A Trade For The Brave: EUR JPY Swing Long Entry

A Trade For The Brave: EUR JPY Swing Long Entry

I’ll be completely straight with you here…. This is not a trade I could take and sleep well, however, Channel Back Tests are a type of set-up I’ve had great results with on a number of pairs over the last year, most recently on GBP:CHF

The great thing about channel back tests is simply the ability to enter a potentially great trade whilst running incredibly tight stop losses. From a risk/reward point of view they are probably one of the most profitable trading set-ups for me simply because 1 winning trade will easily cover the losses of 10 or more losing trades…. when they fail you recognise the failure very quickly, but when they deliver, they can deliver 1000’s of points as did GBP:CHF which had a helping hand from SNB intervention right at the channel backtest.

What makes EUR:JPY comparable is the fact that BOJ keep threatening to intervene in order to devalue the Yen, and they do, regularly. This is why I’m staying away from long Yen positions right now, but actively seeking out the best Yen short set-ups with a view to both taking a good trade whilst also being in a position to benefit greatly from Yen intervention.

This is the Channel Back test shown on the daily chart below. Other than MACD divergence at the previous lows, this is the only real technical reason for this trade and with the Euro zone crisis creating massive volatility in Euro currency pairs, it really is a trade for the most aggressive trader, however, the ability to run that tight stop loss does make it all the more appealing:

If you choose to take this trade, It might be wise to keep an eye on the 5 minute 200 MA as an initial guide to the channel back test’s reliability as a reversal point. As I type, the 5 minute time frame is being offered support by the 200 MA and ideally we need that to continue.

2 Comments
  • RS2OOO
    Posted at 23:34h, 22 November

    Taken a GBP:JPY long at 120.32 based on “possible” daily support here.

    Worth it with 65 point stop loss.

    The EUR:JPY pattern is a bit better, but I get frightened of long side Euro trades at present.

    If BOJ could oblige again tonight, I’ll wake up happy!

  • RS2OOO
    Posted at 23:29h, 28 November

    Closed the GBP:JPY long tonight as part of a tidy up to clear out a few positions with various uncertainties. Closed at 120.96 for + 64 pips.