Quote:
Originally Posted by Aeron
Hello oh wise ones. I had been waiting for quite a while for 109.00 and with RSI (10) topping and prices touching Bol Band (10) upper limites, I sold into the strength but as it worked out not so good. Took 60pt loss but my question is when is it a reasonable risk to go long in such an extended overbought market and when can you take a reasonable risk to sell the strength e.g 109.95??? All advise would be appreciated.
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This is a common struggle for even experienced traders. Even if you get direction correct, your trade needs to be structured correctly so that you can survive the 'whipsaw' effects on the short-term.
I am a cautious trade; so IMO, a reasonable place to go with a possible upside trend in USDJPY was on the initial breakout (because there is a good probability that such a clear level can find momentum on the ultimate breach) and then I would wait until there is a pull back to a reasonable technical level. Former resistance at 108.50 could be new support. There may be a better fib or moving average that you could follow; but just be consistent in what you follow and test what works with your trading style.
As a principle, I don't often try to trade trend reversals (tops and bottoms occur infrequently yet most traders try to make it 90% of their business). If you do want to trade it as a false break or reversal, I would take a small position near the top and then build it to full size when it breaks support and confirms its turn.
