A few tips how to trade it because it looks like you might need it pretty soon:
1. First of all, don't get scared. It always looks very fast and furious but in fact almost every time the market is quite tradable during such moments. In my book there is a template # 20.7 with the detailed description of how to catch such a move on the back of BoJ and other CBs. I would like to remind you that all the orders, such as entry stops and limits for profit taking, must be placed in advance.
2. In addition to that I have to say that usually almost any intrevention can be traded both ways. In such case the results normally depend on the experience of a particular trader accompanied with some portion of a pure luck. Some numbers from the past history of intereventions might help:
- there have never been a single day intervention in more or less recent history in excess of 450 pips on any major USD pair (perhaps with the exception of 800 pips move on the USD/JPY on 06.17.98);
- average intervention trading range is about 300-350 pips;
- such a trading day never closes at the very extreme of the day's range and usually makes an intraday retracement of about 50% of the move within the same trading day;
- almost every intervention trading range stops at some technical level and such a trading day's top usually has some technical significance. Therefore it makes sense to check for good potential resistances within a reachable range ahead ot time;
- the market almost always comes back to pre-intervention levels within several days, or several weeks, or (in rare cases) months. (Except for cases when such an intervention was backed up with some key fundamental changes like in 1995 (the end of a trade war with Japan). In our case such a change might appear in the form of Fed refusing to cut rates on the next meeting, or clearly stating that they are going to put rates on hold after the last cut widely expected to take place this Tuesday. This decision might change the trend forever but looks quite unlikely to me).
Based on this statistics and in case someone will be willing to trade against a CB, the best startegy would be to keep entry limit orders about 250-300 pips above an intraday low and to add a position or two in case it gets higher. I usually place my entry limit orders every 50 pips starting with 250-300 pips above an intraday low.
Also an appropriate money management must be applied especially in case when trading against the momentum. Positions shouldn't be leveraged too much. I wouldn't recommend more than 3:1.
The biggest problem a trader usually will be dealing with during an intervention would be not the market but rather a dealer. With the inceased volatility all the stops will be executed with slippages and dealing spreads will widen. Therefore my only advice on this part would be not to get too greedy and to place all the orders for an automatic execution including the ones for profit taking on the positions taken against the direction of an intervention. Good luck.
1. First of all, don't get scared. It always looks very fast and furious but in fact almost every time the market is quite tradable during such moments. In my book there is a template # 20.7 with the detailed description of how to catch such a move on the back of BoJ and other CBs. I would like to remind you that all the orders, such as entry stops and limits for profit taking, must be placed in advance.
2. In addition to that I have to say that usually almost any intrevention can be traded both ways. In such case the results normally depend on the experience of a particular trader accompanied with some portion of a pure luck. Some numbers from the past history of intereventions might help:
- there have never been a single day intervention in more or less recent history in excess of 450 pips on any major USD pair (perhaps with the exception of 800 pips move on the USD/JPY on 06.17.98);
- average intervention trading range is about 300-350 pips;
- such a trading day never closes at the very extreme of the day's range and usually makes an intraday retracement of about 50% of the move within the same trading day;
- almost every intervention trading range stops at some technical level and such a trading day's top usually has some technical significance. Therefore it makes sense to check for good potential resistances within a reachable range ahead ot time;
- the market almost always comes back to pre-intervention levels within several days, or several weeks, or (in rare cases) months. (Except for cases when such an intervention was backed up with some key fundamental changes like in 1995 (the end of a trade war with Japan). In our case such a change might appear in the form of Fed refusing to cut rates on the next meeting, or clearly stating that they are going to put rates on hold after the last cut widely expected to take place this Tuesday. This decision might change the trend forever but looks quite unlikely to me).
Based on this statistics and in case someone will be willing to trade against a CB, the best startegy would be to keep entry limit orders about 250-300 pips above an intraday low and to add a position or two in case it gets higher. I usually place my entry limit orders every 50 pips starting with 250-300 pips above an intraday low.
Also an appropriate money management must be applied especially in case when trading against the momentum. Positions shouldn't be leveraged too much. I wouldn't recommend more than 3:1.
The biggest problem a trader usually will be dealing with during an intervention would be not the market but rather a dealer. With the inceased volatility all the stops will be executed with slippages and dealing spreads will widen. Therefore my only advice on this part would be not to get too greedy and to place all the orders for an automatic execution including the ones for profit taking on the positions taken against the direction of an intervention. Good luck.