Welcome to my financial speculation blog, where I provide technical analysis of markets and talk through the trades that I make. Today, I took two shots in the same Forex pair — I liked the pattern and direction, but the first one didn’t work out. Read on to see how these USD/CAD Long trades played out.
When I went through relative strength and weakness this morning, I can’t say that I loved either USD or CAD. USD was making recent highs, and seemed to be threatening to break out, but was failing to do so. CAD was range-bound and looked like it was bouncing off of the highs of the range. When I went through individual charts, though, this was the only one that I liked.
USD/CAD’s chart looked similar to USD’s basket — threatening to break out of a resistance area that held up for a couple of weeks and create new recent highs. If this were to make a strong push up, I wanted to be involved.
Entry 1 – 1.3679
When I got to the chart initially, price had made a strong push up, getting near the highest point of this resistance area, then stalled. It was just a one-candle stall, and it looked to me like price was building momentum before breaking the resistance area.
At the time of setting my entry order, the lows of the stalled movement were above the bodies of the key area I was trading, which looked like a good place for a stop to me. And on the 15 minute chart, a mini base had formed. I zoomed out to the 4 hour chart to find a target, and when I ran the numbers, I had a nearly 2.5 R:R.
Entry – 1.3679
Stop – 1.3665
Target – 1.3713
R:R – 2.4:1
Exit 1 – 1.3665
Price pushed up just enough to trigger my entry into the trade, but made a fairly strong drop from there, taking my stop out within 10 minutes.
Overall, I don’t see any glaring mistakes here. The resistance area I played the break of was fairly significant; and while the pattern on the 1 hour chart wasn’t perfect, it looked really good and was corroborated with the 15 minute chart. At least half of my trades are going to be losers, and I think this was just one of those.
Entry 2 – 1.36821
I looked around at some of the other pairs I had picked out this morning, but still didn’t see any patterns I liked (or high enough R:R’s). I came back to this chart, and price was back up near the highs of the day/that strong key area. This was less pretty, but I could argue a retest here — and with the resistance area being so strong, I think I was more comfortable fudging my rules a little bit. It helped that the close of the candle that took me out was above the level it stopped me out at.
Entry – 1.3682
Stop – 1.3667
Target – 1.3713
R:R – 2.1:1
The next candle opened up and price looked like it was making a mini-base on the 1 hour chart, now, so I put in another entry order. It took about 45 minutes, but eventually price pushed up and triggered me in to the trade.
Exit 2 – 1.36821
After triggering my entry, price made a pretty strong push in my favor. Once it got to about 10 pips of profit, I decided to lock it in and move my stop to break even. I haven’t necessarily been waiting for 1R lately [find my explanation of why to link here] to move my stop to break even, and this trade is another feather in the cap as to why. Price never did hit 1R, it reversed from there and hit my stop, stopping me out at break even. And from there, price just continued down.
I like this trade for two reasons. One, the initial loss didn’t scare me out of taking another stab. I have memories in the past of losing trades and just resolving that I was wrong with that pair. Not even considering the possibility that I got stopped out within the confines of another or longer-term pattern. Here, I recognized that I’m comfortable and confident in my initial analysis and played price action with minimal fear.
The other one is that this was somewhat a range play. I’ve been hesitant to look at currencies that are range-bound in their baskets, as I largely play breakouts. Lately, though, if something is range-bound, I’ve been trying to look at it if it’s coming off of the bottom or top of the range. CAD was doing so (dropping off of the highs of the range), and it ended up being involved in my favorite pair for the day.
Logically, it makes sense, as the baskets and the individual charts vary widely. But I’ve always held off as I’m not a range trader. This, though, shows that maybe it’s not the worst idea, especially if the range is in the basket, not the chart itself. Another day, another trade to learn from.
Thanks for reading! Let me know what you thought of these trades, and if you saw/caught anything different. And stay tuned for more trades and market analysis.