The Art of Trading - USD/JPY

Many traders do their utmost to avoid crowded trades, and some traders deliberately seek different parameters, different ways of looking at markets.

Many traders do their utmost to avoid crowded trades. Usually, they were hurt at some stage in their trading career by a “buy the rumour, sell the fact” scenario. That is, their analysis was right, but the market moved the “wrong” way. This is the reason some traders will deliberately seek different parameters, different ways of looking at markets.

Technical analysis is both science and art. A computer would struggle to draw a down trend line on the USD/JPY chart, despite the fact there is a clear down trend. The problem is in observing two of the rules of down trends – there must be lower highs and lows, and there must be three points of contact to establish the trend line. In this case, these rules are in conflict.

This is where a trader’s art comes into play. The strength in taking this approach is there is very little chance of competing with algo traders on entry and exit.

The simple trade is to buy on a breach of the (black) down trend line as the MACD crosses (note how previous MACD crosses below the zero line signalled rallies). This means buying at 102.30, with a stop loss at 101.85. The target is the outside (green) trend line at 105.15. Of course, a breach of that trend line could prompt another long trade.