Grabbing Some USDCAD Pippage

Well, it's about time!

It looks like there is some strength in the USD happening (or perhaps it has already finished happening) at this point. Am I vindicated?

Who knows. As I've seen posted here and there a few times, everyone trades alone. You have your convictions, systems or maybe even a dartboard, and you play as your guidance and resources dictate.

However, recent weakness in the USD does make it hard to determine where the real bottom may be. Is it at 0.9650, 0.9600, or 0.9500? Have we hit it? Only time will tell if we have truly found the bottom or not.

As I was saying not too long ago, eventually we will be at the bottom of what will become a large uptrend in the USDCAD. Presumably, at some point, we'll be back in a position where the exchange rate hits 1.0000, 1.0500, 1.1000 or more. Sometimes things move quickly, but it might take years.

What to do?

USDCAD Is Playing By My Rules

Okay, I've blogged recently about the USDCAD approaching a low.

I know there are always skeptics out there, and I'm not trying to sell you anything, but I will suggest that this pair is now fairly easy to trade.

When it shows signs of weakness, dropping significantly, buy it. When it approaches parity, sell it. It may or may not be at bottom yet, but nobody really believes that the Canadian dollar should be valued much above parity with the US dollar.

So, now that I'm in a long term play on the pair, it's time to scalp some profits out of movements below and back to parity. I don't care how long it takes the greenback to recover as long as I can make my pips over and over again while I wait.

The trick, or so I think, is to find relatively safe ways to squeeze cash out of the market when everyone else hasn't figured it out yet. Once everyone is trying to do exactly the same thing... it will stop working.

Widening things out a bit, where do you think we are with the USD? It has fallen to lows that haven't been seen in thirty years. Do you believe the USA is going to fall out of prominence and become a third world country over the next few years? I don't.

Guess what that means! That means we are sitting at the beginning of a very long rising trend, but we just don't know when it is going to start. It might start in a month. It might start in a year. Who can say? However, if you are a swing trader, it might be time to start sneaking in a bit of cash on the greenback when you spot moments of weakness. If you are patient I'm sure there will be lots of little dips and spikes you can exploit.

If you are a long term player, you may even want to consider some USD based carry trading strategies...

USDCAD Edges Lower

Okay, if we were at bottom a few days ago, it was only a soft bottom!

Right now, according to the charts I'm viewing, this pair is trading at 0.9925, which is nearing a penny below parity. I can hardly imagine what such a drastic change in rates, worldwide, truly means to the state of global economic affairs.

Perhaps the current administration has done the unthinkable? Perhaps the US predominance in global markets is about to evaporate?

USDCAD Once Again

Okay, I think it is nearly safe to say that the USDCAD has hit bottom.

Heh, actually, it's probably not safe to say, but it has certainly found some support at and above the 0.9950 level. I think that the downward pressure from speculators has now eased.

I also think the downward jump has been overdone.

However, assuming I'm right, and I'm finding that often I am, I don't know how long it will take before the elusive traders and speculators our there will change their opinions. It could be months before anything significant happens.

I'm playing a long swing trade on the USDCAD. I expect the Canadian dollar to return to normal levels once everyone focuses their attention on other areas. Perhaps this will happen when one or two signs of strength show up in news reports from US sources.

Missing the USDCAD Bottom

Well, I'm not sure if the USDCAD has finally hit bottom or not. It's around parity today which is pretty much what people were talking about.

Now, I did purchase some before parity. So, I'm underwater, holding my breath, wondering how much time it might take before I'll notice some buoyancy and float back to the surface.

I guess this makes me a swing trader, because now I'm looking at holding my position for a long time, until the market swings a good distance. That's okay, as I've said many times this is a live and learn situation with an extremely small amount of capital involved.

Honestly, I think the world markets are on crack when they think of Canada as predominantly a commodities play. Don't they realize that a large segment of the GDP comes out of the manufacturing and export sector? Who are they going to send exports to with the Loonie hitting massive highs?

Also, while there are massive oil reserves, they are in the form of tar sands. It will take decades of massive development before these can be exploited. In short, the dollar is now way overvalued and the Canadian economy is going to suffer for it. Somehow I expect these facts to show up and force a USDCAD correction.

Bottom Spotting the USD/CAD

Down and down it goes, where it will stop, nobody knows.

Just how low can the USD go compared to the CAD? Parity is an option. Below parity is an option. However, there have to be some fundamentals that come into play here. The amount of trade between the USA and Canada is huge!

Traditionally, the USD has always sat above the CAD.

Anyway, I'm not sure parity or below is realistic. I'm starting to dip my toe into this market. I've got a small stake which represents a "water mark" to help me gauge future expectations. Somewhere, presumably within the next 500 pips, we should find the bottom. From there, we should see lots of volatility and false starts, allowing for profit in the short term.

It should also provide for profits in the long term once the USDCAD starts trending towards a more appropriate historical level. Unless of course there is a large fundamental change happening. That's possible, but flying under the radar still.

Trailing Stop Strikes

Well, whether it is a small correction or not I have no idea, but the USDJPY has gone down enough to remove me from the market. So, my profits have been pocketed and I need to look for opportunities to get back in.

The same is true for my AUDUSD holdings.

I'm starting to look into the USDCAD, in the long term, but there is always the risk that the US dollar will take a dump when the Tuesday interest rate news comes out. It would be hard to imagine that we could get to parity, or that we could stay there for long, but there is always the chance that the war in Iraq will push us there. I see an incredible load of debt being heaped on the USA combined with an inevitable drop in spending when the war ends.

On a different note, I find myself sitting on the sidelines. I don't like being on the sideslines, but I don't want to keep throwing money at a market to see if I can a place where it will stick. That costs too much. Maybe I'll investigate some carry trade ideas. For example, the EURTRY is appealing, though very risky.

New User Mistake

Well, don't do this!

I fell asleep last night before putting a loss limit on my USDCDN position. I could have lost my entire account balance if something disruptive had happened. Bad investor, bad.

However, upon dragging my sorry behind to the computer, with much trepidation, I found I was in the positive. So far, FOREX is my friend. I know the shoe will be dropping soon... especially now that I've been reading up so much and know how clueless and careless I really am.

B USDCDN 1.0554 S USDCAD 1.0560 +1.42 (TL)
B USDCDN 1.0545 S USDCAD 1.0595 +0.47 (TL)

Anyway, when I noticed I was in the positive I promptly put on a trailing stop, which theoretically allows me to continue to profit in a rising market as long as keeps rising. Of course, the market promptly dropped and my orders were executed at prices that kept me in the positive.

Fun stuff.

First Use Of Limits

Surprise, surprise, I've been involved in yet another trading session. This time, due to my reading, I decided to add a stop and a limit after completing my purchase. I'd never done this before and wasn't sure how easy it would be to do. One more small step on my road to knowing what I'm doing:

B USDCAD @ 1.0565
S USDCAD @ 1.0571 (L)

While not all that exciting, I should mention that I only risked $3.00 due to the stop order (which was not used). So, with that amount of money risked I earned $0.57 profit. In reality, more was available to be made, but as this was my first limit trade I set the limit low and was able to observe it in action.

Cool stuff!