Today I was stopped out of the second half of my GBP/JPY short for a nice big win.  The picture below shows how the trade unfolded...

I entered near the top of the descending channel on Sunday night (11/9/08) with two short orders, denoted by the red down arrow.  After the pair had dropped below my entry by 1R, I moved both of my initial stops to breakeven.  The pair dropped steadily all week, and as I'd check in on my position at lunch or in the evenings, I'd move my stops according to my strategy.  That is, I'd move one of my stops to be 250 pips (the size of my initial risk) above the low since entering the position, and I'd move my second stop as price action dictates - keeping it above the most recent swing high.  The method I use to set and move my stops is described in an earlier post - Strategic Stops.

My first trailing stop, the fixed-pip stop, was hit yesterday (11/12/08), as price retraced a bit before resuming the downtrend toward the bottom of the channel.  My first exit is denoted by the first red "X."  So, for the first half of my trade, I got out with 469.5 pips.

Having a price-action-based stop on the second half of my trade allowed me to catch a much larger move.  I stayed in the second half of my short position until this afternoon when price bounced hard and took out my stop, which I had moved at lunchtime today to just above the recent retracement on the 4 hour chart.  So, for the second half of my trade I captured 1225 pips.

 

Note that on the bar that took out the second half of my position, the pair bounced hard off of an area of support that was established on 10/24/08 around 139.  I have a feeling that the pair will resume its downtrend and retest this level in the coming days.  Of course, I could be wrong, but time will tell.

It's Sunday night, which means that another weekend is coming to a close.  Unfortunately, this means that I'll be heading back to the office tomorrow morning to begin another work week.  Fortunately, though, it also means that the Forex market is open again, and there will undoubtedly be some opportunities to make some pips.  Whether I catch them is another question, but I'll certainly give it my best effort. 

As a recap, I've still got my Jacko-style anti-hedge order in place on the AUD/USD, which will hopefully allow me to recoup my losses on my losing trade a couple of weeks ago when/if the pair resumes its downtrend.  The pair has been consolidating for a few days failing to break above the previous high around 0.7060, so if the pair resumes its downtrend, my open order will get me in on the action.  Also, I'm watching the symmetrical triangle on EUR/USD and looking for a breakout to the downside on this pair as well.

So, what's new this week?  Well, the GBP/JPY 4 Hour chart is showing a nice descending channel, with price near the upper line of the channel.  The pair has tested the upper trendline of the channel 4 times, so I'm going to get in now near the top of the channel for a low-risk trade.  If price breaks out of the top of the channel, I'll promptly exit, but if the channel holds and price resumes the downtrend, I should be able to capture some pips.  The prevailing daily trend is down, so I've momentum on my side.

• Short Entry:  156.30
• Initial Stoploss:  158.80