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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.

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

Original Forex Trade Idea: Forex Retracement Play on USD/CAD?

USD/CAD 1 Hour Forex Chart
USD/CAD 1 Hour Forex Chart

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

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.

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.

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!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.