Since my I posted my forex trade idea on USD/CAD, it only moved higher through the holidays without a pullback. Here’s an entry and position adjustment to try to play my long bias.
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Original Forex Trade Idea: Forex Retracement Play on USD/CAD?
With oil still dropping (broke below $50/barrel today) and the general market outlook still bullish for the U.S. dollar, I’m still long biased on USD/CAD but a little more cautious at these levels. We’ve also got the U.S. and Canadian jobs data coming up at the end of the week, which means volatility can kick up a notch and move in undesirable directions if we see the data surprise in favor of a bearish move. Given the upcoming events and the Greenback rally looking a little long in the tooth, I’m going with an entry on a pullback with a smaller position, and a wide stop to weather the potential spike in volatility. Here’s what I’m doing:
Cancelled long orders to enter full position long at 1.1500.
Long half position USD/CAD at 1.1650, max stop at 1.1450, initial target at 1.2000
With this entry adjustment, I’m only risking 0.50% of my account and with this trade structure, I have a potential reward-to-risk ratio of about 1.75:1. But this is just a nibble trade and if it does go my way, I definitely look to add to a winning position and trail my stop to maximize my gain and reduce my risk.