Paper trade: Stopped out of USDCAD short @ 1.0640 for -67 pips, re-entering @ 1.0680

Well this was awful. USDCAD continued on a rampage upward and I was caught on the wrong side of the fence. Total loss for this was 0.12% of my account. At least I was light in it.

In retrospect, I broke my own rule and didn’t enter at one of the 4 fundamental entry points.

However, after some bear rampage throughout the markets today (Bloomberg: Stocks Plunge on Concern Rising Debt, Job Losses Threaten Global Recovery), USDCAD is at the top of my channel as shown in Figure 1 below. So while my previous entry was early. USDCAD at this price is a good short.

I will take it slow this time by setting a limit order below current support on the 4-hour at 1.0680, with a stop at 1.0750. And then adding a second chunk at 1.0640, my stopped out price. As is customarily lately, I am only risking 0.1% of my account on the initial order.

On a weekly chart, 1.0750 to 1.0810 is obviously a strong resistance for the USDCAD. It is a congestion zone in 2007 and 2008. Then USDCAD spent the last quarter of 2009 trying to break this resistance to no avail. But who knows, perhaps USDCAD has had enough and it will break this resistance decisively soon.

That’s why I’m only betting on this reversal with limited risk. It’s just a matter of wait and see now.

USDCAD, 4-hour

Paper trade: Short USD/CAD @ 1.0573, Stop 1.0640, Target 1.0415

Taking a first position in USD/CAD short here at 1.0573 on a 4-hour moving averages cross-over (Figure 1). I’ve also placed a limit order to add more at 1.0519 below Fibonacci support (shown in Figure 1). Reason for this trade is that USD/CAD is moving away from an upper bound channel with a overbought stochastic reading, as shown in the daily chart of Figure 2. I’ve also considered going long AUD/USD, but AUD/CAD trend remains bearish. So I chose to short USD/CAD instead.

Secondly, crude oil (and gold too) looks to be bouncing off an oversold level with a rapid move in 2 days from 72.43 to 77.39. Coincidentally, INO.com posted an intermediate term cyclical analysis video with a bullish outlook (affiliate link). They put out a better case than I do.

USD/CAD might make a short-term upward bounce here because of a short-term oversold condition. However, there’s evidently a lack of buyers in the past few hours (Fig. 1). The price has been sitting on support a bit too long in my view. Thus, I’m expecting it to break without a meaningful retracement (hence the short entry). A confirmation would be a break below 1.0530. Thus I have a limit order to short more below that price.

I am risking 0.1% of my account on this trade.

As you may have noticed, these charts are from Metatrader. I’m switching over to the MT4 platform as of today. Having played with its charting features for the past few hours, I’m quite satisfied with it so far. Although my needs are low as I was fine with the Oanda platform too (arguably the most simplistic platform out there).

USD/CAD, 4-hour

USD/CAD, daily

Paper trade: GBPJPY @ 145.24, Stop 144.70, Target 148

Update: I’ve switched over to long EURJPY @ 125.40 as EURGBP’s downtrend seem to be running out of steam. Moreover, EURJPY looks better on the daily chart with a clear support and an oversold reading.

I’m back in my long GBPJPY play at 145.24. The currency pair is breaking an hourly resistance since consolidating around 145. I had a low ball offer at 144.20 since taking my profit last night at 146.42. But that bid for never filled. So I’m re-entering on a short-term breakout. For this entry, I am risking 0.1% of my account.

This re-entry is a tough decision. Almost all the respectable pros that I follow on Twitter are on the other side of this trade via other currency pairs. However, my long setup is valid as long as GBPJPY is above 144 level. So I’ll take this trade until proven otherwise. Although I must admit that my confidence in this trade is very low.

I also considered long CADJPY instead as it seems to offer more upside potential. However, as I’ve been following the GBPJPY pair this week, I’ll stick with my plan.

I also have a limit order to add more at 145.81 as you can see in Figure 1 below.

GBP/JPY, 3-hour

Paper trade: Closed GBPJPY @ 146.42 for +140 pips

Just closed my GBPJPY long at 146.42 for around +140 pips average gain, or 0.4% in the account balance. Damn good for a 24 hours holding. Obama just finished his State of The Union address at the moment. I am not impressed. Still all talk of change but nothing concrete yet. Anyway, that’s beside the point in this trade log.

146.50 price level for GBPJPY is the 10 day moving average. It has also been a strong support back in late December. This should be a good resistance level. My guess is that GBPJPY should stall, or even retrace, here for a while. Thus I’m taking profit at this price as shown in Figure 1 (yellow triangle).

I still believe my bullish setup from yesterday is still good. So I’ll be watching this pair for a re-entry.

Update: I re-entered at 145.24 the next day.

GBPJPY, 3-hour

Paper Trade: Long GBPJPY @ 144.24, Stop 143.60, Target 148

My previous short-side setup on GBP/JPY played out beautifully. Yet I wasn’t able to ride it down because I got stopped out on a stop-hunt counter-move before the dive, see Fig. 1. Now that GBP/JPY has reached its other end. I am betting for it to go reverse with a long position. I expect this move to be more fierce with more upside potential as it’s in the direction of the long term up trend. Some people are calling the top has been printed in the markets and the wind is now blowing the other way. I am not one to guess what the market is about to do. So it’s business as usual until the trendline is broken.

What I really like about this setup is that GBP/JPY is testing a double trendline cross on the weekly, Fig. 2. Secondly, the 3-hour chart of Figure 1 is showing a RSI positive divergence on this test of the long term support. I am quite confident of this setup. However, I am not confident about the timing as GBP/JPY is known to be a wild horse and volatility could very well stop me out, like last time.

With British preliminary GDP number coming out in about 6 hours, it might have been wiser to wait until the after that to enter. On top of that, the markets have been on a stall for the last few days waiting for data in the next 48 hours. End-of-week volatility this week is expected to be significant.

Anyway, I’ve put in a position already and will just let it run. This a small initial position with 0.1% of my account at risk. I have also placed limit orders above resistances to add to this position. We’ll how this turns out soon enough.

Lastly, even though I said I’ve been cut off from trading at my day job. It doesn’t mean I’m completely out of the game. I just have to adapt my manual trading strategy while my automated system is still in development. Basically meaning that I’ll trade with a slower timeframe for longer-term moves. All the better, as longer term moves are generally less deceptive.

Update: I closed this at 146.42 for +140 pips gain the next day.

GBP/JPY, 3-hour

GBP/JPY, weekly