Not Taking GBP/JPY Short @ 141.85 Today

Posted by Nick 12

Hey Guys,

I won’t be taking the G/Y short @ 141.85 today.

Why, I hear you ask?

Well basically every pair has an average daily range and G/Y has one of roughly 190 pips (based on 200 day average). Today since GMT open at 12am G/Y has ranged 215 pips, so it is already beyond range!

The price moved right down to my constant line at 141.85. As you know my constant line target for GBP/JPY is 50-60 pips. To reach target on a break of the 141.85 line today we would need GBP/JPY to range 275 pips! That is 85 pips beyond its average daily range!

During the London session I would be more open to taking a trade like this as the London session is very volatile. So it isn’t surprising for a pair to move beyond its average daily range during the London session. However, when London ends and volatility decreseases it becomes less likely that a pair will break its average daily range by a significant number. London is closing in 8 min from the time I wrote this post (keep track of market session with out free market session clock). So I wont be open to the idea of trading this line until tomorrow.

It is just smart trading. It is unlikely that a pair will breakout and far surpass its average daily range in low volatility sessions. Does this help?

If you like this post leave a comment please.

Art

Typo, ” (keep track of market session with out free market session clock). ”

….” keep track of the market session with our free market session clock).”

Why am I asleep when the good trades form?!! Oh yea London Session is during my bed time hahahahaha
caffepets

to art. and all good trades taking place when i working. i plan to buy some pocketpc to fix this problem. and you need move to europe.
JeffNLisa

Now THAT was a VERY USEFUL piece of information, right there. I’ve known that a long time, but I’d forgotten it a long time ago. Thank you for it – -
costock

Thanks Nick, helpful tip. I’ve done a couple of trades recently towards the end of the london session only to find very low votalility has meant that Ive had to stay up most of the night to manage the trade. Bring on Smart Trading
NeilA

Nice explanation Nick and once more educating all, I forgot about ADR and have now added this to my trading plan as a further check prior to trading. I decided not to trade this week until after the Election, when total shambles will once more descend on the UK and of course Thanks.
cfw

Nick,
Like the other comments, your advice was a good reminder. If you haven’t covered the subject – a short discussion/explanation of why there’s a difference in volatility between the sessions/
Thanks again!!
Manny

I did take a short on the break of the line.. so far it is +20 pips but I am watching it very closely and will probably close it soon. Didn’t even cross my mind to consider the average daily range..
Art

What about the huge 200 pip short move from 144 area. It was a classic reversal, from my 144.12 line (I place my own lines, don’t really follow Nick’s), especially looking at the 1 hr candles, & 4 hr candles after the London Session opened for a hour. & it crossed a 4 hr trend line and broke it. I can’t see a better set up, unless you are asleep while it’s happening like me.
pbw

So far gj has ranged 283 pips for today — at the times it touched 141.85 — you say it had ranged 215 pips. Looks like gj had just enough to get 60 pips and then reverse fast. Your rational for not entering makes sense –never thought about it in this way. BUt then would not price action and taking less pips be more important. I do see what you mean by only taking the high quality trades though. Many thanks again.
hasnah

Hi Nick, Thanks a million for the earlier sharing, and yes the market acted exactly as what you predicted. Kudos to you. Your assessment of the market is spot on. And your sharing of why you’re not taking the 141.85 is indeed a valuable lesson to me. So again, many thanks.
pbw

Also important to note that non farm report is coming this Friday — and often the whole week is like being on a roller coaster — most currencies act abnormal to some extent. SOme traders are known to take the whoe week off –while the majority just take off the Friday. The brave or the crazies trade on that day.
dan cahill

Cracker comments Nick.. Thanks..