Direct from the desk of Dane Williams,
exclusive to leofinance.io
Key Takeaways:
- USD/JPY holds above daily support/resistance zone.
- As higher time frame and intraday time frame charts lined up, we got long.
- The trade played out and paid us at 1:3.
USD/JPY Technical Analysis
If you want a textbook example of how I trade around forex support/resistance zones, then just check out today's price action in USD/JPY.
Let me walk through my process for taking this trade, all the way through to closing it out for a clean 1:3 profit.
Higher Time Frame View
First of all, we always start looking at the higher time frame chart and identify any obvious support/resistance zones on the daily.
We've been talking about the USD/JPY daily support zone being in-play since last week.
Take a look at the daily chart featured in our last USD/JPY analysis blog which I linked to in the paragraph above:
USD/JPY Daily:
As you can see, price had pushed back above the daily zone, and therefore we've only been looking to play the pair from the long side as a result.
Why fight momentum if we don't have to, right?
Zooming Into the Intraday Chart
Now our higher time frame bias of only playing from the long side is in place, we zoom into an intraday hourly chart to refine our entry.
The whole point here is to ensure that both the higher time frame and intraday charts line up, giving us the best opportunity to take a low risk, high reward trade.
You can see on the following USD/JPY hourly chart from that same previous blog, that price had bounced out of our daily resistance zone in grey.
So we find the last area of short term resistance (just the last hourly red candle) that when retested as support, can be used to manage our risk around when we enter:
USD/JPY Hourly:
Price held our short term zone and the conservative buy was after the hourly candle closed back above.
With a stop at the bottom of that zone, see how tight you can get it and how big you can get your risk:reward?
Now take a look at how the USD/JPY long trade played out:
USD/JPY Hourly Updated:
A nice 1:3 risk:reward trade with absolutely zero drawdown!
While I've closed the trade at +3 units, you can obviously leave these sorts of trades open and move your stop to break-even if you're more aggressive.
These sorts of entries with a tight stop certainly can give you those home run, +20, +50 etc trades that make your entire year.
All by risking just the 1 unit.
This is the power of trading around support/resistance zones in this way.
Best of probabilities to you.
Data to Watch:
- CPI m/m (USD)
- Core CPI m/m (USD)
- Fed Chair Powell Speaks (USD)
- Core Retail Sales m/m (USD)
- Retail Sales m/m (USD)
Why not leave a comment and share a chart of your own in the comments section below? All comments that add something to the discussion will be upvoted.
This daily market analysis blog is exclusive to leofinance.io.