Hopped on the CAD/CHF Downtrend

Good morning forex friends!  This forex trade idea has both fundies and technicals going for it!  Check out how I’m playing the downtrend in CAD/CHF.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

CAD/CHF 4 Hour Forex Chart

CAD/CHF 4 Hour Forex Chart

First, from the fundies point of view, this is based mostly on the weakness we’ve been seeing for a while in Canada.  Most recently, Canadian GDP, retail sales, and foreign investment dipped in January, and we just got a weak Canadian jobs number this past Friday (Net change -7K vs. +15K forecast).  Even the Bank of Canada stated that Q1 2014 growth might not be as good as Q4 2013 at last week’s policy meeting, so even their central bank is a bit worried about the economy.

Technically, on the 4 hour chart above, we can see just a small portion of a longer-term trend lower that started around August 2012 at around .9900.  That’s a 2000 pip grind lower, and I think there’s still some juice left to squeeze outta this trend.  The pair recently retraced, attracting more sellers to now break the previous swing low around .7900.  Since .7900 did break, I decided to jump in short at market with a full weekly ATR stop, and my initial target for where I’ll reassess and adjust is just above the 1.382 Fib extension.  Here’s what I am doing:

Short half position at market (.7880), stop at .8030, initial target at .7630

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2:1 at that first target. If reached, I’ll reassess, trail my stop to reduce risk, and maybe scale into a bigger position if the environment warrants it.

Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • Pip crawler, I hope you dont mind my jumping on here all the time. This is a great trade just lime we were saying before about riding trends.

    Good move.

    I have a question why do you only risk .5% ? I want understand why so small, would you say to make income you would want to be a little more agressive?

  • Pipcrawler

    No problem Casey, glad to have ya around 🙂 I only risk .50% because over time I’ve moved into more of an investing mindset with currency trading. Just taking it slow and practicing for day when I hopefully get to manage a much bigger account. I figure if I ever do get the chance, I wouldn’t be jumping in and out of short-term trades like I used to when using other peoples money. Also, these are unprecedented times, so my framework of fundies and technicals are a bit wonky, so I’m hesitant to go bigger until the market confirms my move and pays me a bit. Why not use the house’s money, right?

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