Had to step away from the markets for a bit but now I’m back, this time with a quick review of a trade in AUD/CAD that went well, but could have been MUCH, MUCH better.
Trade Review: Downtrend Momentum In AUD/CAD
Back in August, I made both fundamental and technical arguments to play the downtrend momentum in AUD/CAD. I decided to go with two short order entries, one at market at the time (.9487) and another entry order at .9600. Both were triggered and since then the bears have been in control big time.
I added to my short position as I planned on doing in my last trade update, increasing my position by 25% at .9333 the market held below the break below .9400, a signal that momentum would continue.
But after a short period of consolidation through mid-September, I decided to roll down my stop to .9470, to lock in a little bit of profit in case there was an upside break on a fundamental catalyst. That’s what we got after events had market speculators pricing in Canada being left out of the NAFTA negotiations, which in turn spiked AUD/CAD higher to trigger my position to close at .9470.
Average Short Price: .9505
Close Price: .9470
Total: +35 pips/ +0.20% gain on 0.50% risk
That stop roll down turned out to be a bad move as Canada was eventually included in the new trade deal with the U.S. and Mexico, prompting a strong rally in the Canada, which was likely helped along by the recent strong rally in oil and bearish Aussie sentiment over the trade spat between China and the U.S. The move was pretty powerful as we can see on the 4-hour chart above, enough to hit my adjusted max target at .9150.
So, this turned out to be a big kick in the pants for me, seeing another great move I should’ve caught totally go my way. In hindsight, not rolling down the stop was the profitable move, but with consolidation in price action and NAFTA worries at the time hindering Loonie bulls, it was probably the right move at the time.
Overall, it was a good trade that was played a little too conservatively. I didn’t get to make a huge profit from it, but for those of you trading AUD/CAD short, I hope you were able to catch it!
With an empty book at the moment, I’m spending time getting back into the market groove and hopefully I’ll have some fresh ideas for the watchlist coming up soon. Stay tuned!
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