Before the BOJ monetary policy statement announcement on Friday there were several huge spikes in the USDJPY pair. The spikes lasted literally seconds:
Apparently, these spikes are being caused by computer trading algorithms. I think a good strategy to take advantage of these “flash” spikes is small off the market orders. Of course there is the potential one may not stop and just keep going. But it seems if you catch a few successfully and one fails that would be all right. Worth looking into anyway.
Our buy USDJPY trade idea (see daily trade webcast) did great using out of the money (OTM) Binary call options and selling out when the strike prices are reached (about $45). It’s a great way to catch the spikes without taking a lot of risk.
SETUP: The press put a damper on the USDJPY bullish trend starting on Sunday. What spoiled the USDJPY buying party was an article indicating that several of the Bank of Japan (BOJ – Central Bank of Japan) officials did not think more monetary easing was necessary (monetary easing weakens the JPY and causes the USDJPY pair to trade higher).
TRADE: On Monday bought Binary put options (bets that the USDJPY pair would close lower on Tuesday).
RESULT: Win at better than 10 to 1 risk reward
LIVE TRADING CHAT ROOM:
Still had the USDJPY bullish view on Tuesday’s webcast as well; allowing to catch the rest of the down move?
Here are the click and play links if you are interested
Bullish USDCAD (new high close on Friday) in anticipation of lower oil prices (new low close on Friday). Anticipating a continuation of these direction price moves.
BACKGROUND: Based upon a bullish trend on the daily chart (technical) and a bearish trend in oil (correlation) we liked buying the USDCAD on Friday. The pair opened (Thursday 5pm Eastern Time) at 1.3087 and our price target for the next 24 hours was 100 pips higher at 1.3187. Oil opened (Thursday 5pm Eastern Time) at 44.55 and our price target for the next 24 hours was 43.15
DETAILS: USDCAD daily chart had a 5-day pattern of higher lows and higher highs and we anticipated this pattern could continue for another day; and if the highs from 2 weeks earlier were taken out we could see the USDCAD pair trading as high as 1.3187 (why 100 pips above the opening price will be explained in a separate blog; it’s a simple but unique approximation method).
Oil was near 10 week lows and we expected to see those lows taken out and a continuation down as low as 43.15 on Friday. Since oil and USDCAD have a strong negative correlation (oil down, USDCAD up) we felt an expected decline in oil would enhance the chances of the USDCAD pair trading higher.
CHALLENGE: Finding a comfortable and stress free USDCAD buy trade entry and stop loss for Friday July 22, 2016.
SIMPLE STRATEGY: Buy at the start of the trading day (Thursday 5pm Eastern Time) at 1.3087; put a 60 pip stop loss 1.3027 (1.3087 -60 pips) and a 90 pip take profit 1.3177 (1.3087+90 pips).
RESULT: 1.3177 profit target reached. Friday’s data (Open 1.3087, High 1.3185, Low 1.3056, Close 1.3128)
MORE COMPLICATED STRATEGY: After the 8:30am Eastern Time Canada CPI and retail sales simultaneous economic news releases the USDCAD will likely spike lower if the news is good for Canada. If this happens (the news is good for Canada and USDCAD spikes lower) you can then buy a cheap Binary option bet that USDCAD will retrace or reverse the news decline. Your risk would be limited to the cost of the option and your potential profit could be 5 to 10 times what you paid for the option. Of course if the payoff is 10 to 1 your chances of winning will be low but if you are comfortable with “taking a chance” for a high return this is one way of doing that and having a fighting chance of being successful.
RESULT: The Canada economic news was pretty good and USDCAD spiked down 45 pips; it then reversed which resulted in winning Binary option bets.
BACKGROUND: In our LIVE trading chat room, we discussed the ECB press conference and concluded the EURUSD pair would be unchanged at the end of the conference but the pair would likely experience some minor ups and down (volatility) during the conference.
DETAILS: ECB President Mario Draghi was not expected to announce any major changes to the ECB’s current monetary policy. If that’s the case, the minority anticipating major policy changes would need to buy EURUSD to close their trades. It’s likely the buying would drive the EURUSD higher but unlikely the gains would be sustained. Also, Draghi could make minor changes to the current monetary policy that could cause some downside EURUSD price action but once again any losses were unlikely to be sustained
CHALLENGE: Identifying a stress free, low risk EURUSD trade strategy to profit from the fact we expect the EURUSD pair to move up and down during the press conference but not sustain any of the gains or losses.
TRADE TAKEN: At 8:28am Eastern Time we made a 1:1 bet that at exactly 9am Eastern Time (32 minutes later) the EURUSD pair would not be more than 36 pips above or not be more than 36 points below the 8:28am price. At 9am the EURUSD price was not more 30 points different than the 8:28am price and so we won the bet.
HOW IS THIS POSSIBLE?: Binary options; we placed two trades. Our maximum loss was known; no change of slippage or getting stopped out. Our maximum profit was known; it equaled exactly the amount as our possible maximum loss. Bottom line; we make or loss the exact same amount: 1:1 risk reward. Stress free
NOT FAMILIAR WITH BINARY OPTIONS?: Simple and straightforward. Takes minutes to understand and start using
CUT AND PASTE FROM THE LIVE TRADING CHAT ROOM:
Note: At the time these trades were placed EURUSD was trading at 1.1013:
In the form of a key reversal day. Personally, I still think after a brief pause the USDJPY will continue its journey back to 125.00.
Technical analysis works great in hindsight or for teaching but for my rel money I need more. Anyway here is this technical marvel for all of you technical analysis buffs: