TRADE UPDATE: Move To Risk-Free On AUD/CAD Short...

Last updated 11/4/2009 3:14 PM EST (GMT -5) 0 Comments - Add your comment

Roger A. Stojsic

Technical Analyst, GFT

Last week's AUD/CAD short (at.9792) has been moving along nicely, and it's time now to move stops to break-even. Remember, this is a longer-term position primarily based on a weekly triple top so this trade may last as long as a few weeks, so some short-term rallies (like the one we're seeing now) are inevitable. In fact, the current rally we're seeing does not at all come as a big surprise because a bullish butterfly pattern as recently completed based on price action that has developed since our entry last week (see 30min chart below).

Prices are currently testing 50% resistance of the CD leg of this recently completed bullish butterfly, but there is still room up to 61.8%-78.6% near .9700-.9750. This means moving stops to break-even (.9792) still leaves a little room for this possible rally to continue to fib resistance. It's important to remind oneself that there is always the possibility of being wrong, and the last thing we want to do is turn a winning trade into a loser. Of course, t he downside of moving stops to break even is that there is the possibility of breaking even, but that's far different from turning a winning trade into a loser. This is one of those ever-present risk/reward decisions that can be a struggle, and it's times like these that I remind myself of a great piece of advice of trading advice..."winners think about how much they can lose, and losers think about how much they can win." So to put it another way, the risk is that we may lose nothing on this trade, and the reward is that we may end up with at least an approximate 5-to-1 return based on the risk/reward ratio at T1.

We'll check back in on this trade in a day or two, and if prices do continue lower and approach our initial target of .9450 (T1), we will look for signs (i.e. bullish patterns) which may indicate whether or not to take profits or to let the run to T2 (similar to the recently completed bullish butterfly pattern that only began to emerge after our entry as illustrated below).

* For previous 30min chart (at time of entry) see " Prime AUD/CAD Selling Opportunity At Hand "

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