Short USD/CAD: Riding the Downtrend – Trade Closed

Trade Closed: 2011-08-02
Yikes, “Goodbye Downtrend Pattern” indeed! USD/CAD not only broke the descending channel pattern on the 4-hour chart, it also managed to reach the .9600 area yesterday! Apparently, the economic reports from both Canada and the U.S. last Friday were just too strong for the pattern to contain.

Last Friday we all saw how the U.S. GDP came in at a depressing 1.3% in the second quarter while the first quarter figure was also revised down. Unfortunately for the Loonie bulls, Canada’s GDP also surprised to the downside, coming in with a 0.3% slide in May, the lowest in TWO YEARS. As a result, USD/CAD shot up sharply at the release of the reports.

USD/CAD Descending Channel...not

Good thing I was able to close my trade early! I was around at the time, so I immediately closed my trade as planned when I saw the poor data. I ended up with another loss this time, but I was also able to follow my trading plan.

But now I’m wondering… How could I have played this trade better? I know tons of my friends have been warning me about the downtrend being overdone, but how could I have followed my trade plan AND minimized my losses at the same time?

Do you guys have any ideas? I’ll appreciate all of them no matter how deep or trivial. I’m sure I could use it! Just give me a holler on one of those boxes below, or on my Twitter and Facebook pages. Heck, you can even visit me on one of my Comdoll Corners!

Thanks a lot for your support!

Happy time

Trade Idea: 2011-07-28
Happy Thursday, guys!

Earlier today, I checked out Big Pippin’s daily chart art and saw his take on USD/CAD. I was already keeping a close eye on the potential bearish divergence on the pair’s 4-hour chart but I found even more confirmation to short when Big Pippin pointed out that a descending channel was forming. Aside from that, the top of the channel coincided with the .9500 major psychological handle. Now that could act as strong resistance right there!

In terms of my trade statistics, I think I’ve been doing much better with USD/CAD than AUD/USD so I decided to just go for it. I shorted at market around .9490 when price broke below the Asian session box on the 15-minute chart.

USD/CAD Descending Channel

I have a good feeling that the U.S. dollar selloff could carry on for the next few days, after we saw a slight pullback yesterday. Word through the forex grapevine is that U.S. lawmakers are still bickering over which deficit reduction plan should be passed and that President Obama himself isn’t pleased with all this.

Now that the August 2 deadline is just a few days away, traders could be preparing themselves for the worst case scenario. From what I read in Forex Gump’s article about the possible impact of the debt talks on the U.S. dollar, the markets could be in for a huge dollar drop if no deal whatsoever is reached.

The Canadian dollar seems to be a good strong counterpart for the weakening U.S. dollar since the Bank of Canada has been relatively hawkish lately. In their latest monetary policy statement, central bank head Mark Carney pointed out that they are likely to raise interest rates soon. If that isn’t enough to provide support for the Loonie, I don’t know what will!

When I checked the economic calendar, I realized that Canada also has an event catalyst for tomorrow. They will be releasing their monthly GDP reading for May and the consensus is a 0.1% uptick. A higher than expected reading could give the Loonie the boost it needs to take USD/CAD to its former lows around .9410 or even break below the .9400 handle. Of course I’ll close my trade early if the actual figure comes in below consensus or if we hear of any progress on the U.S. debt talks.

Here’s my recipe for success:

Short USD/CAD at market (.9487), stop loss at .9560, profit target at .9410. I risked 0.5% of my account on this trade and I’ll be moving my stop to my entry once price reaches my first target. I’ll also be closing half my position at this point.

Wish me luck!

If you have any other comdoll trade ideas, don’t hesitate to give me a holler through my Twitter or Facebook account. You might also want to join in the discussion with my BFFs in my Comdoll Corners in the forums. See y’all there, I hope!

Happy time

  • Nbhat

    yeah i didn’t take the trade as there was no follow through

    its important to combine divergence with a follow through signal.

  • Jennifer Kok

    Hey what is your thoughts on keeping the money in the trading platform? Why if USD became zero value? Is this not possible?

  • Big Cheese

    Hi Happy-Pip,
     
    This is my first post, sooo Im officially out of my shell  :)  I trade on 15min charts myself, Im currently long on the “aussie” so Im expecting the “loonie” to drop, but just be alert, theres gonna be strong support around 0.9468-65 as the daily pivot, 200MA and 400MA all coincide.  I’d put my stop to break even when price is at this level if I were in this trade  :)
     
    Take care, I wish you all the best.

  • സലീം (Salim)

    Best of luck, I am a newby. I want a strategy to trade in forex. Since some weeks before I am checking your trades. And trade in demo account with your setup.   

    Hope You can make pips along with me :P                                               

  • Anirudhs1985

    Gud luck, Happy. May u book profit and do a happy dance for the Loonie

    Ani

  • Nbhat

    at the moment staying tight at 95, needs some momentum to get it to break. sometimes you need to stay patient. its a bet after all

    • Big Cheese

      Hi Nih,

      I dont think its gonna head south any more m8, I broke even on my aussie trade this morning, im now shorting aussie @ 1.1040  :)  I suggest you reverse your trade to long on the canadian :)  The best area to buy was around the 0.9468-65 region, which I said earlier.

      Take care.

  • Stephen Oatley

    Set a stop about 20 pips above the trend line and at least 10 pips above the res/sup line. I tend to keep clear of GDP announcements 

  • nih

    yes, you have sound strategy, and two key technical reasons to short- downtrend channel, and bearish divergence. fundamental reason USD is well known and will continue to play out.

  • Bryon

    Hi Happy Pip,
    I am learning Forex but have done stocks and futures for years. I have two things to share about your trade. First, I think the writing is on the wall for a multi-month bounce for the dollar. Just look at the white candles forming with stochastics turning up on a monthly chart. That means also the Euro should be going down for several months. There will be plenty of corrections, but the major trend should hold on the monthly chart. So looking to go on the long side of the dollar will get the odds in one’s favor somewhat. Secondly, I would have my stop loss just above the top of the red 4-hour candle that was near your short. I think .9560 is risking too much. If the market fakes you out with a whipsaw and shows bearishness again, you can always short again later. My stop would have been nearer to .9505 or .9510.With a tighter stoploss you can take a larger position to try to profit more. Having a stop loss too far out is not really necessary because a good trade should not go against you very much.

    Not good luck. Good skill. Bryon

  • Fecri Irsat

    nahhh I don’t think it is a good idea to take this again to the down side. I have a 4 hr down wedge formed on my chart and the price did break that wedge and it might carry to higher price levels.

  • Newguy

    Battle of the timeframes?  Hopefully the longer timeframe wins!  Great looking stop.  Good luck!

  • Foricks

    I hate to be negative, Doll, but I hope you are not last to the party on this trade.  While I do see the stochastic cooperating with you, it has been a long ride down.  One glimmer of hope from Washington could cancel this trade in a hurry.  I like your stops and TP’s.  Good Luck.

    • Dean FX Paul

      I just can’t help thinking they’ll pull a rabbit out of a hat any minute now, and everything will be roses again..