When the market is trending, it is better for traders to understand when the market trend is changing, rather than trying to pick a top or bottom depending on which direction the market is going.
For the GBP/JPY pair, it has been in an uptrend for the past seven months or so. The price has also been (comfortably) above its 100-day moving average since January.
Yes….the market is overbought but trends are fast, directional and tend to go further than traders expect. Anyone who sold GBPJPY in 2024 did not do well.
For traders looking for a top, it is not wise to try to pick the top, but rather to try to see where the bias turns from bullish to bearish in the shorter term.
In this video, I look specifically at the hourly chart. Back in mid-June, the price was trending higher, and in the process, it was interacting with the 100- and 200-day moving averages. Today, the price has bounced lower off the 100-day moving average on three separate occasions (see the blue line on the chart below).
Needless to say, it takes a move below the 100-day moving average – and staying below it – to increase the downside bias going forward. Absent that, the trend is your friend. Buyers win. Sellers don’t.
Be aware. Be prepared. This video prepares both buyers and sellers for what could turn a GBP/JPY bullish trend into a bearish one – even if it is in the short term. When trading trends, you can try to pick a high, a high, a high (and fail with the market trend), or you can let price action and technical indicators tell you when the bias is turning and the trend is slowing down and set to go lower. GBP/JPY paints the technical picture clearly.