I wanted to take a look at a current trade that I am positioned in. I wanted to do this with the NZDUSD short trade that just completed but didn’t have time to get to my computer to screen capture and do a write up.
This is a short on the USDCAD that wasn’t posted in the weekly Forex setups on my website. What’s important about this trade is not only the setup, but how the trade was entered.
UPDATE: At 8:45 a.m. Friday morning, I had an alert that price had reached my 1R target. Consistency in trading had me scalping out a portion of my trade and bringing stop to break-even. I won’t wait until the break-even stop is hit if price action is showing signs of any downside momentum.
The USDCAD chart is bullish on the daily time frame and this, for me, was a bull flag (pullback in an uptrend) that I’d like to see at least hit the previous pivot high.
It is not a perfect pullback on the daily because I really like to see a strong impulse leg to set up a pullback. I glanced at the weekly chart and the momentum to the upside was decent.
Now the entry –
We all want the perfect entry and the fact is that rarely will we get it. Even on the NZDUSD trade short, the entry was on the 4 hour chart. Why the four hour? We had large candlesticks in a tight range and if you waited for a strong close below the bear flag, price could have run a great distance.
On the USDCAD chart above, we had a few days of lower volatility and my choice was to get into the trade if:
- The bull flag began to break to the upside
- The candlestick looked like it was going to close with a bullish tone above the trend line
- The trade would be entered that night (the benefit of 24 hour markets!)
Maybe I could have monitored the setup on a lower time frame such as the hourly but then I am getting into time frames that I believe have a lot of noise in them – especially with Forex trading.
It’s A Simple Price Pattern
This trade and the NZDUSD are perfect examples of simplicity in trading. Pullback and continuation DOES have an edge in the market – it’s how price evolves – where strategies based on indicators only are hit and miss.
How will this trade be managed?
- Any strong move against the position will cause me to exit. You don’t need to wait until your stop is hit.
- At 1R, I will scale out a portion of the position and adjust the stop.
- Monitor price action at structure points and if the trade is struggling, exit
Remember, this is swing trading. We are looking for one move in the market and not to give back during a retrace in price. Leave that for your longer term position trades.