Zulutrade Hidden Gem (2): How to Protect Your GBP/JPY Portfolio

Markets hardly ever trade in the same trading range for long. There are general trends that may unfold for weeks, months and years.

On top of that, there is always considerable price fluctuation during uncertain periods – sometimes leading to significant volatility.

Interestingly, the volatility could be both good or bad depending on which side you're on.

For example, it can boost your account significantly or easily wipe you off, just like that (see figures below) when dealing with the scary volatile market of GBP/JPY.

• Zulutrade Hidden Gem: It's Not Perfect Unless It's (Almost) 100%

Before the meltdown, the above two systems (4xMarketTrackers and CurrencyForce) used to have a 100% win record. Eventually, the market/volatility finally caught up with them.

These systems used a fixed 500-pip wide stop but still couldn't escape from their fate ! The GBP/JPY fell more than 1000 pips in less than 72 trading hours in mid March !

I still have confidence in these GBP/JPY signal providers. But it is up to us to protect ourselves in the most unexpected circumstances.

Here are some precaution signs I would use to warn myself about the possible bad trades ahead.

a) Longer than expected trade time. Start checking out the open trades if they are still open after 12 hours.

b) Higher-than-normal standard deviation (StdDev) reading. Note that the StdDev is a measure of price volatility. When the StdDev indicator shows a reading of more than 0.9 (on M30 metatrader chart), reduce the number of open trades in the next 36 hours.