Skip to main content

USD/JPY – A Swing Trade Analysis

Today I would like to do a swing trade analysis of the USD/JPY and show you some points that I think are pretty important there.

Crazy USD/JPY buying

There was some pretty aggressive buying on the USD/JPY recently. The price shot 240 pips upwards just in two days!
What also happened here was that 10 months old gap got closed as a result of this buying activity.
Gaps on forex are pretty important for two reasons. First, they tend to get closed soon. Second, if they don’t get closed, then there is likely to be a trend. This happened on the USD/JPY in 2019. There was a gap which did not close and this started a new strong downtrend.
More about trading gaps here:
How to trade gaps

Sudden price reversal

So, we have a gap closed and strong buying activity. Then the price suddenly turned.
Why did that happen? One word – Volumes.
Back in 2019, there was a Volume accumulation right before the new downtrend started. There were clearly strong sellers building up their selling positions.
After they accumulated their selling positions they pushed the price aggressively downwards. They were so strong, that buyers were not even able to close the gap I mentioned before.
Now, after 10 months the price went back into this area again.
What happened few days ago is that sellers from 2019 became active again and started an aggressive selling activity.
What I also think happened is that the buyers who were pushing the price upwards recently started to get rid of their long positions (because they saw the aggressive sellers from 2019 becoming active again). When a buyer closes his position he SELLS. This helps to drive the price downwards.
Those were the two factors that turned the price so sharply.

What now?

Now, after the sudden price reversal, the price is heading towards a newly formed Volume Cluster. Under normal circumstances, such Volume Cluster would be nice support to go long from.
What is pretty risky in this particular situation is the strength of the rejection that we see on USD/JPY right now.
In other words – this Volume Cluster would be a pretty nice level to trade only of the price didn’t do what it just did – sharp reversal almost immediately after this Volume Cluster got formed.
I am not saying that this support won’t hold but I think longs in such situations are really risky and not really worth it.

The point is that it is generally better not to trade every Volume Cluster blindly, but to look at what is going on in the market and filter out the most risky trades.
I hope you guys liked the article. Let me know what you think in the comment section below!
Happy trading!
-Dale

Comments

  1. Phani Kumar7/29/20, 4:05 AM

    Hey, thanks for the information. your posts are informative and useful.
    Ind-Swift Laboratories Ltd

    ReplyDelete

Post a Comment

Popular posts from this blog

How To Trade The Point Of Control (POC)

DEFINITION: Point Of Control (= POC) is a price level at which the heaviest volumes were traded. The most important thing that the Volume Profile indicator shows is the POC. I dare say that if you used Volume Profile only for the purpose of identifying the POC, you would be a way better and trader then 99% of the retail traders. No matter what trading strategy you trade. Why do I say this? Why is POC so important? Point Of Control is so important because it shows the place where the most trading took place – where the biggest trading positions were accumulated. POC shows the BIG guys! Who accumulates those huge trading positions? The BIG guys – that’s the big financial institutions like hedge funds, pension funds, huge banks, etc… It is those BIG guys who move and manipulate the markets. It would be a huge advantage to know where they placed most of their positions, right? The good news is th
Post a Comment
Read more

Beginners Guide to Order Flow PART 1: What Is Order Flow?

DEFINITION: Order Flow is an advanced charting software which enables you to read all trading orders that are processed in the market. It helps to track the BIG financial institutions through the trades they make. Most people get confused when they open up a chart with Order Flow for the first time. There is no shame in that. Order Flow shows so many information and it is easy to get overwhelmed and confused if you don’t know what to look for! This Beginners Guide will teach you how to understand how Order Flow works and how you can use it in your trading! In this 1st part of the Order Flow Guide I will show you around the Order Flow interface. Footprints The Order Flow does not show standard candles, but it shows FOOTPRINTS . A footprint shows not only Open, High, Low, Close (as standard candles) but it also shows orders traded in that candle. Orders can be
Post a Comment
Read more

5 Character Traits of a Successful Trader – Tips & Tricks of the Pros!

 Maybe you are interested in trading, and you have taken the first step by researching on forex trading. You might also be currently trading but going through a tough time with your results in the markets and dealing with the recurrent autosuggestion, telling you how this journey might not be for you or you are not capable of achieving successes in this journey. It is essential to know that you are not alone in this feeling, and before you fall into the rabbit hole of depression, feeling like a failure in yet another skill you have chosen. Let me make it clear; the answer is YES, anyone can achieve success in trading , including you. It would only cost you a few character trait adjustments. Before we delve in, it is vital to point out that success in re
8 comments
Read more