We’ve got a big and uncertain event just ahead for the Canadian dollar, which means I’d better make some moves to protect my long position in USD/CAD.
Adjustment: Uptrend Momentum In USD/CAD
It took a little while but it looks like I got the pullback in USD/CAD I was hoping for. After topping out just under the 1.3400 handle, the pair has made a pullback to the broken resistance level and rising ‘lows’ area around 1.3100. My long orders were triggered there, putting me in the pair with 0.50% risk.
Now we’ve got the Bank of Canada monetary policy meeting tomorrow, and with a potential “dovish hike” in the works, I’m not sure what we’re going to see in the Loonie. On one hand, a hike usually brings the bulls out on a currency, but it Poloz is gonna give off some negative vibes on the housing market and trade developments with the U.S.
Fundamentally, I still like this pair long, but I decided to reduce my risk ahead of this event and structure a trade that could take advantage of a deeper pullback. With the pair just above my entry I decided to close half my position. With half of my position gone, I expanded my stop just a bit (usually a no-no) but my risk is actually less than before now. And I’ve entered another buy order on a pullback if I see one. Here’s what I’m doing:
Closed half position at 1.3121
Added buy order at 1.2900 to put back original half
Stop loss set to 1.2850
Max target is still 1.3700
My risk on the first half is now 0.32% and on the new order it is 0.06% for a total risk of 0.38%.
My max reward if both positions are put on is about 1.79% for a return-on-risk of about 4.71:1
If I don’t get triggered on my second position, I still have the original working in case the pair goes higher so I’m covered there in case it’s a bullish day for the pair. Of course, I’ll keep my eyes glued to the event and if there is another adjustment to be made, I’ll be sure to update on my blog!
Stay tuned and as always, 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 simply follow what I do.
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.