Paper trade: Stopped USDCAD short @ 1.0540 for +131 pips

Finally a profitable trade in my USDCAD short after being stopped out a few times. My decision last week to hold this for longer after USDCAD touched my target paid off. I moved my stop closer last Thursday evening and the order got filled on Friday. However, as I type this on the following Monday, USDCAD is trading even lower at 1.0478. It looks as though my original target of 1.0415 is in the cards.

Even though this is a profitable trade with a 0.17% gain in my demo account, there is one major flaw with this short USDCAD play. I was not able to squeeze more out of this profitable move.

As I’ve said, this short took a few tries. In fact, if we consider all the entires and exits of this play. My stopped out losses totaled 0.29% and my single win here is merely 0.17%. So I’m actually at a net loss of 0.12% from all these work.

My win/loss rate is about 40% based on my review of recent forex trades. I was able to edge out more than 10% profit in four months because when I am wrong, I take small steps. But when I’m right, I pile into a position.

Ever since my trading environment has changed, I’ve been trying to trade a longer timeframe. This USDCAD short is my first attempt on a new strategy. Evidently, I will need to re-think and re-learn what I’ve become accustomed to in the past few months.

One of the necessary trait of a successful trader is to be able to adapt. Markets change. Traders need to evolve with the markets or they will become obsolete. This will be a good test of myself to see if I can re-invent myself to adapt to a changing trading environment.

USDCAD, 3-hour

USDCAD short target hit @ 1.0581, trying something new–to hold for longer

USDCAD comes to a halt at 1.0581 today. My original target was 1.05761. A mere 5 pips difference. This position is now +79 pips on paper. I moved my stop to breakeven last night. Normally, I would have covered most, if not all, of the position at this point. But I’ll hold onto the full amount this time. For now. Reasons are as follow.

Paper trade: Short USDCAD @ 1.0671, Stop 1.0756, Target 1.05761

Perhaps third times’ the charm? I tried to short USDCAD twice last week already. Both times I’ve been stopped out for a total of -0.2% of account loss. My intermediate term analysis remains the same as before. So I won’t repeat myself here.

Entry signal for this particular short is shown in Figure 1. I’m just using the 4-hour chart as I have a well defined (recent top) stop this time. I compensate with a smaller position size to limit my risk to 0.1%.

Reward / Risk = (1.05761 – 1.0671) / (1.0671 – 1.0756) = 1.11

USD/CAD, 4-hour

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