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Risk-Free Trade Now In USD/JPY Swing Trade

05/19/11 08:16:23 AM
by Jamie Theiss

After the first profit target is hit, we now have a risk-free trade.

Security:   USD/JPY
Position:   Hold

Following up on my last post from Monday, May 9, titled "Two Reasons To Buy The USD/JPY Now," we have hit our first profit target of 81.50. Now the protective stops are brought up to the breakeven figure. We now have a risk-free trade with the only question yet to answer is, "Are we going to make a little money, or a lot of money?" That is a very good position to be in as we wait for our next profit target of 82.00.

FIGURE 1: USD/JPY, ONE DAY. Note how old resistance becomes new support.
Graphic provided by: Oanda.
Looking at Figure 1, you can see how, at first, the 21-period simple moving average (SMA) acted as overhead resistance. The price went up and tested it, and was pushed right back down. On the next attempt, it went right on through, and now the 21-period SMA has caught the price and is acting as a floor of support.

Interestingly, the new support level is at the price of our last two entries at 80.95, within one pip, which is where our new breakeven stop is placed. Who says technical analysis has no place in trading? I like to give several pips of slippage to avoid stop running. But with my first entry of 80.64 and all the stops at 80.87, I will still make a few more pips of profit, even if stopped out.

What a great place to be, both financially and psychologically, 95 pips profit in the bank and our stop is a little bit better than breakeven. So are we going to make a little money, or a lot of money? That is the advantage of the risk-free trade.

Jamie Theiss

Jamie Theiss is a full-time trader who daytrades stocks, swing trades forex, and from time to time position trades commodities.

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