2020.11.29 CADUSD Futures Strategy
As there is interest in my analysis of the USDCAD and CADUSD pairs, I will begin reporting on strategies as I identify them.
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For transparency, I will track my Forex trades on the CME Practice Simulator.
The CME uses the CADUSD pair and that is how my position will be executed.
The USDCAD trade would be the reverse of this example.
Here are our Current Open Positions reporting in the CME Practice Simulator.
Let’s look at the CADUSD weekly chart.
*******Click on each chart to expand*******
As the above chart shows the price is above the:
purple 200 week moving average;
light blue VWAP (Volume-Weighted Average Price) from the September 2017 high; and,
my ‘best fit’ horizontal line of resistance.
This area of resistance had been tested 5 times since last October. The more times support or resistance is tested, the more likely it is to break.
Price is also above my orange trend line from the 2016 low.
I view each of these to be bullish CAD, bearish USD.
Below is the Daily chart.
The Daily chart has the price above the:
rising 50 Day Moving Average (DMA);
200 DMA;
VWAP from the September 2017 high
Price is also above my ‘best fit” line of resistance.
The price looks like it will break out of a two resistance on both the Weekly and the Daily timeframes.
This trend alignment across multiple timeframes gives me the confidence to look for a long position in CADUSD or a short position in USDCAD.
I want to be Long CADUSD in each contract month leading to December 2021.
As I mentioned, the the CME practice simulator will only allow me to trade the DEC 2020 and the MAR 2021 contracts.
This was an oversight and perhaps another platform should have been chosen.
Let’s take a look at the charts of our open trades.
CADUSD CANADIAN DOLLAR/US DOLLAR
6CZO DEC 2020
The DEC 2020 chart above shows our long entry at .76810 in green and our stop in red at 0.76325.
I placed my stop below the rising red 10 DMA and the VWAP from the Nov 9 High.
This stop might a little tight, however, if I am wrong then at least the losses will be small.
I consider our stop level to be more important than our entry.
Why is that?
It is said that the best traders in the world hope to be successful 50% of the time.
While that level of success will fast track you to Cooperstown, it won’t get you through high school.
How are they successful then?
By knowing when they are wrong and by exiting their position at that level keeping their losses small.
It is the most difficult aspect of trading to master.
I have learned to identify my exit prior to entering a position.
Let’s look at the other position.
CADUSD CANADIAN DOLLAR/US DOLLAR
6CH1 MAR 2021
The MAR 2021 chart above depicts our Long entry at .76840 in green and our stop in red at 0.76315.
I placed my stop below the rising red 10 DMA and the VWAP from the Nov 9 High.
The stop level should be below the VWAP from the Oct 29 low in a day or two also.
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