How To Trade GBPJPY

When experienced traders think of GBPJPY, they think of one of the wildest currency pairs there is. A pair that likes to suddenly trend for hundreds and thousands of pips. Although to catch one of these moves is any traders dream, a lot of investors are scared to trade it due to the wild swings in price. There's a reason it has the nickname "The Dragon".

However, in this post, i'm going to be breaking it down using technical analysis and wave analysis to find a way to capitalise on these impulses. First, let's have a look at the weekly chart to get a long term overall view of the market. (click on the chart to enlarge it)

So with this chart above, we can see a clear five wave impulse down, which means we have been correcting this move since late 2016. With the count above, we are currently in an ending diagonal which will take us into the red zone where a high will be put in. This would mean that buying is a good idea for the next year or so.

My other view is that we are currently making a (Y) corrective wave down which will complete the 3 wave structure for ((B)). From there, a good buying opportunity should present for wave ((C)). For the purpose of this post, we are going to focus on the first view. Please note the trade which I talk about later works fine with both views.

The daily chart (above) of the first chart has a little more detail. It shows wave ((A)) was a very strong impulse and that wave B was a 3 wave correction. Now, you may ask me why do I not think that (1) is the high. Well, it didn't extend beyond ((A)) and also the move down was clearly corrective. This means that we still have more upside to come. The question is when... well I would say now. Let me show you why.

On the four hour chart I have drawn on a potential wave count if it is turning bullish now. It would be a good idea to buy all corrections until five waves up can be counted if this is the case.

Now finally on the one hour chart, I have labelled what I can count as an incomplete 5 wave motive wave up. Now, if I see a 3 wave correction I will definitely try to get a buy position in to ride wave (iii) up. This trade has a very high probability because even if this up-swing is going to turn out to be a 3 wave correction, there must be a move up after this retracement for wave (ii) or (b).

As you can see if this five wave move up is actually (a) and not (i) then we can still trade wave (c) up. I will judge how the wave unfolds and if it looks more like a third wave, then I will likely hold and add to the position.

How Will I Enter This Trade

I will be using a very simple flag pattern to get involved in this setup. Once I see 3 corrective waves down into at least a 50% retracement from the impulse, I will look for flag patterns to form and will buy into them at certain points. The image below presents an idea of how this works. If you want to learn more about flag patterns then have a look at our free flag patterns course: https://www.4xtrading.co.uk/4x-trading-s-flag-pattern-course

I will update this post within the next few weeks in order to show you the outcome of the trade and the next opportunity in this pair.

-Wian Stipp

Founder Of 4xTrading

#WianStipp #Forex #GBPJPY