Yesterday’s Trade Strategy

 Yesterday’s Trading Opportunity

Pictured below is an hourly chart of the EUR/JPY.  The green channel is called the Keltner Channel and the indicator at the bottom is the CCI or Commodity Channel Index.  My short came at around the purple downfacing triangle.

My rationale for this trade was that the price before I entered was hovering above the top channel line indicating that the price may have reached exhaustion.  Now there is no guarantee that exhaustion had been reach yet in this case.  The price could have continued to go up.

The key here is to wait to see if the candle closes below the upper channel line which it does.  Once it does, a selling opportunity arises and can be furthur confirmed by the CCI which in this case had begun to fall below the 100 level.  In addition, I looked at other momentum indictors and they showed similar findings.

I initiated a short at 142.26 once the indicators confirmed this.  The Keltner Channel as well as other channels expect that price will gravitate towards the median line 80% of the time.  I was betting that gravity was on my side.

The price retraced a bit to the top line of the channel once my short was in but then declined and passed through the median line.  I had place a stop at the high of the previous candle which was never close to being hit.  

Once momentum slowed, I got out of the trade for a 43 pip profit x 2 lots = 86 pips.