Friday, April 29, 2016

I need to "trade out" of my long, USDJPY position

Yesterday I posted here how that early morning 300 point collapse in USDJPY was ridiculous.

It came about as a result of the BOJ standing pat on rates. "That's how people trade?" I asked.

Well apparently.

As if a greater degree of negative rates was somehow a "stimulus." The whole thing was absurdity to the extreme and completely out of paradigm with the current reality so what was I supposed to do? I simply HAD TO go long USDJPY and I did.

That trade was actually in the money for about 2-3 hours, but then it turned around and we're about 100 pips lower than where I bought in.

Then what did I do? Did I panic? Did I beat myself up? Did I frantically PAY the market to get out and take a loss?

No. That is not the proper mental game and not the proper strategy.

While I believe my reasoning for buying USDJPY was correct (although in the backdrop there is a serious, bearish dollar environment developing now), it is not working out.

What I teach in my Forex course is that we trade according to the principles of MMT. This trade was. (Japan enacting a nearly, $200 billion FISCAL stimulus for the economy and earthquake cleanup and reconstruction. That's bearish for the yen all things equal.)

However, when MMT trades do not work and we are caught with losses (it can happen because sentiment, too, drives markets and when clueless idiots believe something they can push the market like a stampeding herd) my course teaches you the SKILLS to trade out of what is not working.

The best offense is a good defense!

So, that's what I am about to do...trade out of this position that is not working. I am adding another unit of long, USDJPY at 106.89 to lower my average.

Stay tuned...

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4 comments:

Ben Johannson said...

Same. Had an additional buy order in at 107 even and will trade out next week with correction. Moves like this I think equate to an energy imbalance; they will snap back and a lot of people will get their fingers broken.

Ben Johannson said...
This comment has been removed by the author.
Benedict said...

(Japan enacting a nearly, $200 billion FISCAL stimulus for the economy and earthquake cleanup and reconstruction. That's bearish for the yen all things equal.)

Pardon my innocence - why is this bearish for the yen?

pebird said...

Mike, take a look around Martin Armstrong:

https://www.armstrongeconomics.com/markets-by-sector/stock-indicies/nikkei/strange-movement-in-capital-flows-someone-is-trying-to-push-markets/