Follow up on the Aud/Jpy

Yesterday I commented I like the Aud/Jpy when the price was near 101.30. Right now it is at 102.36, do I still like it? Not as much frankly. We have slowed just outside of the past 3 day highs which also match up to our Fibonacci retrament levels. If I am going to be comfortable with a position I want to get in closer to a bounce or support or after we break above this short term level with a bounce above the level. I wouldn't be surprised if we blast right through and make the previous trade very profitable but I certainly not looking to add a position here. Not yet anyway.

Now if we can get that upward mobility, 105 is certainly not out of reach and possibly back to the 107 level as we discussed a couple of days ago. Potential bounce levels? 102, 101.40, 102.70

Usd/Cad Short, Aud/Jpy Long?

Both of these are looking good. Short term we could see a little pull back on the Aud/Jpy to keep our risk in check. Usd/Cad is looking good to me. I will post with graphs later.

Aud/Jpy Trade

In the comments from of yesterday's post, I mentioned the idea of not chasing the trade. Let it come back to you. So here it is back to us. To gather further insight to the trade set up, first look at John's posting at Forex Factory on the AUD/USD. Half of the trade I am looking at is tied up in the strength of the AUD.

Next let's look at the long term view of the AUD/JPY. The pair is still trading in the channel that goes back to Feb/March time frame. It is testing the channel support, approaching the 100% fib retracement level and the 38% fib fan "supports" the trade for the same time frame (groan... I can't believe Blake went for the cheap pun). All of these favor the setup of a long position. From the risk and reward stand point, a 100 pip stop could allow you to trade the pair back to 107.50 level. Risk 100 pips gain 650. Mmm tasty. But the upside trend line is moving higher as time goes on so the target could becom 110.00 now we have a 900 pip target for the same 100 pips stop...yummier.

I have talked a lot about giving yourself more room to trade than you think is necessary. What about a stop in the 97.50 level. We now risk 350 pips for the same 650 or 1000 pips. Though the risk to reward isn't as appealing, I think the view of taking bigger stops will make you more right more of the time. It only takes one more winning trade in 8 trades to make up for the additional exposure.

To be more conservative and time the trade, let's drop down into an intraday view. Waiting for a move to break the 102.50 level for confirmation of the break of the fib fan and getting back into the fib retracement from prior would be a good idea. BUT, WE SHOULD BE MUCH MORE WORRIED ABOUT THE LOWS AND NOT THE HIGHS. If we are going for a long or bullish trade then we concern ourselves with the lows or support levels. If those support levels are broken then our trade is over. The reverse is true in down trends. If we bounce off of the 101 level then we have a higher low and continuation of our trend. I will then use a fib fan and the 61% line to draw a support line off of the bottom of those two lows. The fib fan will give me a quick controlled out of the trade as well as a target for the next high. After we see a bounce I will post again.

Added insight

Adding to my encouragement for you to look at GLD, and the AUD/JPY, take a look at the video and blog on the Profiting with Forex home page and today's blog title Watching Stocks to Trade the JPY. Add that to the Aud/Usd analysis and put all the pieces together.

I am not kidding, take a stand, make a comment, show you have an opinion. No one is wrong, some of us will just be "righter" than others.

No time for graphs

See if you can see what I am seeing. I like the idea of a buy on the Aud/Jpy near 100.70-101.30.

Look at the long term trends, look at fib levels, look at gold... then post in the comments and let's talk about this one. What is the appropriate stop level? What would you expect long term? Is the pull back over? Is it time for a trade? Am I a few sandwiches short of a picnic?

This and more in the next blog post.

Stopped out?

Were you stopped out? We have experienced a shadow up to 2.5738 which, depending on if you gave your trade any room from the 2.5700 resistance, you could still be in the trade but, more likely than not, you were stopped out.

Now What???

It's payback time of course. That's right get mad, show the Gbp/Nzd who is boss. Throw your money at it and see if it bleeds... oh wait, that's your blood...hmmm... scratch what I just said.

I am still bearish on the pair but now I have to wait for a good risk to reward again before I take the trade.

Is it here at the 2.5650 level? Only time will tell. Exactly 2 hours and 3 minutes to see if the close price takes me outside of my fib fan level and the resistance level. If not, I am good to watch for another entry. If it is closer higher, I like 2.5800 as a possible new short.

As fortune would have it, I am still in the trade and it got within 12 pips of stopping me out. If we close higher I will exit the trade with some profits and watch for the new entry.

If you got stopped out, cry me a river and wipe your eyes with dollar bills. You made about $140 per mini contract for a couple days of reading my blog.

Happy trading

You have two choices

To quote Morpheus from the matrix, "This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes."

So here are your choices, the trade is profitable and you can walk away with 170 pips or you can tighten your stop and risk 100 pips of your trade to see how deep the rabbit hole goes.

I see a short term resistance level right where we are at and the next suppor level is our low we were at earlier today with a potential move closer to 2.5300. So even treating the trade as a new trade we are close to a 3 to 1 risk/reward ratio. A potentially good trade set up... or is it.

If you forget why we got in the trade and what were were looking at prior you can see the Gbp/Nzd short, original blog posting here.

Fixed Link

If one of my links doesn't work, please put it in the comments and I can fix it. Here is the link to the special report that probably didn't work for you you yesterday.

Click here for the special report page with the protective puts article.

For you options fans

The options addict link to the right is a great site for options traders. I personally stick to the forex in about 85% of my trading. If you want a fun site and good in site into the options world, consider Jeff Kohler's option addict blog.

Holding steady.

Dropping the stop loss to 2.5700. A close above 2.5600 will push me to a close or a break below 2.5450 will get me to stick to this trade for days and weeks to come.

Tightening one more time tonight

It's running nicely and I am using a fibonacci fan for the recent run and one from the last week and I am adjusting to where they cross roughly and where you can see my cross hairs. Stop tightened to 2.5800. I know this isn't a big adjustment but the previous stop tightening was temporary until I could further analyse the trade. I didn't like risking over 500 pips from the current price. I will be adjusting it again as soon as we get a 4 hour bullish candle.

Article on Protective Puts

Are you interested in hedging your long term trading strategies in the FOREX? My friend, John Jagerson, wrote an article on protective puts.

You can get to this free special report by clicking the link here or by going to the link on the right side of this page and then going to the special reports section of the PFX Global site.

If the links in the web page don't work for you , you may need to copy and paste the URL here.

http://www.pfxglobal.com/index.php?option=com_content&task=view&id=48&Itemid=96

Tightening the stop

I am not expecting to get out of this trade quite yet but I want to be protected from a big surprise. I am tightening my stop to 2.5830. This will lock in about 50 pips but remember the amount of profits locked in has nothing to do with where I am moving my stop loss to. I am moving the stop loss based on seeing the break out, going to the trending resistance line at the point of the break out and making it a tight stop to the candle just before the break out occurred. We will update this later after we see where this plays out over the next day or two.

Never Never Never let them see you sweat

Were you sweating before the weekend. Looking at the 8 hour chart you can see a range of 180 pips in the 8 morning hours. watching your potential or initial gains go from $100 down to a loss and then back to profitable in that short time period can make you nervous and make you sweat. Remember your initial analysis. The arrow is roughly where most of us got into the trade. The "small" intra-day moves don't matter in the big picture of your trade. If you are going to take a stand, stand your ground. Things are looking about where I would want it to be or expect it to be at this point. Have a good weekend.

Kiwi video at the bottom of the page

For a 3 minute break check out the video at the bottom of the page.

mmmm Golden Kiwis

The Gbp/Nzd trade continues to test both upside and downside in the short term. I will feel much more confident of a big profitable trade if we can get a solid close below the 2.5700 area. Gold is on a move and has done so strongly finding support and breaking the downward resistance trend line. This could be a bonus to the Gbp/Nzd trade as well as the Aud/Jpy, Nzd/Jpy, Aud/Chf, Aud/Usd or just gold. There is still room to move to the top side.

Any other Gold traders out there besides me???

Letting my mullet down

Back by popular demand, here is the trucker picture. Yes that is me, yes that is my real flannel, yes that is my real stash.

How 'bout now?

How 'bout now, can I trade it now...no how 'bout now...how bout now...and now?

So what do you do when it is near either a break out in a short term uptrend or resistance in longer term trend. GO WITH THE LONGER TERM TRADE!!!

I like the risk level now. It is about where it was yesterday as it is testing this 60 pip range going back and forth. A short position near 2.5880 with a stop up about 2.6100 seems like huge risk. Remember that the risk is 220 pips at about a 80 cents per pip or $176 per mini contract and realistically if I see a solid move beyond 2.5900, I will watch for an early exit. There is a solid resistance near 2.60 as well. These are all key levels to moderate risk for the potential target. If you are only risking the move to 2.60 that is about $100. Potential target...2.5560, 320 pips, $256. 2.5:1 risk to reward.

It is time we met.

If you would like to sign up for this community, we can share pictures, thoughts and trades. Join the community down at the bottom right and let's meet.

GBP/NZD still a good short?

I had an email questioning whether someone in GBP/NZD trade short could hang on to the trade. It is easier for me to show my point using my blog with some images so here we are.

First, it depends on where you got into the trade. If you went short and sold near resistance (at 2.6100) you are still very profitable, if you got in the trade lower and losing money you are probably struggling right now and looking to get out.

Second, it doesn't matter where you got into the trade, either it is a good trade now or it isn't. If you are in the trade now where do you see resistance. Money gained or lost in the trade at this point has nothing to do with the current set up.

I see the resistances at 2.6100, 2.5870 and 2.5880. Any of these points could be considered for shorting opportunities. You may note that we are at or near the lowest resistance level listed which correlates to the consolidation and resistance level 4-5 days ago and the support level tested on June 28th. I like this position from a risk stand point but I like this pair has a tendency to give large shadows and test your tolerance of larger stop losses. If you aren't short a position here with a 125 pip stop seems appropriate. If we close beyond the fib fan and the 2.5900, I would still be comfortable selling it near the 2.6100 again. Low risk--Great Potential.

This pair is great for practicing your long term trading strategies and getting better at understanding risk to reward ratios.

Good luck and Good Trading.