Tagged: usd/jpy

Two Moving Average Price Crossover

Place 20 EMA and 30 EMA on USDJPY 1H chart.

Rules for entry:
For Longs/Buys, wait for price to CLOSE above both EMAs and place a Buy order above the high of the bar. Stop loss will be placed at the low of the bar.
For shorts, do the reverse.
Exit current position and reverse when the opposite trade signal appears.

As with all trend following systems, this works best in a trending market and is not good for ranging or whipsaw periods.
You can add ADX as an additional filter. Enter trades only when ADX is above 25, for both Buys and Sells.

Note that this strategy is only concerned with whether price has closed above or below the 2 EMAs. It does not matter if the faster EMA is above or below the slower one.

This differs from the other two MA crossover strategy.

2 ema price cross

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Two Moving Average Crossover

This trading strategy is both simple and effective. You can trade a few currency pairs or even other markets together to get some diversification. This will increase your chance of catching a trend and reduce the effects of whipsaws and trading ranges.

Rules:
Place 12 EMA and 30 EMA on USDJPY chart. Timeframe will be 4H.

For longs:
Long entry signal appears when the faster EMA, which is the 12 period one in this case, cross above the slower 30 period EMA at the close.
Create Buy order 2 pips above the high and stop loss will be 2 pips below the low of the same bar.
For shorts:
When at close, 12 EMA has crossed and gone below 30 EMA.
Create sell order 2 pips below the bar with stop loss 2 pips above the high.

This is an ‘always-in’ trading strategy. If you are long, you will exit and go short when a sell signal appears.

This strategy works well on longer time frames, 1H, 4H and Daily charts.
If you trade on daily time frames, you can check all the charts once a day nad setup orders if you find signals. A less stressful yet profitable scenario!

2 ema cross

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Leverage and Risk

There are many misconceptions/myths when it comes to leverage and their relationship to your profitability or ruin.
Many gurus and experts always advise against using high leverage, citing it as a sure thing to failure. What they fail to explain is that it depends on the kind of forex trading strategy you are using, the size of the stop loss, the size of each position and the total size of all your trading positions.
In view of that, I think it would be useful to differentiate them as ‘position leverage’ and ‘portfolio leverage’.

Assume 2 traders, A and B, has one position each (Long 100,000 units of USD/JPY) and a $50,000 USD funded account with 50 times leverage given by the broker.
The value of the position is obviously $100,000. At 50 times leverage, Trader A will need to post a margin of $2,000 (100,000 / 50 = 2,000).
That would mean they have a 2 times leverage ratio, as they now have a $100,000 open position on $50,000 in capital.
oanda-leverage-uj

Trader A trades a long term trend following strategy and has his stop loss set at 300 pips and gunning for a 1000 pips target/TP point.
Trader B has a similar position in USD/JPY, but he is a day trader and has set a 20 pips stop loss while trying to capture a 50 pips profit.
Trader A will be risking $3,000 or a whopping 6% of his capital on a single trade, while Trader B will be risking $200 or 0.4% of his capital. Although they employ the same level of leverage, it does not have any bearing on how much risk they are taking.

Trader C on the other hand, has 3 open positions. They are Long 100,000 EUR/USD, Long 133,680 USD/JPY and Short 100,000 EUR/JPY respectively.
Assuming EUR/USD is trading at 1.3368, he will theoretically have no risk exposure. But he would still be required to provide about $8,000 in margin ($2,674 for each).
I have no idea why he would want to do this.
leverage-synthetic cross eg

Some JPYs are ‘missing’ due to spread and rounding errors in the calculations.
It would be prudent to not risk more than 2% of your account balance on any single trade or 5% on any one currency.
So using the above example of $50,000 in capital, you should only risk a maximum of $1,000 on each trade.
For trader A using a 300 pip stop, his trade size should only be 33,000 units or about 3 mini lots. As for trader B, using a 20 pip stop, his trade size can reach 500,000 units, or 5 standard lots.
Regarding not risking more than 5% on any one currency, imagine you are long EUR/USD, GBP/USD and short USD/CHF at the same time. You are actually long European currencies and shorting USD in all 3 positions.

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