EURJPY: Long, Short or Both?

Related ariticle: Understanding Support & Resistance

EURJPY presented a nice set up this morning. The chart below is a EURJPY on a 60 min chart.

(Click on image for Larger View)

The currency pair has been ranging in a well define range since the 22nd of Aug. This setup was quite similar to the one on AUDUSD in my previous article (click here to view) .

Looking at both the AUDUSD chart and the EURJPY, my first reaction was to sell the currency pair – which was what I did.  The zoom out box shows a High Test Reversal Bar that is reacting to a decent Resistance Level, this gave an extra tick in the box to my decision.

 

And a few hours later…

 

If you thought I took a profit from the trade, then I’m pretty sorry to disappoint you with the following chart (a few hours later).

(Click on image for Larger View)

 

The currency pair turned out to be a Breakout trade instead of a Range Bound Reversal trade.

Well, too bad if you took a short trade on EURJPY and well done if you took a long one. Either way, that’s part and parcel of being a trader.

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Conclusion

1. In trading, as well as many things in life, there is no such thing as a Guaranteed Return. We don’t know the future, and sometimes, that’s exactly the thing that makes trading exciting.

In fact, if you start thinking that you’re Definitely Correct before taking a trade, the only thing that is “Definite” is that your Trading Account will be emptied eventually.

2. My decision to take the trade was the right one. From the chart, there has been at least 4-5 trades since the 22nd of Aug, I would have

  • more winners than losers
  • generally winners with a Reward:Risk ratio of 2 or more and
  • only taken 1 (or may be 2) losing trade before the range set up was no longer valid.

And this is an example where the Odds were in my favour.

 

Anyway, hope you enjoyed this article. Thank you and happy Non-Farm (tomorrow)!

 

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