Monday, August 23, 2010

Oh Canada

First things first ..... the Loonie is really the USD/CAD.  The way it works when you purchase a contract of this pair is that you are buying U.S. dollars against the Canadian dollar.  At first blush one may thing that there would not be much going on between this pair but au contraire mon frere!  As respective top trading partners, there's tons of action although the spreads (difference between the bid and the ask) aren't as tight as I would like.  

And yes, I have checked in with other brokers ..... this could be a whole series of posts on this blog.

There does seem to be a correlation between commodities and especially oil and the Canadian dollar and the oil is traded in dollars .. I'll post more on this later but safe to safe to say ... when oil tanks this pair rises and vice versa.  This is just one fundamental factor.  I'm no fundamentalist although I keep abreast of the news flow on the pair that I am trading.  The news is in the charts but one needs to keep attuned to what is going on if only to stiffen one's resolve in the face of a wavering position. 

I tend to set loose stops but I do make projections and see if a case can be made for a 3:1 risk to reward ratio.  I've marked primary and secondary targets in flourescent green.  This money management, a necessary practice.  You can just sign up for MARKETCLUB and let loose positions while you wait for the next trade triangle.  Its not that simple.

In this loony trade I already took some profits 43 pips in and set the stop at break even plus $2 to cover some commissions.  The USD/CAD has a good chance of making it to thos green area(s) but you gotta pay yourself along the way.  On this trade . this happened just 6 hours in but I'm not a forex day trader.  Those 43 pips could have taken 3 days and that would have been fine. 

Looming on the horizon at 8:30 Eastern Standard Time are some economic reports that may have a major effect on the pair.  A big report can fling your position around by 100 pips, or .0100, so that can bounce you out of a good trade REAL QUICK.  There's a real possibility of that happening and then there's the chance that the report will drive things in my favor, in which case, I will continue to ride this trend.

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