No luck on getting in USD/CAD short at a better price, so I’m adjusting my entry strategy to get in as I’m still pretty confident in the downtrend.
Entry Adjustment: Channel Break Lower in USD/CAD?
On Tuesday, I was looking to short USD/CAD on a bounce after the pair broke lower from a rising channel to play the bigger theme of potential Fed rate cuts ahead vs. rising oil prices and the lower probability of rate cuts ahead from the Bank of Canada. Unfortunately for me, the bounce never materialized, which of course means no short trade for me as the pair moves lower.
As mentioned above, I still have a pretty high conviction in this idea, and given that the channel break seems to be drawing in sellers, I think the odds are low that this is a fakeout. Now, I actually wanna go bigger on this trade, going from a swing trade to a longer-term position. So, I’m going to scale in from the current levels up to below the broken channel, my stop will be a full weekly ATR from my higher sell orders, and my target will be the major support area last seen at the beginning of 2018, which is roughly 3x the weekly ATR. Here’s what I’m doing:
Cancelled orders to short USD/CAD at 1.3250
Shorted half position USD/CAD at market (1.3100), max stop at 1.3370, max target at 1.2500
Short half position USD/CAD at 1.3200, max stop at 1.3370, max target at 1.2500
If both positions are triggered, I’ll be risking only 1.00% of my account to start, and my max potential return-on-risk is 3:1. I’ll look to add further to the position or adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on the latest data and geopolitical developments, which should come quickly as we head into the G20 meetings and a brand new month of economic updates.
Stay tuned for updates 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.
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