I recently found myself in a day trade in USD/CAD that I’d like to talk about. The exact reason for my entry actually doesn't matter for this article but the idea was to buy the pair at a support level where I expected it to at least temporarily bounce off nicely. The best case outcome for this trade was that it would hit my profit target that I had set shortly after the entry. It would give me a nice profit of more than two times my risk and I set it at a price where I was expecting the potential rally to run into sellers again.
For sure I’ve been lucky with this one as shortly after the entry the market rallied nicely straight up for hours without any significant corrections. So the next morning (entry happened during the night) I was pleasantly surprised that USD/CAD was already approaching my profit target, see below on the first chart the market looked like at that point in time.
USD/CAD was just about 7 pips short of reaching my profit target while my stop-loss was still at the initial stop loss level. I think I’ve read a similar story in one of the market wizards books, but in a summary, the situation was like this. The market was trading very close to my profit target that I had set because I expected sellers around that price level. At the same time, the trade could still turn into a full loss as I hadn’t moved my stop loss.
So, in other words, the potential for further profits was just about 7 pips while my risk was about 53 pips! That’s when you simply cannot be stubborn in a discretionary trade, you got to act!
As this had been such a nice, stress-free rally to that point and I’ve been already so close to the profit target I decided to simply take my money and run. I just got out at the market.
If the profit target had been slightly further away I might have chosen another option. Go down to a lower timeframe and use a tight trailing stop to either get stopped out with a nice profit or have the market run into the profit target.
On the right chart, you can see what happened after that. The rally fizzled and USD/CAD plummeted. So don’t be stubborn in trading!
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Editors’ Picks
EUR/USD off highs, back to around 1.1900
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GBP/USD hits three-day peaks, targets 1.3700
GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.
USD/JPY bounces off lows, back above 156.00
USD/JPY is starting the week markedly on the defensive, sliding back toward the 155.50 area where it has met some decent contention for now. The move lower in spot follows FX intervention chatter after PM S. Takaichi scored a landslide win in Sunday’s election..
Editors’ Picks
EUR/USD off highs, back to around 1.1900
EUR/USD keeps its strong bid bias in place despite recedeing to the 1.1900 zone following earlier peaks north of 1.1900 the figure on Monday. The US Dollar remains under pressure, as traders stay on the sidelines ahead of Wednesday’s key January jobs report, leaving the pair room to extend its upward trend for now.
USD/JPY bounces off lows, back above 156.00
USD/JPY is starting the week markedly on the defensive, sliding back toward the 155.50 area where it has met some decent contention for now. The move lower in spot follows FX intervention chatter after PM S. Takaichi scored a landslide win in Sunday’s election..
Gold picks up pace, retargets $5,100
Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.
Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure
Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.
Japanese PM Takaichi nabs unprecedented victory – US data eyed this week
I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.
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