CAD: Know thy levels…

• InEgoVeritas
• October 27th, 2010

… and the rest shall be just trade implementation details.

 

This is what the $USDCAD ping pong game looks like on a daily chart:

Yes these are all Fibonacci levels. I work with both retracements and extensions. Notice the use of clear impulses with easily identifiable levels to start with. Once these are in, the ping pong game looks more like a chess game with precise moves and counter-moves. Most of the predicted levels have been used as support or resistance at some point or another, since the pair has entered its range back in the spring. The fib levels defining this range have been put in place back then, and should remain key levels until the pair exits the range, or until observations lead me to conclude that they aren’t respected any more.

The key here is to use only the impulses that are the cleanness, that is without too much noise in them. I find those built on a new low in a down trend (and vice versa in an up trend) often to be important, and indeed they are on this pair as you can see from the chart.  In fact the 4 fib studies used are all from that set-up. The range defining ones from the daily chart and the two longer term ones shown on this monthly chart:

Extension fibs also provides good targets once the range is broken as shown on both charts.

Now about those oscillators, MAs, momentum indicators and others, you can use them if you like, but make sure you use them at these particular levels and not whilst the pair is in some no man’s land. This will improve your success rate and that is what we’re all looking for.

So before starting to trade, know your levels. If the chart doesn’t provide you with any good ones, wait for clarity to return…

Happy trading,
IEV

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: CAD, USDCAD

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