Beaujolais and USD/JPY - 21st November 2014

Le Beaujolais Nouveau est arrivé. Have you tried it ? This year, this young wine from the Beaujolais region in the North of Lyon, East of France, is extremely fruity and absolutely delicious. The summer was rainy and the Autumn hot and sunny, but at the end of the day the grape had everything it needs to make great wine.

What about the USD/JPY ? Well... not much. As seen before, the pair is stuck under a resistance zone, and with declining volumes it doesn't look like it is ready to break through it yet. We'll have to wait for daily RSI to move out of the overbought zone before looking for a new long opportunity.

The Nikkei is in a range between 17,000 and 17,500. The key is to wait for the range to be broken. You could trade this range using an oscillator like Stochastics, but I don't do that. Why? Range trading is interesting in that you think that you can easily manage your risk: the range is between x and x+1, so all you have to do is go long at x with a stop at x-1. But, just for you, Abe is interviewed by a newspaper and declares that "Japan will fight deflation by all means necessary" (nothing new really) and that's enough for your pair to react and trigger your stop, going as low as x-1.5 before bouncing back into the range. Frustrating.

My point? Tight stops are dangerously subject to any noise caused by an uninspired headline. Trading smaller amounts with larger stops helps you avoid news-related noise and stay in the trend.