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GBPJPY - What If?
By Eliseo Agas | August 16, 2007
Rob had a great question regarding my previous post. What happens if it doesn’t bounce and just keeps falling…now trading roughly 700 PIPs lower than where it was trading when I posted yesterday, what indeed? My answer to your question, do nothing.
On any given day, week, month or year the odds of the kind of gigantic move like we saw in GBPJPY and some other pairs overnight happening again are one-off deals. These are the “homerun” types of situations that a trader does not hope to build a successful track record of trading on since unless you have the power of seeing into the future, you’re simply not going to catch enough of these homerun plays to be a net profitable trader in the long run relative to the kinds of hits and losing streaks most traders encounter in their trading careers.
During most normal market conditions, the chances of the pair bouncing upwards versus falling another 700, 300 or even 100 PIPs relative to where it was yesterday is much more in favor of the bounce. If you watch enough of these kinds of selloffs over time on a Daily chart you’ll see what I mean. The primary reason I’d rather wait for the bounce is because it represents a lower risk entry while giving me a better price…the kind of action I need so that I can sleep at night when trading a 24-hr market like Forex.
If you are an extremely aggressive “shoot from the hip” kind of trader then the only other opportunity to have gotten into GBPJPY in my opinion was back on Tuesday, Aug. 14th when the initial break downward occurred on the Daily chart. But since I’m a bit more conservative, I generally don’t like playing “breaks” out of ranges or congestion areas on the chart because based on my own experience I haven’t been able to be a net winner with those kinds of setups. Not to say that someone else out there couldn’t get these kinds of setups to work…I just go with what works for me.
The good news is there is always another trade around the corner more to my liking. So here I am waiting patiently for that setup. And yes, shorting a bounce in GBPJPY and some of the other JPY pairs is still a potentially good idea in my mind. We’ll wait and see.
Tags: forex, forextrading, gbp, jpy, pips
Topics: Better Use Charts - Use Charts Better |
August 16th, 2007 at 11:41 am
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August 22nd, 2007 at 7:48 am
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