SCOTT WELSH TRADING BLOG

Taking On The GBPJPY

Taking On The GBPJPY

June 25, 2014

For me, my forex life began with the GBPJPY.

I remember sitting in Orange County early in 2009, listening to Rob Booker teach me how to trade the GBPJPY using the London Pivot Method. I had only traded stocks from 2005 until that time and my mind was being blown. I remember Rob showing us a trade on Forex Tester that would have made $21,000. The room actually gasped as Rob walked bar by bar through that trade. It was scary as Luis Suarez at a dentist office. It was awesome.

If you don’t already know, the GBPJPY is a monster. Rob calls it “The Orient Express” because once it starts moving, it really moves. And that’s an understatement. Don’t believe me? Here’s a short list of memorable GBPJPY moves:

  • On 12/18/13, the GBPJPY messed around and moved 431 pips in a single day
  • On 4/4/13, the Orient Express got frisky and jolted 643 pips in 24 hours
  • On 5/6/10, the GBPJPY did some hot yoga and then cranked out 1,236 pips that day
  • And let’s not forget–how can we ever forget??–when the GBPJPY dropped a whopping 9,648 pips in only six months (July, 2008-January, 2009)!

Think about that. I like to trade Strategies that work very well with measly 20 pip profit targets. How, then, could I ever handle something that can move 1,000 pips in a day?

For my short-term trading Strategies, the answer has been: I can’t. For years, I haven’t been able to tame the GBPJPY to trade it on a day-trading basis. I tried for 50 pips, but the stops kept getting hit. I tried for 100 pips, but the stops had to be so large (due to its wild nature) that it wasn’t usable. For day-trading, it just wasn’t possible for me.

Until recently. Because of its power, I never considered using a small profit target for the GBPJPY. There just wasn’t any point to it. Why go for tiny win on such a monstrous beast? That’s like asking Tim Duncan to dunk on a 4-inch hoop. So I never looked at it.

But this month, I decided to put a 16-pip profit target on a 15-minute GBPJPY chart. [I’ll wait for the laughter to die down].

It’s true. I put a 16-pip profit target on it and…I couldn’t believe it. It behaved. It was reasonable and respectable. It was not something I was prepared for.

There were no losing years. Whoa.

And an 81% win rate?

And a nice Equity Curve?

I’m shocked.

It turns out this behemoth performs quite well if you don’t let it run. Sure, it can move hundreds of pips in a few hours, but that doesn’t matter. If you keep your discipline and just ask it to do a normal, un-extraordinary things, it can actually be okay.

In fact, I am looking to switch out my portfolio at the end of this month to some new Robots with higher win percentages. Unbelievably, I am actually considering trading the GBPJPY with real money. A short while ago, I would have bet the house that this wasn’t possible.

So, the bottom line is that every currency is tradeable if you don’t ask it to do too much (and aren’t afraid of it). Keep an open mind and a currency pair you’ve hated just  just might turn out to be your friend.

 

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