After getting whacked lower thanks to the latest Fed meeting, I decided to lock in some profits on my USD/CAD short.
Top of Range to Hold on USD/CAD?
Back at the end of November, I combined the themes of rising global trade optimism, the BOC unlikely to cut rates, and the strong resistance area to short USD/CAD at market (1.3270) with 1.00% max risk. And so far, that trade has worked out well, especially today after the Fed signals that rate hikes will not likely come until we see a persistent rise in inflation, a situation that doesn’t seem to be likely any time soon. This brought the market down quickly from around 1.3233 to finding support around 1.3160 at the moment.
It’s a solid gain but no where near my max profit target, but with a heavy calendar ahead to close out the rest of the month for both the U.S. and Canada, I decided to lock in some profits. My thought is that with volatility dropping and trades taking longer to play out than ever before, it’s probably a good idea to lock in something before a surprise news story shifts sentiment. With that thought I closed half position manually at market (1.3172). Rolled stop lower to 1.3360.
This basically drops my risk down from a max 1.00% of my account originally to approximately 0.03%. Of course, this adjustment also reduces my max gain at my target (1.3055) from +1.34% to +0.98%, but the trade off is that I basically have a near risk-free trade and with wiggle room in case USD/CAD bulls take back control again.
I also have the option of adding back to this trade in either case of a move higher or lower, so the potential gain can always increase. And with a profit of +0.31% locked in and the ability to roll my stops further, my max loss will be very limited even with a bigger position.
That’s it for now, so I’ll just sit back and wait to see what the slew of upcoming U.S. & Canadian economic data gives me, as well as the U.S.-China trade updates, including this weekend’s potential rise or delay in China tariffs.
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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