Trade Closed: 2011-06-02 2:30
Looks like the only thing I got from my “multiple time frame analysis” is that I got to see my trade lose in so many time frames! Boo!
Yesterday we saw risk aversion settle over markets as economic data from both the U.K. and the U.S. came in so much worse than expected. Goodness, I heard that the ADP non-farm employment report only revealed an increase of 38,000 in April! That’s just like the employee count of a single corporation…or half of the capacity of Disneyland!
In any case, the strong move caused by risk aversion canceled out the BOC’s hawkishness from early this week and pushed USD/CAD all the way to my stop loss. As a result, my account slipped by a full 1% and I lost an average of 95 pips. Nooooo!!! 🙁
How could I have played this trade better? Are you seeing patterns in my trading that I’m not seeing? Heck, I even tried to stay away from AUD/USD this week just to see if I can repeat my winning USD/CAD trade!
So will you help me? If you have any ideas on how to improve my trading, you can drop a thought or two on the comment box below, or you can talk to me through my @Happy_pip Twitter and Facebook accounts.
Thanks a lot, guys!
Trade Idea: 2011-06-01 2:41
Even better, I’ll give it a slight twist by making use of multiple time frame analysis. You see, as I reviewed my past comdoll trades, I noticed that I sometimes forget to look at longer-term time frames. In other cases, I fail to zoom in to the short-term ones to look for signs that I should jump ship. Well, I’ve learned my lesson. This time around I’m looking at the daily chart AND the one-hour chart!
As salt-n-pipper pointed out in her daily chart analysis, USD/CAD was testing not only a potential resistance at the falling trendline, but it was also consolidating around the major .9800 handle and a 61.8% Fibonacci retracement.
After seeing that the 61.8% Fib held on the daily time frame, I decided to take a look at the 1-hour chart. I saw a breakdown from the consolidation above the .9750 minor psychological level. That’s gotta be a sign that the Loonie bulls are about to charge big time, right?
As tempting as those signals were, I wasn’t ready to dive in just yet. I wanted to wait for a little more confirmation since the pair stalled around the previous week low, and the BOC was just about to announce its interest rate decision. Good thing that turned out in my trade’s favor!
In its statement yesterday, the BOC sounded surprisingly hawkish, saying that it will “eventually” have to raise its interest rates. What’s more, the S&P home prices in the U.S., Chicago PMI, and the CB consumer confidence all surprisingly printed to the downside. I still gotta be careful though, as these reports might come back to haunt the high-yielding Loonie when risk aversion sets in!
For this trade, I figured that the safest way to avoid a fakeout would be to set my sell stop order right below the .9700 major psychological handle.
I was able to jump in the drop right at .9670 with 0.5% risk but I’m still hoping to add another 0.5% if the pair pulls back to .9700. After all, that level is in line with this week’s bottom ATR and the 38.2% Fib. Plus, stochastic seems to be climbing, which means that USD/CAD could retrace before resuming its dive.
So what you think about this trade idea of mine?
Short USD/CAD at .9670, stop loss at .9780, profit target at .9450. Add another short position at .9700, stop loss at .9780, profit target at .9450.
I risked 0.5% on each entry and I’m hoping for a 2.5% gain if both my entries get triggered and USD/CAD drops all the way down to its recent lows at .9450. In case my pending sell order at .9700 doesn’t get hit, I’ll still be in for a 1% win if USD/CAD falls to .9450.