Friday, November 13, 2009

USDCAD—Long trade paying off

Was it difficult for me to take the long trade late Wednesday when it looked for sure as though the USD was tanking? Of course it was. This is after a few years of taking hundreds of trades like this—they look solid technically, I can write out my reasons—but psychologically it still feels as though I’m jumping off a cliff. Sometimes, even after being careful, the trade stops me out anyway. This leads to my clenching my jaw but this is why you want and need tight stops. Losing is part of trading.

Another challenge for me in this trade is that I’m under the weather with some sort of virus. I don’t think it’s the H1N1 flu but I generally feel crummy. This takes you off your game in trading. I noticed that even in the trades I haven’t been blogging about that I’ve let good opportunities get away from me, missing signals that I routinely pick up on. Fortunately, I’ve had no catastrophes but that’s because I insist on giving myself reasons for trades and I keep stops small. My point is that any kind of stress, tiredness, or illness can make trading more difficult than it already is. For me, it adds a level of pessimism that makes it hard to even take a trade.

Regardless, I took the long at 1.0435 on Wednesday for the reasons I cited in yesterday’s blog. Yesterday, I took some profits at 1.0557 (122 pips). It’s up 95 pips as I write this at 6:34 AM EST.

Where to now? Obviously, with a profitable trade I’m going to leave it on with a profit stop in place. Let’s see if it can get any legs and run. There are things I don’t like on the charts but there’s no reason to believe I should give up at this point, either.

On the three hour chart, the pair encountered some resistance at 1.0577, an area it also found resistance at on October 22 during its previous ascent. It has fallen off a bit, building what could be a small bull flag which, if it turns out to be true, would target 1.07, another resistance area. One thing that bothers me is that last time it was at this level in October, momentum was higher, as reflected in RSI. It’s even higher than it was when it was at this level on the way down. But that’s not enough to close longs. The candle prior to the one currently forming was a hammer after a small uptrend. As long as it doesn’t close below that hammer’s low (1.05), that’s positive. The candles are getting smaller—I’d prefer more robust ones—but it is at resistance and, as we saw on the way down, small candles don’t mean an end to something.

The only thing to do is continue to watch the chart, both on this time frame and smaller ones. Here’s the 3-hour chart:

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.

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