Shorting USD/CAD for a Day Trade – Stopped Out

Trade Update: 2012-08-29 10:12

Not again! I chalked up another loss as I got stopped out on this short USD/CAD day trade of mine. As you can see from the chart below, price broke above the falling trend line on the 1-hour chart and reached my stop at .9920.

USD/CAD Stopped Out

I probably should’ve moved my stop to my .9880 entry when I saw that the trend line was holding for a bit. That way, when the pair suddenly rallied later on, I could’ve gotten out at breakeven.

Thank goodness I only risked 0.5% of my account on this short-term trade. Here’s the damage:

P/L: -40 pips / -0.5%

Maybe I should’ve simply stayed on the sidelines since it seemed that dollar pairs have been acting a little cray-cray these days, with all the fuss about the Beige Book, Bernanke’s Jackson Hole speech, and speculations of QE3 for the next FOMC meeting.

What else do you think went wrong with this trade? I could really use your feedback on this one! Thanks!

Trade Update: 2012-08-29 10:12

I’m in! Just after I posted my trade I had a gut feeling that USD/CAD will find it hard to reach the hard .9900 level that I was aiming for. And since the best traders pay attention to their gut feelings (which is different from impulse, by the way), I decided to put a sell stop order at .9880 in case the pair doesn’t hit .9900 and goes down without me.

Unfortunately for me, the pair went to trigger my sell stop order before high-yielding currencies spiked down across the board and USD/CAD just touched .9900. Imagine what I felt when I saw the chart! It’s like spotting the perfect pair of shoes only to find out that they don’t have a smaller size. Settling for another pair of shoes is not the best feeling, I tell ya.

Good thing that price is going my way! Not a bad trade, eh? I’m keeping my fingers crossed that it reaches my original profit target!

What do you think of my plan? Should I take profit now, or wait for a few more hours? Oh, and who here has ever tried to use sell stop orders? Care to share?

Hope you’re having a good time trading!

Trade Idea: 2012-08-29 2:30

Thanks to the success of my latest AUD/USD day trade, I’m taking another short-term setup. This time, I’m trading USD/CAD because I’m diggin’ how the signals line up on its 1-hour time frame.

As you can see, there’s a falling trend line connecting the pair’s recent highs, suggesting that the pair is in a downtrend. After the pair found support at bottom WATR, it seems to be retracing towards the .9900 area, which could act as resistance. You see, that level is right in line with the trend line and week open price, and it’s also around the 61.8% Fib level!

USD/CAD Day Trade Idea

To top that all off, there’s a pretty good bearish divergence forming with Stochastic making higher highs. I decided to be a tad more careful though, as I plan to jump in only when Stochastic starts to cross down from the overbought region.

As for fundamentals, I’m betting on U.S. dollar weakness, at least for the days leading up to the Jackson Hole Summit. After all, the most recent FOMC meeting minutes revealed that the Fed is mulling further easing since U.S. data hasn’t been on the up and up lately. This was confirmed by the weaker than expected U.S. CB consumer confidence figure released yesterday, which triggered a sharp dollar selloff.

I’m inclined to think that the Fed’s Beige Book will more or less show signs of bleak activity in the U.S. economy, which could fuel QE3 speculations again. Since the U.S. dollar is moving to the tune of fundamentals these days, a downbeat Beige Book report could send USD/CAD back south.

I’ll be aiming for the bottom WATR, which is in line with the previous week low and the .9850 minor psychological support, as target for this day trade. I’ll set a tight stop above the week open price and falling trend line.

Here are the details:

Short USD/CAD at the 61.8% Fib area or .9900 once stochastic crosses down, stop loss at .9930, pt at .9850. I’ll be risking only 0.5% on this short-term play and if you plan to join me, make sure you look at our risk disclosure first!

Depending on my entry price, I could be looking at a potential 2:1 reward-to-risk on this trade. Do you think I’ll be able to bag another win this week? You know where to reach me!

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Have fun and good luck trading this week, friends!

Happy time

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AUD/USD trade What is the STA strategy? Q2 2012 in Review Comdoll Trading Kit (August 13-17, 2012)

  • Baseballman

    I agree – am in on recent bounce at a tad over 9882. Good luck to us both!

    • happypip

      Are you still in this trade?

  • Jamessheppard

    Nice trade Happypip! I have been to busy to trade the last week or so. Trying to catch up on the charts a bit today. I see the Jackson Hole event starts on thursday and continues into the weekend. I am not that fimilar with this summit so are there usually any major annoucments before the weekend from it?

    • happypip

      Well there were times when Bernanke dropped some huge announcements during his Jackson Hole speeches in the past, but I’m not sure if that’d be the same case this time. Regardless, I’m still keeping close tabs on this event because I know that many market participants are anxious to find out if Bernanke will disappoint or not.

  • Baseballman

    Regarding sell stops… I (almost) always use a sell stop to enter shorts (especially trading EUR/USD) as I find it keeps my emotions in check. Sometimes it works better than others but it usually helps me to keep thinking straight!

    • happypip

      I agree! Sometimes I find sell stops easier to use when I just want to go with the flow and let the market dictate the direction instead of anticipating. I tend to get faked out sometimes though, and I hope this isn’t the case this time!

  • RB

    I was able to snag a long at .9871. Originally I had set a TP at the .9900 area… but the slow steady move up has me more hesitant to cut it here (and go short). My trendline broke on the hourly after the short consolidation at .9890-95. Wondering if I should let it run??

    • happypip

      It looks like it hit your PT already! Were you able to catch those pips?

      • RB

        Well I would love to have milked a for more pips. But after a few tries at the .9920 resistance, I’m out at .9910. I would like to go short here, but I am a little wary of the whipsaw coming tonight/tomorrow.

  • gabymour

    Trading short before Jackson hole is Very risky in my opinion. If no QE is sensed, which is the most probable, the USDCAD may shoot up and screw your trade. If a QE is sensed (less likely) the USDCAD goes down and may reach 0.9830s (a guess). But beware of volatily when the speech is given since it may shoot counter the final direction since some big players will profit from the chaos to confuse the market and make lots of money and lots of headless chikens embarque in trade with their emotions!

    • happypip

      Thanks for your insights! I’ll be sure to exit this trade prior to Bernanke’s Jackson Hole speech though, in order to avoid event risk.

  • Gorodn

    Looks like it is in an ending triangle of a corrective upsloping triangle. It has also just exited from a bullish butterfly pattern and also exited aa Andrews pitchfork during its 4th wave move.. So a short looks good, targetting0-97490
    good luck

    • happypip

      Unfortunately it didn’t turn out as well as I had hoped. Time to bounce back, yes? Got any ideas for this week?

  • casle… never move a stop….. once the decision is took .. go with it… if lost. then take a little brake. and then come back..

    • happypip

      All right, I’ll keep that in mind next time. Just wanted to minimize my losses on this one but it didn’t work out 🙁

  • Atheis Mei

    you shoul wait & executer your master plan

  • zmolokoz

    The fundamentals were edging slightly towards risk off group, there were other pairs that were showing those signs halfway through this trade too. Nonetheless, it’s a valid entry, was attracted by your trade idea and was observing the movements. Dont be disheartened! =)

    • happypip

      Thanks for those kind words, I really appreciate ’em! You’re right, I should’ve paid closer attention when the fundamental factors changed midway. I’ll keep that in mind next time!

  • ChartWatcher

    Trading is about probabilities and you did the right thing shorting USDCAD at 0.9880. However things don’t always go according to plan and we have to be prepared if the technical picture changes.

    The first warning of a reversal of the downtrend is the appearance of the candlestick doji. It is confirmed by a long bullish candlestick the next session. The final bullish signal came when the price broke out of the downward trendline and then taking out the previous high.

    Don’t give up. Just remember that when the initial reasons for the short position is no longer valid, the position should be closed as soon as possible.

    • happypip

      Thanks for the kind feedback! I should keep closer watch on my open positions next time to see if it’s still valid or not. Hopefully I can do better this week!