Trading Update 15/3/2011: 100 pips on AUDJPY

This trade was set on the 6th March and was triggered overnight Thursday /Friday 11th March based on the horrific events that hit Japan that day.  All of my comments are tempered with the fact that whilst this was going there were people engaged in much more important basic activities, namely simple survival. My best wishes go out to the people of Japan during this terrible period.

As previously said this trade was set on the Sunday and then triggered on Friday morning, taking me short at 82.51. It went about 55 pips positive before consolidating sideways.  I was talking to FXTrader Sandy (yeah remember her? She needs to get writing again!) and expressed my discomfort at this trade because it had not been triggered by technical or pre-determined economic news flow.  This was a pure emotional response by traders to the events going on in Japan.  Sandy shrugged off my concerns and said just let the trade play, which I had already decided to do but it was good to get the confirmation from a detached source.  A few hours later I was rueing that decision!

Some have described Friday afternoons events as a ‘Black Swan’ event.  A multitude of news releases including news of an explosion at one of Japans Nuclear reactors sent the markets into turmoil.  They turned on a 6-pence and headed in the opposite direction from he previous 12 hours.  So I went from being in a trade that was at +50 pips to being in one by close of play on Friday of – 65 nearly a 120 pips swing!  Not surprisingly when I came to look at my trade on Friday evening I was somewhat surprised at the events of the afternoon. At one point price had gotten within 7-8 pips of my stop-loss.  I was left fully expecting to be closed out come Sunday night….and probably to experience some slippage depending upon what happened news-wise over the weekend. 

Well most of you will know what happened over the weekend. When Sunday evening appeared I sat down to watch the markets open fully expecting to be closed out in the pre-market or upon market opening when my broker usually widens spreads by 3-4 times normal.

However I was lucky, and it was pure luck, that when the markets opened they gapped down not up and not only that they fell…and they fell hard.  Within a matter of moments I went from being -50 to hitting my first target at 81.74 for +75!  Price continued to slam down and at one point had dropped nearly 200 points from the close on Friday.  Almost as quickly as price dropped it reversed a good 130 pips. My words and picture  don’t really do justice to describing how aggressively these markets moved and the pace at which they turned around.

I had planned to let the 2nd position ride out but seeing the volatility that was present on Sunday evening I decided to step aside and leave with a small profit on the 2nd portion.  When fear and doubt reign; cash is King.  It was obvious that all manner of shenanigans were going on and I was happy to just be a spectator.  Remember the old trading adage: Better to be on the sidelines wishing you were in a trade rather than being in a trade wishing you were out on the sidelines.

So my position closed out with +75 for the first and +25 for the second portion. It was luck though, pure and simple. In the grand scheme of things I’m very fortunate compared to the folks in Japan at the moment (and I suppose Libya, Bahrain and Yemen come to think of it).  I wish them all the best during what must be a terrible time.  What I have started doing is donating the first 10% of my coaching fees to Kathy Liens Forex Traders Disaster Relief for Japan fund. You can find the details here should you wish to contribute.

http://www.firstgiving.com/fundraiser/kathy-lien/forex-traders-for-japan-disaster-relief

Until next time, take care and trade well.

FXTraderPaul