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Trade Closed: 2011-02-15 4:03

USD/CAD closed trade

My, oh my! Imagine my surprise when I came back home from a night out with my home girls and found out that USD/CAD dropped like a rock! Thank goodness for my trailing stops because my trade got closed at breakeven.

Still, I’m hugely frustrated knowing that I was up by more than 1% on this trade before my gains were completely wiped out. I looked back on the economic schedule that day and realized that it was because of the strong Canadian trade balance data that the Loonie rallied. Had I spent my Friday night on a date with my trading platform then, I would’ve been able to close my trade early (and probably end up with a decent profit) on that upbeat report.

So what did I learn from this trade?

I guess that goes to show that I shouldn’t just focus on catching a nice entry price then forget about the trade while it’s open. Since I plan to hold on to my trades for days, I should keep track of the upcoming releases and the fresh-off-the-press data to see whether the price will continue to head my way or not.

On top of that, I should also check for technical signals pointing towards an early exit. Check out the longer-term falling trend line on USD/CAD for instance. I noticed this on a previous USD/CAD trade and used it as an entry point but I should’ve kept watching out for that resistance level. See how price bumped that area a couple of times? I could’ve locked in my winnings then!

Adding up may not have worked so nicely for me on this trade since my loss on my second position erased my gains from my first one. Still, I breathed a sigh of relief knowing that I calculated my risk such that the worst case scenario was a breakeven trade. Also, I’ll keep in mind how trailing stops saved me from suffering losses on this one so I’ll use them again in my next trades.

Here’s how it panned out:

P/L: 0 pips / 0%

Added Position: 2011-02-11 2:10

USD/CAD added position

USD/CAD is rockin’ its way to parity, and I’m hitching along for the ride! For the past couple of days Canada has been giving off bad vibes in markets by printing worse-than-expected reports. Its new housing prices, for example, only grew by 0.1% in December after rising by 0.3% in November.

And we can’t forget the political and economic threats from all over the world! I hear that news about the Saudi Arabian King’s death and the non-resignation of Egypt’s President Mumbarak has been scaring off my risk-loving friends, which isn’t exactly good news to the high-yielding comdolls since Australia, a major commodity-related economy, has also been printing red figures lately.

Meanwhile, the dollar has recently been the sweetest apple in the eyes of markets after the U.S. showed a healthier initial jobless claims report last Thursday. The data came in with only 383,000 claims, which is fewer than last week’s 419,000. Looks like the Fed officials will sleep a little bit better this week!

Anyway, I decided to twirl my way into a possible USD/CAD rally by doubling up my trades. I zoomed in on the 1-hour chart and I spotted a possible retracement entry at .9965, which is near the 50% Fib support and the minor psychological level. Oh, and Stochastic is almost oversold too!

For my additional position I put my trailing stop 100 pips from yesterday’s high at .9890 because that’s where my first trailing stop is, and I risked another 0.5% of my account since I’ve already made 0.5% on the first one. Fingers crossed for my risk-free trade… The party’s at parity!

Trade Update: 2011-02-08 2:56

USD/CAD update

Oh yeah! USD/CAD got its party started! I decided to enter the long trade just after the release of labor reports from Canada and the U.S. Even though Canada‘s employment change report beat expectations and printed a 69,200 increase in hiring, it wasn’t enough to keep the unemployment rate from climbing a couple of notches from 7.6% to 7.8%.

Meanwhile, the U.S. NFP figure came in slightly below consensus (but still positive!) but its unemployment rate improved from 9.4% to 9.0%. Analysts said that this was mostly due to a drop in labor force participation, but it seemed like U.S. dollar bulls were movin’ and groovin’ to the upbeat headline figures.

As I mentioned in my trade plan, I was waiting to enter at .9850 but I got filled at .9860 because spreads widened during the release of the data. All that price action during the NFP release was way wilder than the spring break beach parties I’ve been to!

However, it looks like the pair is having difficulty moving past resistance at .9900, and with the Canadian housing starts slated to post positive results, I’m thinking if I should close my trade… or not. Then again, if the building permits data failed to hit the mark, the housing starts figure could fall short too. Hmm, decisions decisions….

Trade Idea: 2011-02-03 2:10

USD/CAD 4-hour Chart

Since Canada released a strong GDP report early this week, the Loonie has been pounding the dollar like it was a meat slab that needed to be tenderized. But while tender meat could later on become a juicy steak soaked in red wine sauce, the dollar bulls are not in the mood to feast against the Loonie right now.

For one, all the bad vibes in Egypt are pushing oil prices higher, which, as you know, is good for the oil-related Loonie. I guess that provides the Canadian dollar extra protection against risk aversion.

Also, investors are still tossing coins over the U.S. economy. You see, while recent PMI and consumer sentiment reports have been surprising markets to the upside, attention is still on one of the biggest (if not the biggest) problem of the U.S. economy – jobs. Yesterday’s ADP report highlighted the Fed‘s statements that recovery in the labor market could take longer than aging Parmesan cheese.

But why, oh why can’t I resist that USD/CAD support?! In my 4-hour chart I saw a potential support at the .9850 handle, as well as an oversold Stochastic signal. It’s also near the bottom of the average daily range, so the setup is looking more delectable than a strawberry chocolate tart! If I do decide to give in to temptation, I’ll probably put a 100-pip stop loss on it, set my first PT at 1.0000, and trail the second position.

It all comes down to this Friday’s showdown though. Canada will be releasing its employment figures tomorrow, and the big NFP report from the U.S. will follow a few minutes later. My anti-dollar fundamental analysis is the only thing keeping me from pushing that BUY button, so I hope the NFP figures surprise to the upside!

If the fundies go my way, here’s my recipe for a win:

Long USD/CAD at .9850, stop loss at .9750, PT1 at 1.0000, and then trail the second position. As always, I’ll be risking 1% of my account on this trade if the signals all line up.

What do you think? Should I take this one? Vote on the poll below or share your thoughts on the comment box!

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