Known as the beast due to it’s large swings, the pound/yen can be tamed if using a low risk high potential trading strategy. Listed below is a great way to trade this currency pair.
Due to the large swings in this pair, target profits and stop losses may vary based on the traders discretion.
We are looking for the Low and High range between 2:00pm EST and 9:00pm EST. This will be the end of the New York session and the start of the Asian session. Between these hours the currency pair will most likely have a fairly tight range, except on FED day, which can cause some big swings after the rate announcement, so the day after FED rate day may be off the scales.
Once your range has been defined, the next thing you need to do is place buy stop and sell stop orders 6-10 pips outside of these ranges. These extra few pips will work as a buffer for false breakouts. You are looking for around 100 pip target profit and a 50 pip stop loss. The GBPJPY is a beast and can move really quick.
Usually two things will happen.
1. The entry order will trigger reaching your target profit.
2. The entry order will trigger and fall back to your stop loss.
You will run into many days when one of your long orders gets hit, and stopped out only to work out the next time it breaks out of the range. Here is where the system works in your favor. Should the stop loss be hit on the first trade, re-enter the original order, so it has a second chance. Should it work the second time, you have one loss with 50 pips and one winner with 100 pips. This equals a total gain of 50 pips. Depending on where you live, you may have to set alerts so you know when these orders are triggered. It is recommend that you only try a max of two times a night. After it fails the second time, wait until the next day to retry, leaving you with a 100 pip loss.
Try this on demo first until you feel comfortable with this method. A breakout strategy keeps the emotions on the sidelines and can create a nice tool to your trading style.