*Reviewing my first trade position of the new year on the GBPJPY FX currency pair*
Welcome back to the blog! Happy Friday to you all, I hope you had a good first working week of the new year and are ready to make the most of 2021. In this blog post I am going to show you the analysis and trade management of a short duration “day trade” I entered earlier this week which proved to work great and has put me in a good position moving in to Q1 of the new year.
Let’s get right in to it and look at the pre-trade analysis for the short trade position I entered on the GBPJPY FX currency pair on Monday morning.
I have previously covered day trades in many blog posts and the same analysis normally features in most of the trade set ups. The main things I look for when entering a short duration day trade is a trend and momentum. In this case, the trend was a new one that was established after the incoming bearish momentum had reversed the previous trend (apologies if this sounds confusing).
As you can see on the chart above, there was a bullish trend established in the previous week of trading and on Monday morning the bullish trendline, supporting the higher lows of that trend, was broken to the downside with strong momentum. A lower low was made and this gave me further confidence that a short trade was the way to go.
Price pulled back into the daily pivot level and 15 minute 50EMA before rejecting this zone around 140.800 and this was where my trade entry occurred. By waiting for the bullish trend to reverse and a retracement to occur, I made sure I was then “selling high” and selling into the new bearish trend that was establishing.
The chart below shows a screenshot of the GBPJPY price chart from my trading terminal. You will see my short trade position entry marked by the yellow arrow and you will see how the trade started to play out through the remainder of Monday.
Trade management is a very important part of trading and is something where the same rules may not be explicitly applicable to all trading strategies. When day trading I try to keep things as simple as possible with both the position entry but also the position management and exit.
Because I am trading with the (newly established) bearish trend, the first thing I wanted to see was a new lower low made. This actually came pretty quickly within 3 hours of entering the short position. Once the lower low was made, I wanted to remove my exposure from the trade and I do this by moving my stop loss order to my trade entry price. The stop loss order was originally placed 20 pips above the highs of the bearish wick rejection candlestick upon which I entered the short trade position.
My justification for this is that if price then goes back up to the level at which I entered then I am happy to exit the trade with no profit and no loss and wait for a new trade set up because the bearish trend I was attempting to trade may not have been established as I first thought.
GBPJPY continued to sell off through the remainder of Monday until late in the US trading session. I took my first profits when price hit 140.000 key price level where the RSI indicator was now showing extreme oversold conditions for the day. I am not a greedy person and I think controlling greed when day trading is very important. It is quite easy to take large and fast movements in price for granted and expect them to continue when in reality you should lock in the returns.
Price then began to consolidate towards the end of Monday. Consolidation is okay but you should monitor it carefully because price action can appear like consolidation on a lower timeframe but actually be the beginning of a reversal on a higher timeframe. Price actually broke to the downside and tested the 139.500 support zone which was an intraday support zone from the previous weeks trading. From there consolidation started once again.
I moved my stop loss order lower to above the current daily pivot level at 140.400. If price was to break higher and the extended consolidation turn into a reversal then I would like to be taken out of the trade with some more profits locked in. An important part of trading and trade management is being able to know when to admit you are wrong or your trade bias direction is starting to become wrong. My stop loss order was triggered on Wednesday morning.
To summarise this trade, the list below shows my trade entry price and the various other price levels I used to manage the trade. The image below shows all of these levels annotated on the chart.
- Short trade position entry – 140.820
- Stop loss placement (original) – 140.220
- Stop loss moved to 140.820 when price made a lower lows at 140.200
- 80% of position closed at 140.000 key support zone.
- Stop loss moved to 140.400 (above daily pivot).
- Final 20% of position closed at 140.400 when price reversed.
Day trading is a very popular topic among new traders and those looking to start trading. I suppose it is because day trading is the most active type of trading that requires the most involvement from a trader and therefore also provides the most excitement. Day trading can be profitable but if you are trading more for the excitement factor vs the potential to make a return on investment then this might lead to troubles.
When I talk about day trades I often refer to short duration trades that can last anywhere from a few hours to a few days. This is not technically “day trading” according to its original definition where traders would not carry positions across a market close. However, the majority of my day trades are on spot FX currencies which trade 24 hours per day, 5 days per week and therefore there is no real market close during the week. I do NOT hold day trade positions through weekend market closures.
To repeat what I said earlier, the 2 most important things I look for when entering a short duration day trade is a trend and momentum. Trading with the trend is important for obvious reasons and this carries across to almost all of my trading analysis. Momentum is important for these short duration trades because if the markets aren’t moving then you aren’t making money and when you are trading with leverage and larger position sizing with tighter stop losses then sideways markets will cost you money.
If you are interested in learning more about day trading and my own personal day trading strategy then I highly recommend that you consider purchasing My Day Trading Strategy Guide.
It costs only £4.99 and the document contains the necessary information required to trade the FX currencies, Stocks, Equities and Oil markets on a day to day basis. It explains, in detail how a trader can look to enter and exit the market and use certain technical tools to create a profitable strategy.
Also included in this strategy guide:
– Visual chart examples
– 2 years of back testing data
– Free trade checklist
– Advanced trading techniques
My day trading strategy guide is available on the Trading Education page of this blog.
If you are interested in learning my personal trading strategies, please consider my Mastering The Markets – Retail Trading Course. Head over to my Trading Education page to check out all of my education packages and the deals available.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.
FTMO Trader Funding Programme.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.