There's every possibility the yen reverses significantly after the BOJ meeting. But fundamentally, you need to understand that there are significant changes in the winds of the Yen. Japan is now running a trade deficit, for example. Abe has hinted they will target a specific yen level and just print until they get it. Significantly different than before.
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Fading Yen - It has gone parabolic
- Thread starter gmst
- Start date
Great comments all around. Some guys pointed out that there is a better method to fade parabolic moves. Possibly yes.
My idea behind starting this thread is to just demonstrate how such parabolic moves can be faded profitably in a very mechanical way - without the need to be in front of a computer. This approach is very useful to folks who work full-time jobs and are not professional independent traders.
A person working full time in a job can easily track 50 futures once a week by looking at the charts on a Saturday - if any market is setting up for a parabolic move. Once the parabolic move happens in any market, he can start fading by scaling-in.
Across say 50 futures markets, at least 4-6 such moves would happen every year. If one can become proficient in taking 6-8% from each such move, and wins on say 5 moves out of 6. One can make 7%*5 = 35% and lose say 10%, for a net of 25%. Even if one loses on 2 trades, one can still make 8%.
And all these fade trades will last around a week. So, we are looking at roughly 8%-20% for 5-6 weeks of being in the market.
Even if you are a short term day trader or a long-term trend follower, adding a fade the parabolic move to your arsenal doesn't hurt. As far as my trading style is concerned, I am primarily a short term intraday trader and less than 10% of my positions are swing trades with hold times between 1-10 days.
Anyways, so we got triggered at 90 for 0.25% risk. Waiting patiently for more scale-ins.
My idea behind starting this thread is to just demonstrate how such parabolic moves can be faded profitably in a very mechanical way - without the need to be in front of a computer. This approach is very useful to folks who work full-time jobs and are not professional independent traders.
A person working full time in a job can easily track 50 futures once a week by looking at the charts on a Saturday - if any market is setting up for a parabolic move. Once the parabolic move happens in any market, he can start fading by scaling-in.
Across say 50 futures markets, at least 4-6 such moves would happen every year. If one can become proficient in taking 6-8% from each such move, and wins on say 5 moves out of 6. One can make 7%*5 = 35% and lose say 10%, for a net of 25%. Even if one loses on 2 trades, one can still make 8%.
And all these fade trades will last around a week. So, we are looking at roughly 8%-20% for 5-6 weeks of being in the market.
Even if you are a short term day trader or a long-term trend follower, adding a fade the parabolic move to your arsenal doesn't hurt. As far as my trading style is concerned, I am primarily a short term intraday trader and less than 10% of my positions are swing trades with hold times between 1-10 days.
Anyways, so we got triggered at 90 for 0.25% risk. Waiting patiently for more scale-ins.
This is not a parabolic move. Not even remotely close to parabolic. The Yen went from 250 to 70 over the dollar in the 80's. This thing can go to 110 in a heartbeat. You want to be long this move, not short it. This is what is known as a generational breakout. You don't get these moves often, but when you do, you want to go with it, not fade it.
Quote from Maverick74:
This is not a parabolic move. Not even remotely close to parabolic. The Yen went from 250 to 70 over the dollar in the 80's. This thing can go to 110 in a heartbeat. You want to be long this move, not short it. This is what is known as a generational breakout. You don't get these moves often, but when you do, you want to go with it, not fade it.
Thanks for stopping by. You might very well be correct. If you truly believe that yen can go to 105-110, I encourage you to start your own thread where you will go long usdjpy and possibly scale-in as position moves in your favor. If you are not 100% confident, don't have to do it with real dollars, do it with virtual money.
Lets call it a friendly competition.
Btw, 250 to 70 move in 80s happened over how many years? We have already moved from 80 to 90 and I am giving myself a 6 bigfigure error room in this trade. So, from 80 to 96, we are talking about a 20% move in 3-4 months.
Quote from gmst:
Thanks for stopping by. You might very well be correct. If you truly believe that yen can go to 105-110, I encourage you to start your own thread where you will go long usdjpy and possibly scale-in as position moves in your favor. If you are not 100% confident, don't have to do it with real dollars, do it with virtual money.
Lets call it a friendly competition.
Btw, 250 to 70 move in 80s happened over how many years? We have already moved from 80 to 90 and I am giving myself a 6 bigfigure error room in this trade. So, from 80 to 96, we are talking about a 20% move in 3-4 months.
I think the other poster was simply trying to be of assistance, not necessarily to compete. I've been stalking the long USDJPY trade for over two years, and this does appear to be quite an impulsive move after a super long consolidation.
Of course, it's nice to not be biased, so perhaps a more ideal approach is to keep open theories about the long and short side, have battle plans for both, and act accordingly.
IMO, neither short from here to 96, nor long from here to 8X would need to involve scaling in over a massive amount of HUNDREDS of pips.. why do you need to scale in? The thing has tons and tons of liquidity.
Quote from gmst:
Thanks for stopping by. You might very well be correct. If you truly believe that yen can go to 105-110, I encourage you to start your own thread where you will go long usdjpy and possibly scale-in as position moves in your favor. If you are not 100% confident, don't have to do it with real dollars, do it with virtual money.
Lets call it a friendly competition.
Btw, 250 to 70 move in 80s happened over how many years? We have already moved from 80 to 90 and I am giving myself a 6 bigfigure error room in this trade. So, from 80 to 96, we are talking about a 20% move in 3-4 months.
I'll post some charts on the ACD thread. But this move is small so far. We had moves 5 times this large as recently as the credit crises in 2008. I wouldn't go long at this level, the breakout on my levels was just under 80! Now you want to buy on the dips. But I'll post levels on my thread.
One of the things about currencies is people always think they mean revert. That's really only on a intra-day time frame. When currencies breakout and go they can run for months or years in a straight line with no re-tracements. Part of this are central bank actions obviously jawboning the market or actual policy action. But some of it is related to catalysts in interest rates where massive long term carry positions are either being put on or unwound. So the idea is to fade the intra-day noise but go with the long term trend.
Anyway, I'll post the levels on my thread. Good luck.
Quote from murrica:
IMO, neither short from here to 96, nor long from here to 8X would need to involve scaling in over a massive amount of HUNDREDS of pips.. why do you need to scale in? The thing has tons and tons of liquidity.
Regarding the other poster - as I said I could be wrong. Eventually yen might go and touch 100. But at this stage, I don't think it is going to happen without a decent correction.
The rationale for scaling in is just money management from a trader's perspective. So, if a trader thinks yen is going to make a 10 figure move, he may start small and then add as position moves in his favor.
There is actually a WONDERFUL poster/thread here which caught this yen trade wonderfully. He started scaling into a long position around 80 and kept adding.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=249172&highlight=neither+tech+nor+macro
Quote from Maverick74:
When currencies breakout and go they can run for months or years in a straight line with no re-tracements. Part of this are central bank actions obviously jawboning the market or actual policy action. But some of it is related to catalysts in interest rates where massive long term carry positions are either being put on or unwound. So the idea is to fade the intra-day noise but go with the long term trend.
Above is correct observation. I shorted euro using spot and hedged with options in 2010 and it ran against me 13 big figures over a month. Then I finally closed the trade, lost my ass in that one. I was very new at swing/position trading at that time. But it was not my money and my boss had the same view of shorting Euro to parity. LOL! How wrong that turned out! Now, I mostly follow the trends on currencies.
As I said, this thread is just about a very specific methodology to fade parabolic moves. I know many guys bankrupted themselves in 1980 fading silver. I guess I am just learning the art of fading parabolic moves. I also agree with you that this is not your quintessential parabolic move. But I reckon that money can be made by fading yen at this level. We will see how it goes. Cheers.
EDIT: Oops, correction. I had shorted euro synthetically using options and managed the delta using spot. Disregard what I said above.
Quote from gmst:
Regarding the other poster - as I said I could be wrong. Eventually yen might go and touch 100. But at this stage, I don't think it is going to happen without a decent correction.
The rationale for scaling in is just money management from a trader's perspective. So, if a trader thinks yen is going to make a 10 figure move, he may start small and then add as position moves in his favor.
There is actually a WONDERFUL poster/thread here which caught this yen trade wonderfully. He started scaling into a long position around 80 and kept adding.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=249172&highlight=neither+tech+nor+macro
Ok, I like the 'add to winner' idea instead of martinscaling. Just my opinion.