In this post we analyze a recent USDCAD sell trade with a stop loss of 10 pips and take profit target of 200 pips. Did you read the previous post on how to trade Headline News and Magazine Cover stories? The crux of our swing trading strategy is to lower risk as much as possible. We usually open a trade with a stop loss of 10 pips when we identify the setup that we are looking for. Take a look at the screenshot of USDCAD H4 timeframe below!
In the above screenshot you can see the red arrow. This is the entry. We placed a pending order with a stop loss of 10 pips. We used the high of the candle just below the red arrow and placed an entry 9 pips below it. Stop loss was placed 1 pip above the high of the candle just below the red arrow. This gives a stop loss of 10 pips. Always take risk management very serious. Stop loss should be between 10-20 pips for us. At no time we risk more than 2% of the account equity. Watch this 41 minute video tutorial on risk management.
We use daily and the weekly candle for doing the analysis. Once we have made the analysis and determined the direction of the market, we switch to H4 timeframe and look for a low risk entry. We are looking for an entry with a 10-20 pips stop loss. We use pending orders to place the trade. Once the trade has been placed, it is set and forget. We don’t fiddle with it. Either the stop loss gets hit and we lose 10 pips or the take profit target is hit and we make 200 pips. It is as simple as that.
When you trade USDCAD pair, you should keep this in mind that USDCAD pair is negatively correlated with Crude Oil. So when oil prices go up, you will find USDCAD going down and when oil prices go down, you will find USDCAD going up. Keep this in mind. Taking an occasional look at the oil chart while trading USDCAD can be helpful. Did you read this post on how RBNZ was shocked by the currency market.
Central banks are supposed to be the biggest players in the market with the power to control the direction of the market. But they cannot control the magnitude of the movement. When you trade USDCAD always keep a look at the Bank of Canada news releases and policy statements. USDCAD is a highly volatile pair. So it is always a good idea to keep the stop loss as small as possible. Do you know about Institute of Trading And Portfolio Management? Watch its South Africa documentary and enjoy.