stop loss or the target level. However, with a 0.4% gain of the bank locked in, this is now a no-lose trade.

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