I placed this order to short AUD/JPY before going to bed last night. The order was filled overnight. I have tweaked my strategy a little and this is a first test. I think I need to start naming my strategies and giving them version number. It will make it easier to keep track in my trading log and for quick comparisons. Here's what I saw to make me throw my dice at this pair. Figure 1 is the daily and Figure 2 is the 3-hour chart. My reasoning are as follow:
- AUD/JPY is testing the top of a channel, Fig. 1
- Its RSI is pushing above 80, a level not seen since January when it was trading about 67.50.
- USD/JPY tested 91 and headed downward.
- AUD/USD heading up to the sky with a worsening divergence.
- EUR/JPY (a recent +500 pips trade) failed to break 136 and showing an evident negative divergence too.
- Short term testing of ascending support line, Fig. 2. (Should have given this more room though)
Position size: 50%, another 50% waiting to enter below 82.90 Entry: 83.60 Stop: 85.50, see Fig. 1. Target: 77.50, bottom of channel, see Fig. 1. Reward / Risk =610 / 190 = 3.2. The stop is a lot wider than my previous trades because I'm finding it not worth my time to micro-manage my trades. However, notice that my total position size is adjusted accordingly to not risk more than 1% of my forex portfolio in a trade. My focus is on the daily so it's only natural to give it more room as I'm not a prophet and couldn't tell when a trade would work out. This is one of the revision made to this strategy as learned from my recent lessons. A trade is only as good as what you have learned from it. Profit is only secondary.