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EUR/JPY Short at 122.39

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Last updated 3/1/2010 8:13 PM EST (GMT -5) 29 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

We posted a short term bearish butterfly for the EUR/JPY last Friday, but the pair shot down a few pips before our entry.  However, the pair is rising back up and now giving us new bearish pattern to watch.  In my experience it is a good sign when pattern stack on top of each other like this.  The price symmetry in the pattern is great, but the pattern is too early in development to judge the time symmetry.  The trade would also enter near the bearish trend line on the 8hr Chart.

We are looking the sell the EUR/JPY if it rises to 122.39 (Point D).  Point D is located at the convergence of the following points:

We will now go over what to watch for assuming the pair continues rising towards our entry at 122.39.  First, we need to watch how quickly CD completes.  We are looking for the CD leg to rise slowly and enter the trade near where we have drawn the hypothetical entry.  If there are long bars near the completion of the CD leg, we will not take the trade.  Also, if the pair comes within 10 pips of reaching our entry, does not enter, and reaches 121.45 before entering, the trade is invalid.  The trade is also invalid if the pair falls below 119.90 before hitting our entry.

To recap, we will look to sell the EUR/JPY at 122.39 with our stop placed at 122.87.  Our initial profit target is 121.66 (38.2% of CD).

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  • 8hr Chart - Trade would enter near bearish trend line.
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  • 2hr Chart - Bearish Gartley; sell at 122.39.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

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Comments (29)

MoneyManager

March 02, 2010 at 02:11 AM ET

No comment on the EUR/JPY idea, but this seems to be the only place to comment on the USD/JPY proposed short.

For me, Brad, it's too narrow. Sixteen pips at risk for just twenty-three? I know the percentages work out, but my feeling is that both numbers, and certainly the risk number of 16, are too close to mere market noise. I'd rather risk enough pips to be well outside white noise if my stop is hit, and then of course I don't want to be in there at all unless I think the gain is worth the risk. This is a cross between a scalp and a coin-flip, to me. ^_^

Sorry, I'm going to pretend I didn't see this one.

bgareiss

March 02, 2010 at 01:42 PM ET

The trade was invalidated so we will never know what the outcome would have been. This one was definitely on the edge of being posted or not posted. In the end I decided to post it because there was no major announcement for the USD or the JPY until tomorrow (Wednesday) morning. By that time the trade would have probably been over either way. Brad

MoneyManager

March 02, 2010 at 10:57 PM ET

I can't believe you guys make it nearly impossible to find ALL THE PARAMETERS for your trade recommendations. I'd love to examine the long NZD-JPY, but I *KNOW* there are entry parameters other than just price, yet I cannot easily find them.

You should NOT be posting recommendations with partial parameters. Anywhere. At the very least, you should have a LINK to the full parameters anywhere that you mention the trade.

C'mon, eh? This isn't rocket science; this is just decent organizational skill. Frankly, I don't even want to see a trade recommendation if I can't easily and immediately know all the parameters.

bgareiss

March 02, 2010 at 11:05 PM ET

What do you mean by "parameters"? Are you referring to the reason we take the trade or the reason the trades can be invalidated? I think we do a pretty thorough job of explaining both of these though. Could you please give me a more detailed example or explanation so I can address your concern further? You can post here or email me at bgareiss@gftforex.com. Brad

MoneyManager

March 03, 2010 at 02:24 AM ET

I'm sorry for the confusion. I mean the complete trade setup including, of course, the invalidators.

You do, actually, do a thorough job of explaining the latter ... WHEN I CAN FIND THEM. But in many places, the trade rec stands with an entry price recommendation -- as if there were no invalidators.

This is what I think you need to correct. The trade rec can be accessed on several pages. But only one page (and one that for me at least is non-intuitive to find) has *all* the requirements including the invalidators. The *entire* setup (wherever you have it) should be linked to any page where the recommendation exists without the invalidators.

Are we (pun intended) on the same page now? ^_^

MoneyManager

March 03, 2010 at 02:35 AM ET

Just to make this clearer, if I can ...

Try this at home. ^_^ Go to the main site home page. On the right side, about 1/3 of the way down or so, you'll see "TRADE RECOMMENDATIONS". So far, so good. But click on the link at the bottom of the section, the one that says "view more trades ..."

You end up here: http://www.fx360.com/techAnalysis/trade-recommendations.aspx

And there is NOTHING about invalidators there. Nor, (most importantly) can I find any link to a page that outlines *IN ITS ENTIRETY* all the trade stipulations (which of course include invalidators). Somewhere (either a link on the trade rec itself on the main page, or on the trade rec itself on the recommendations page), there should be a link to the ENTIRE set of parameters that involve that trade. We should not have to hunt for this.

It's really quite frustrating for people trying to keep tabs on you. ^_^

MoneyManager

March 03, 2010 at 02:42 AM ET

I guess it boils down to this: Don't put a trade rec with *only* an entry price qualifier *ANYWHERE*, unless entry price is the *only* qualifier. If there are other qualifiers, put a link to them, something like "See all trade requirements here ..."

You are potentially confusing people, and I doubt very much that you want or intend to do that. And the people who are not confused are just frustrated, because they know there is more to it than your headline trade rec, but they are probably having trouble finding the qualifiers.

Link, Brad. Link. ^_^

alexjbrandt

March 03, 2010 at 02:45 AM ET

I don't follow the trade recs. posted on this site, but I always check em out. I believe all the invalidators are in the last paragraph of each trade rec. And since FX360 is pattern based trading, its not too hard to determine what entry conditions have to be met, especially since they post at least two charts per trade rec.

alexjbrandt

March 03, 2010 at 02:51 AM ET

I personally hate pattern based trading, and will never prescribe to its methods. I don't like it primarily because there are too many variables that have to be met to make a profit. Not only is the trader speculating on what direction price will go, but then speculating what price will do once that target level has been reached. I'm sure that there are plenty of traders who are successful with pattern based trading, but I explored it and its not for me.

MoneyManager

March 03, 2010 at 02:59 AM ET

I know they post them (the invalidators). But they are difficult at least for me to find easily, whereas the ENTRY PRICES and basic direction are standing out screaming at me -- as if there were no invalidators.

And, as you say, "the last paragraph".

Even if I could find the last paragraph, which I have found in the past, but don't know how to find again without knocking my brains against the wall, is *that* where they belong? IMHO, the whole trade setup should be in a table presentation, with *every* requirement clearly specified. Then, if I want to drill down into the reasoning, fine. Either that, or present the reasoning first, but still present *ALL* the trade requirements in one concise manner.

Do *not* present the rec, anywhere, as if it had no invalidators. This is the sin. Uninformed people will look at the rec without knowing there are invalidators. People like me who know that they are posted somewhere, but who can't find them because they are not clearly linked or delineiated, are just aggravated.

It's a matter of site management and design. Period. There is a lot lacking here.

MoneyManager

March 03, 2010 at 03:04 AM ET

I won't argue the cleverness or lack thereof of the methodology. What I am arguing is that the methodology is presented in a way that would result in a failure grade in "Web Page Design 101". The information is incomplete in several locations, and links to the complete information are missing. That is all, and that is my point. I assume the owners want to make a go of this and are giving it their best effort, and I am giving feedback, which comes from decades of experience. That's it.

alexjbrandt

March 03, 2010 at 03:13 AM ET

Okay, well i'm a bit confused as to what your complaining about cause if you read the article above, you'll find the invalidators are in the last paragraph like they always are.

To find the invalidators again, just means you have to click on the article again.....

But, usually the invalidators are consistent and the same for every trade rec...so once you learn what invalidates these trades, then you won't need to look for it....

My solution for you, is copy the paragraph below (found above in the article), print it and post it by your computer: This way you won't have to search for the invalidators.

"First, we need to watch how quickly CD completes. We are looking for the CD leg to rise slowly and enter the trade near where we have drawn the hypothetical entry. If there are long bars near the completion of the CD leg, we will not take the trade. Also, if the pair comes within 10 pips of reaching our entry, does not enter, and reaches target 1 before entering, the trade is invalid. The trade is also invalid if the pair falls below point C before hitting our entry."

margaret

March 03, 2010 at 03:34 AM ET

Brad! I have a small suggestion. You made a very valid trade alert GBP/USD. This was obviously invalidated and fell off the trade page into the invalidated page. Then it reappeared, clearly because although the timing was out, the trade was still possible. Brad can you please date trades. If you have then I have missed it. Anyway. your GBP/USD was spot on so well done even if many of us would have missed it.
PS I love this website and really enjoy the comments of members, Alex, Tom, Money Manager , NeoFX and the humour of Senilus to name just a few. So please - keep it up - your intellegence and knowledge come through loud and clear

bgareiss

March 03, 2010 at 01:10 PM ET

I agree with you. In fact, it is almost as if you read my mind. We are working on changes that will address the issues you have brought up. I won't go into details quite yet, but I think you will be pleased when the updates are completed. Brad

bgareiss

March 03, 2010 at 01:13 PM ET

The above comment starting "I agree with you" was referencing Money Manager's concerns about site organization. In the future, try to make new posts. It can get really difficult to follow a thread this long because my answers pop up well below the original questions. Brad

alexjbrandt

March 03, 2010 at 03:20 AM ET

The only complaints I have about the website is that we can't edit comments once they are posted and users (such as me and you) can't create a profile on here for other users to view to learn more about a person's experience or history in the forex, and to know if they actually know what the **** they are talking about when commenting. Other then that, I think this site is just fine, but thats just my two pips. :)

MoneyManager

March 03, 2010 at 04:06 AM ET

I've said my piece. We'll see now if they want to design a site with functionality and ease of user navigation in mind, or if they want to continue to promote clever graphics and Flash (the latter of which many knowledgeable users disable by default anyway because Adobe doesn't keep up with security exploits very well).

I realize (now) that if I follow the Flash headline link, I will find all the qualifiers. Screw that. It goes by too fast, and I don't want to bother to have to remember which number it was. Just give me the information on one page, please, including the so-called headlines. I'll click where I want to click. Otherwise, I won't visit, and there go the page view counts, as well as any advertiser pass-through revenues.

Capice?

bgareiss

March 03, 2010 at 01:18 PM ET

Again, I have voiced the same concerns and we were working on this long before you correctly pointed out these flaws. The site works fine, mind you, but I there are always improvements to be made. Brad

FXDragon

March 03, 2010 at 05:18 AM ET

Why would a fx company want to post winning trades anyway really?
They would go bankrupt if most traders won right?

MoneyManager

March 03, 2010 at 05:24 AM ET

What a silly and naive assumption. First of all, it's not necessary for an FX dealer to take the other side of a trade. The spread makes money all by itself.

The driver for this site, and most, is loyal readership and happy clients. You can bet your bottom dollar that they try to post winning trades. It's good for their business.

Now ... that said ... they may try to post too many trades, because, after all, turnover is what racks up the coins assuming they lay off the risk of taking the other side of the trade. So they are very interested in people who think 1, or 4 hour charts mean signal, and not noise. Every time you buy, every time you sell, you are paying the spread. If I was the proprietor, anything I could do to make you pay that spread as often as possible would be in my interest.

And having said that ... if you win, and the more you win, the more willing you are going to be to pay that spread.

Get it?

MoneyManager

March 03, 2010 at 05:35 AM ET

I could even go deeper here, if you want to learn. Let's assume FX company 'ABC' has 200,000 clients. Over time, it's going to be easy to use computers to figure out who the winners and who the losers are. If I was ABC company, after a while I'd only lay off a percentage of plays from "the losers" and I'd be sure to lay off *all* the plays from "the winners".

Get it? ^_^ (Think any brokerage firm in existence doesn't know who the winners and losers are, and can't profit from that information?) Ha. Ha. Ha.

MoneyManager

March 03, 2010 at 05:51 AM ET

You know what else I would do (and I'm not anymore avaricious than the next person)? If I was a brokerage or an FX company, I'd apply my best data miners to winning clients. I'd find out if they have a system, and *what* *that* *system* *is*. If I was convinced it was a solid system, I'd use it. If nothing else, I'd coattail my best clients' trades.

Think this doesn't happen? ^_^

But to answer your first inquiry ... NO! Dealers would not go broke if most clients won. They lay off the risk in almost every case. They are in it for the spread, the same way your bookie tries to balance his bets so that he collects the 10 percent from the losers, who then pay the winners 1 to 1.

I'm surprised you don't understand this.

FXDragon

March 03, 2010 at 07:30 AM ET

How do they lay off the risk? What if a hand full of super traders smack the broker with huge leverage? Im sure there are genius traders out there somewhere getting loaded.

Also what do you mean by "If I was ABC company, after a while I'd only lay off a percentage of plays from "the losers" and I'd be sure to lay off *all* the plays from "the winners".

Regards,

MoneyManager

March 03, 2010 at 08:18 AM ET

They lay off the risk by not acting as a dealer, but as a broker. You buy USD-JPY from them @ 88.75. They just buy it at exactly the same instant from a primary dealer, but for a smaller spread than the 2 pips they are getting from you. They pay, for example, 88.7475, and they pocket the difference. Do that tens of thousands of times a day for serious money and it's a great income. Moreover, it's basically risk free. They have no market position. You assume all the risk. They assume no risk.

You do understand that FX is basically an accounting game, right? It's about as zero-sum as you can get. Every winner is paid by the losers. It's not like equities, where value is actually created (or destroyed) by market sentiment.

What I meant by the ABC example was that, if I was a huge broker, I'd have a huge database of client transactions. That database would reveal to me, very easily, who were consistent winners and who were consistent losers. If I did not know who was a consistent winner or loser, I'd always be just a broker, not a dealer, so I'd never take a market position. I'd just keep sweeping in that spread. But if I had a big database showing me consistent winners and losers, I'd certainly consider acting as a broker to the most consistent losers, and taking on the opposite market risk that they are taking on -- because they are demonstrated long-term losers. But if I know they are consistent winners, I'm just a broker looking for the spread, and I will always lay off the risk.

Bookies do the same thing. They usually square their bets with other bookies (the whole reason for a point spread is to entice an equal amount of money to be wagered on each side, so bookies can square their risk), so that they have zero exposure. But they also have clients that they know from long experience are consistently bad gamblers. Once in a while, they take the other side of the bet from those clients themselves, gambling that they can not only win the "vig" (the 10 percent fee losers pay), but the entire bet as well. In other words, they do not "lay off" (pass on to another party) that risk, but assume it themselves. They are now both bookies, and gamblers.

With FX, you can't make a bet unless there is someone on the other side betting the other way. Brokers, if they are smart, don't take market risk. They stand in the middle and take your 2 pips or more, millions and millions of times a day.

As for your "handful of super traders" using high leverage? The broker says thanks for the extra pips and passes on the risk. Easy-peasy. ^_^

MoneyManager

March 03, 2010 at 08:21 AM ET

In the ABC example above, I wrote 'acting as a broker' and it should have been dealer, of course. Sorry.

alexjbrandt

March 03, 2010 at 09:12 AM ET

The only downside to a dealer who takes the opposite trade of a client (who loses consistently) is that eventually the client will run out of money, and then the dealer has too look for a new losing client to make money from. If I was a dealer, I know what I would do to make money, but can't discuss it here :)

FXDragon

March 03, 2010 at 11:48 AM ET

I think the argument about tracking winners and losers are wrong because thats assuming winners will keep winning and losers will keep losing. And i dont think fx firm would bother much with that.
Your arguments are good manager but i still think if most traders won the firm would go bankrupt. Just because pip spreads are small and successful ones would sweep the deposits eventually.

FXDragon

March 03, 2010 at 11:54 AM ET

Im sure what you know the firm knows already:)
I dont think they care what we discuss here unless you advertise another firm or say bad words.

FXDragon

March 03, 2010 at 08:40 AM ET

If you're a fx company and track the constant winners, would it not be smart to take positions same with the winners and opposite of losers?
Or mybe they employ senior analysts who are good at trading and they know most of the time where the market will go and take those positions to make extra?

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