With the technical picture changing, I decided to close my NZD/CAD trade long position as the uptrend shifts into consolidation. Here’s a quick forex review.
Original Trade Idea: Short-term Long on NZD/CAD
On the 1-hour chart above, we can see the market getting to both of my long entry orders and then spiking higher, most likely on the recent drop in commodities prices, specifically oil. Unfortunately for NZD/CAD bulls, that major resistance around .8680 held like a champ, and the sellers took back control on broad NZD weakness this week (ANZ reported 11.2% drop in commodity prices in June dragged the Kiwi down).
The picture on NZD/CAD has turned from a short-term rally higher into a consolidation pattern, and with commodity currencies likely to fight for the top ‘loser’ position in the short-term, I think the ranging pattern will likely continue. With that, I decided to close down my long position manually at .8605.
1st quarter position: -45 pips
2nd quarter position: +55 pips
Total: +5 pips avg./ +0.08% gain
Thanks to a bigger position at my lower entry order, I managed to scrape a tiny profit, which highlights one of the pros of scaling into positions. But looking back, I think this was a trade that actually could have turned out well had I recognized the resistance area sooner and closed out the trade there. Since I think I’ll continue to trade with this type of risk management (scaling into multiple, small positions), I think I will take profits quicker–at least for the rest of the less volatile Summer months.