Trade Breakdown – USDCAD Short November ’19

*Reviewing an intraday momentum trade that didn’t work out in the end*

Last week I entered a quick intraday momentum short trade on the USDCAD FX currency pair using my own flag pattern trading strategy. This is a strategy I have developed over time and it has been built on a solid theory of how the markets move in phases. Over time it has continued to produce good reward:risk ratio entries but unfortunately, it does not have a 100% success rate.

In this blog post, I will show you my pre trade technical analysis and explain why I took the trade. I will then show you why it didn’t work out for me.

As always, I posted my analysis and short position entry live on the TradingView platform. You can view the trade entry your self and track it’s progress by clicking on the link below.

https://uk.tradingview.com/chart/USDCAD/o8SU5Dpj-USDCAD-Short-Trade-CB-FLAG-PATTERN/

Let’s start by looking at the daily timeframe chart and I will show you my pre trade, higher timeframe analysis of the USDCAD FX currency pair.

USDCAD daily timeframe chart

The higher timeframe analysis was based on a bearish trend continuation set up. I have a top bearish trendline drawn across the 2 previous lower highs and as you can see, the daily timeframe rejected the trendline with 2 nice wick rejection candles. The daily candle, before I entered short, was a fairly strong bearish close with price remaining below 1.33.

Let’a go to the lower timeframe and I will show you my short position entry.

USDCAD 1 hour timeframe chart
(with short position entry)

The main premise behind my short position entry on the 1hr timeframe chart is also a trend continuation but using much stronger momentum. The daily timeframe trend is making big pullbacks with lower highs on the daily often reaching the 0.786 fibonacci retracement level. On the lower timeframe I was waiting for a much smaller pullback and consolidation to form after the large bearish momentum candle.

I entered short on the close of the 1hr bearish wick candle with a 15 pips stop loss and 48 pip target profit. This gives a healthy potential return of 3.2R which is perfectly good for an intraday trade like this that tends to move quite quickly.

This is taken from my flag pattern trading strategy where I look to take advantage of strong market momentum and wait for the next consolidation to enter a position in anticipation of the momentum then continuing. I have shown this using the arrows and labels on the chart above.

The process is as follows:

  1. Heavy selling comes in to the market = big bearish momentum candle closure.
  2. Price breaks support zone or trendline then begins to pause.
  3. Sellers take profits, reassess, price goes sideways.
  4. Heavy selling continues to new lower lows.

This is the basics to a bearish flag continuation pattern trade like this. I am not looking for a big pullback because that shows that there are still a good number of buyers in the market. I want a small pullback, tight consolidation and bearish candle closures to show that the sellers still hold control.

Let’s look at how the trade played out. As the subtitle of this blog posts suggests, it didn’t quite work out how I wanted it to but the pre trade analysis was definitely good and accurate.

USDCAD 1 hour timeframe chart
(post trade)

Almost immediately after entry I saw a bearish candle closure and then sellers came in to the market with force. A nice strong bearish momentum candle formed and price dropped to over halfway towards my target profit. At this point I moved my stop loss to my entry price to remove exposure and I left my office to go and play golf.

Price then immediately reversed. I believe there was a number of economic data releases that came out and USD speculators came back in to play to take advantage of the positive USD data. Unfortunately for me, this happened before my trade reached its profit target order that was set at 1.32350.

Trade Summary:

  • Entry Criteria – Daily bearish trend continuation, 1hr flag pattern continuation.
  • Entry Price – 1.32830
  • Stop Loss Order Price – 1.32980
  • Target Profit – 1.32350
  • Potential Return – 3.2R
  • Actual Return – 0R

There are other rules and analysis involved in my flag pattern trading strategy which I have included in my Mastering the Market retail trading course. It is its own strategy that can be used across almost all financial markets such as FX, Commodities and Indices.

USDCAD Predictions & Trading Opportunities:

I am currently now holding a new short position on the USDCAD FX currency pair. It is a different style of entry where I waited for price to pullback in to the daily resistance zone and enter with a wider stop loss and larger profit target. I am looking to take advantage of the daily trend that I showed you in the first chart of this blog post.

USDCAD 4 hour timeframe chart
(new short position)

You can track this trade live via the TradingView platform by clicking on the link below. I am looking for price to make its way down to the 1.32 support zone before breaking that and gain back down to the weekly support zone at 1.30500.

https://uk.tradingview.com/chart/USDCAD/Rlj83xYO-USDCAD-Short-Trade/

If the bullish counter trendline breaks then there could be chances to scale in and add more short position exposure as price makes its way down to these profit targets. The chart below shows the potential price action over the next few days and weeks.

USDCAD 4 hour timeframe chart
(price prediction)

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

https://tradingview.go2cloud.org/SH3bP

My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.

https://www.icmarkets.com/?camp=38537

Thanks for reading and please don’t forget to LIKE, SHARE and FOLLOW my blog to stay up to date with the latest market analysis and trading education posts.

DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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