*Reviewing my swing trade on USDCAD with multiple scale in positions*
I am going to use this blog post to give you a full breakdown of my recent trading activities on the USDCAD FX currency pair including my pre-trade analysis, risk management, scaling in positions and eventual take profit levels.
If you have not read my previous blog post on my plans for trading the Canadian Dollar through December 2019 then I highly recommend you do. It has turned out to be a very popular post with highly accurate technical analysis. Click on the link below to read it.
As always, if you use the TradingView platform like myself then you can find all of my open and closed trade positions on USDCAD, CADJPY and US Crude Oil by clicking on the link below and viewing my profile.
US Crude Oil, which is heavily linked to the CAD $ currency value, has been on a nice bull run since it hit support @ $52 per barrel back in the beginning of October 2019. I was anticipating the usual delayed buying of CAD after oil began to climb as it often does take time for the commodities to push on to FX unless there is major news/data releases.
I believe a lot of the gain in US crude oil prices is coming from traders/investors betting on the US and China trade war to quiet down and more progress to be made. This will drive the price of oil up as it is considered to be a fairly “risky” investment so a to of investors sold their oil holdings earlier in the year when trade war rumours kicked up a fuss again.
As US crude prices continued to climb, the bearish CAD waves (USDCAD climbing) appeared to be a good opportunity to get in at discounted rate. I have also been buying US crude oil for a number of weeks now which you can read in other blog posts. See links below.
Let’s get right into it and look at my first short position entry on USDCAD and I will take you through my reasoning behind taking the position.
My higher timeframe analysis was done on the daily timeframe chart. It is shown above and the basis behind my bearish bias was the continuous lower highs forming on this timeframe. That shows the selling pressure is still there. I also used the daily timeframe chart for my end profit target of 1.30500 which is the support level that price had reacted to twice since the beginning of summer this year.
My first short entry was using the 4hr timeframe chart. I have spoken a lot on this blog about finding and using intraday support/resistance zones for good, simple trade entries. If you look at the chart above, you can see I used this exact method for finding a price zone with high probability that it would cause price to reverse and continue on its bearish trend.
Price had already broken the 4hr bullish trendline that was supporting price up through November, and when price broke through the 1.32650 support zone (coloured box on chart). I was then patiently waiting for price to come back and retest this zone exactly like I had explained to you in previous blog posts about using support/resistance zones in your trading.
I applied the fibonacci retracement tool to the new lower low and previous swing high and the 0.618 fib retracement level aligned with my ideal entry zone. I shorted at 1.32620 with a 30 pip stop loss to give me a potential reward:risk ratio of 7R for this position.
Following on from my first short position, the intraday resistance zone held strong and price began to sell off through Monday afternoon. Multiple bearish candle closures appeared price broke below the daily pivot level on Tuesday. Price then began to consolidate a little and form a basic flag pattern with the daily pivot level holding strong and keeping price down.
My second short position was entered on the 2nd rejection of the daily pivot level on Tuesday 10th December. Once again, I used a 30 pip stop loss which is fairly conservative for this sort of trading style and kept my target profit the same as my first positon which was the daily support zone at 1.30500.
With a 30 pip stop loss and potential profit of more than 190 pips, this short trade position had a potential return of more than 6.3R.
After my 2nd short position was entered, price once again began to sell off. You can see on the 4hr timeframe chart shown above that a large bearish momentum candle closed and then price went on to make new 4hr lower lows at 1.31200. This confirmed to me that USDCAD was definitely now in a bearish trend and I was now looking to short the pullbacks as they occurred.
Because we had now had 3 lower highs, I was able to draw a bearish trendline and start to once again add the fibonacci retracement levels to find good entry points for more short positions.
On the morning of Tuesday 17th December price pulled back in to the bearish trendline and the zone around the 0.786 fibonacci retracement level. I entered a third short position at 1.31800 where price touched the bearish trendline.
I actually used a slightly larger stop loss for this short position which turned out to be unnecessary. Because price had began to make tighter bearish waves during the previous trading days, I wanted to keep my stop loss wave above the previous highs.
And finally, my 4th short position was entered on the Thursday of last week using the rules from my own CB flag pattern trading strategy. You can learn this strategy in my mastering the markets – retail trading course.
The idea behind this 4th entry was to make good use of the selling momentum that was happening on the 1hr timeframe prior to the consolidation. I waited for price to reach the daily pivot level and 50 EMA as they are normally good providers of lower timeframe resistance. I then shorted in the hope of the selling momentum to continue.
A tighter SL of 25 pips and a profit target still aimed at the daily support zone at 1.30500 gave this trade a potential return of 3.2R.
Initially I make each position net risk free and remove exposure using a stop loss order that is past my entry price. I did this for all 3 trade entries except short position 4 because I had not had time to do so.
Price initial began to reject the daily pivot level and 1hr 50EMA for a 2nd time after I had entered my 4th short position and I was confident that price would break downwards towards my final profit target.
This was on Thursday before the Christmas week and I was always planning on closing all open positions prior to the Friday market close to lock in profits before the holidays. I moved all my stop loss orders (for the other 3 short positions) down to the 1.31550 price level where my 4th position stop loss was situated.
This price level was above the daily pivot level, 1hr 50EMA and also the bearish trendline that had been supporting price down to the current levels. If price was to push up outside of these levels of resistance then I assume the trade was no longer valid and I would happily take profit there.
Price opened above the daily pivot level on Friday and from there it began to slowly climb. I was eventually closed out of all of my short positions on USDCAD on the bullish spike and momentum candle that formed around lunch time on Friday.
My first 3 short positions all had profit locked in thanks to the stop loss being below the entry prices. My 4th position was a net loss but combined with the other positions, my profits were covered.
- Short Position 1 = 3.57R
- Short Position 2 = 2.89R
- Short Position 3 = 0.71R
- Short Position 4 = -1R
I think the most important thing to take note from the management and ending of this entire trade is that your trades will not always go to plan. Profit targets will not be reached in an orderly fashion and you must use risk management to lock in some profit to continue account growth and stay positive.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
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.
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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.