forex-scalping.com

Everybody has a pair where their discipline is weakest. For me it's USDJPY, and specifically on the days when it goes wild: intervention rumours, BOJ surprises, a big move in US yields.

My rule is to walk away. Literally. If USDJPY moves more than 70 pips in 15 minutes, I close any yen position, close the chart, and leave the room for at least 20 minutes. I make a cup of tea, walk round the block, anything except watch.

Why so drastic? Because my history on chaotic USDJPY days is poor, and not because of the first trade. The first trade is usually stopped out at a reasonable loss. It's the second, third and fourth trades, where I try to catch the reversal, or chase the continuation, or win back the first loss. On the worst day I can remember, I took nine USDJPY trades in an hour and lost more than in the previous three weeks combined.

The walk away rule broke that pattern. Coming back after 20 minutes, the move has usually either finished or become a trend. Either way the picture is clearer, and I'm calmer.

I'm curious what others do, particularly on yen. Do you have a hard rule, or do you rely on judgement in the moment? And does yours apply to all pairs or just the one that gets to you?

Mine is GBPUSD on UK data days, but the pattern is the same. The first loss is fine. It's trades two to five that cost the money.

The attached chart is an illustration of the kind of USDJPY move your rule is designed for: about 70 pips in 15 minutes, then a 20 minute wait, by which time it has either settled into a range or kept trending.
I'd add a small change to the rule. Instead of a fixed 70 pips, I use a multiple of the recent range, about three times the average 15 minute range over the past week. On quiet weeks 40 pips can be chaos, and on busy weeks 70 pips is normal.

The other thing I'd do is log what happened during the 20 minutes. After a few months you'll know whether coming back is still worth it, or if you should just finish the day.

When you come back after 20 minutes, do you allow yourself a full size trade straight away, or start smaller?

I'd make the walk away mechanical on spread as well as range. If USDJPY's spread stays above three times its five day median for two full minutes, I close yen exposure and leave the desk for twenty minutes, even when the pip move is still under your 70.

That caught two mornings last year where the range was only about 35 pips but liquidity had already gone. The next tickets on those days were garbage.

I keep a small sticky note with both triggers written: three times the weekly 15 minute ADR, or three times median spread for two minutes. Hitting either one ends the yen card for that stretch.

Coming back, I also require the spread to be back inside 1.5 times median before I allow a new ticket. That stops me re entering into a still broken tape.

LondonScalper, would you add a spread trigger to the pip rule, or keep it range only? I found range alone missed the thin tape days.