A great end to a good week.

The month of February is now over and we are heading into the final stretch of Q1 2019 which is crazy! February was one of my best trading months in all of my time trading the financial markets with a large number of intraday and swing trade opportunities appearing towards the end of January and the first week of this month. I have documented my individual trades in a journal which you can find on my downloads page here.

Anyway, I am writing this post to reflect on my final trade of the week which is now currently residing in my portfolio as an open position. I did mention that the USD/CAD FX Currency pair was on my watchlist but unfortunately (or fortunately depending on how you look at it), the perfect entry set up appeared on the morning of Friday 1st March. I will talk you through why this Currency was on my radar and what I was looking for to enter.

USDCAD Daily timeframe chart

The chart above is the daily timeframe chart and immediately, you can see that there is a long term bullish channel apparent on this FX currency. This is what interests me from a long term swing trade perspective, the fact that over time this pair has continued to climb nicely from lows of 1.21 back in late 2017 to recent highs of 1.365 before a large sell off/correction in early 2019. This last correction has now brought price back into that lower trendline and has provided, what I believe to be, a good opportunity to buy in before the next bullish phase.

I am a swing trader, so I do buy and hold positions (or short and hold) for as long as I need for price to reach my target profits and maximum returns. That being said, I also regular trade on the intraday markets for smaller & quicker returns on capital. The reason I am saying this is because although I could simply enter this trade on the daily timeframe as shown above, it doesn’t necessarily provide the most accurate and most profitable trade entry in terms of Reward vs Risk. So what I did next was drop to the 4hr timeframe chart and plan a more accurate entry.

USDCAD 4hr timeframe chart

The key to getting high probability trades is to view the multiple timeframes of the instrument you are trading. So in this example I am looking at the weekly, daily and 4hr timeframes because ideally this will be a long term position that I have now bought into and will hold. If I was day trading or looking for intraday positions then I would look at the 15min, 1hr and 4hr timeframes.

On this USDCAD position we had the weekly Fibonacci 0.618 retracement level holding strong and a weekly bullish trend as shown by the longer term channel with trendlines. Dropping to the 4hr timeframe you can see price made a clear downwards trend over the past 2 weeks with lower highs and lower lows. However, when price reached the weekly trendline and 0.618 Fibonacci Retracement level it stalled and actually made a higher low. This shows momentum slowing and potentially a change of direction to come. I then applied another Fibonacci Retracement tool to the most recent swing high and swing low on the 4hr chart to look for where the next higher low may occur. By adding a simple trendline across the bottom of the 4hr higher lows and seeing where it interacts with the fibonacci levels, you got a perfect long entry at 1.31380.

In terms of R:R and a target profit, you could at least assume that with a trendline bounce and change in trend based on the Fibonacci, price should reach the previous highs and the Fib 0.27 extension level. With a modest 35 pip stop loss this would produce a 3:1 R:R trade. However, this is a long term buy & hold trade so I will be targeting the upper regions of the weekly bullish channel. If price reaches this area then that will produce returns of over 15%.

There is also an extra added benefit of holding this trade for as long as it is profitable and that is because of the positive carry on long positions. The USD currently pays a higher rate of interest than the Canadian Dollar and therefore there is a positive differential on buying USD and selling CAD like in this trade. Perfect!

As it stands… the USDCAD FX currency pair rocketed on Friday 1st March 2019 due to some weak CAD data. I am a technical trader but it is always good when the fundamentals and news helps your positions.

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