My wife studied in British Columbia and Ontario and loves Canada. Her sisters studied in Canada and they think the place and people are alright. I met lots of Canadians in Guinea and found them to be real friends, who speak with a quaint English and even quainter French accent.
I have however begun to develop a dislike for things Canadian since I started forex trading. Trading is risky business: prices go up and they come down. Sometimes the daily movements are large, say 150-200 points (that's as many US dollars per lot traded), and that volatility is what creates nice trading conditions. But you like to feel there is some rhyme or reason to the movements. The Canadian dollar is called a commodity currency because it is sensitive to the developments in the market for crude oil and gold, minerals it has in abundance. It is also very sensitive to developments in the US, its neighbour and major trading partner. But it also seems to have mind of its own.
The US dollar has had a period of prolonged weakness, and it was movements against the Canadian dollar over the past weeks that signalled the start of a US dollar rally; the Canadian dollar had reached nearly 90 US cents in early November from a position of about US$ 1.08 in August. It since rose quickly and touched US$ 1.25 on Sunday and Monday. But as they say there was no follow through, and this level was known as one of major resistance. But the "loonie", as the Canadian dollar is called (because of the duck on the dollar coin, not because of the people) seems to have gone a bit barmy (see chart and click to see full size).
The start of this trading week has been unbelievable. Admittedly conditions are strange the week before Christmas, especially after important interest rate decisions over the past two weeks; traders are winding down and closing their books for the year. But picture poor me. The US dollar was strengthening against other major currencies, but the Canadian dollar position did not respond. Gold and oil prices fell and the Canadian dollar did not decline. I was trading Canadian dollar several days ago, and bought US$ and saw little gain; I should have been suspicious then. However, I bought US$:Can.$ again on Sunday at around US$1.015 and saw the price move towards US$1.025, and I got a nice little profit. The rise faltered and I rode the down movement towards 1.018 and bought again; the price rose towards 1.022 and I made a little more dosh. Good day, I thought, and was ready to leave my trading desk. Then I saw the price fall again towards 1.016 (see the first block of blue bars going down), so I bought again and the price began to rise and I was rubbing my hands.
Now we know about going to the well too often and about that deadly sin, greed. Yikes! During the course of the next few minutes the price fell about 200 points! It rebounded and then had a slow slide for the rest of the day to settle at around 1.003. I was not fazed because I thought about the fact that over the past two weeks the US$:Can $ pair had traded in a range between 1 and 1.025; it was "consolidating" in this area so I set my stop-loss at 1.0. Market sentiment was that if it went below 1, then look out o.95. If it went above 1.025, hello heaven. But that's a wide range for sure. Let me cut to the chase. The lunatic that I am had a position that went as low as minus US$1000 as of early this morning as the North American traders pummelled on Monday, and when the loonie saw the greenback getting up, it pummelled it again with Asian traders and early European traders pushin the rate to around 1.001. You have to imagine the loss ticker flipping between minus $200 and 600, staying stable, then switching back and forth to have an idea of how the day went.
When I saw that 1.001 figure at about 2.30am this morning I said to myself, well it was a deep stop and if it gets broken then so be it. I went back to bed accepting a nasty stain on my trading book. Well blow me down. I got up at 6am and found the loonie had counter punched by the greenback and was now around US$1.01. What the @#% is going on?, I ask myself. But before I could figure it out I just accepted that at least my potential loss was now only about US$350. I gave a heavy sigh of relief. I had dreamed of how I would rationalize the $1000 loss and that I would never "double-dip" again on the trades, etc., yaddah-yaddah.
A few bits of Canadian price data were due out around 8.30am and the rate coasted up toward 1.012 ahead of that. I nibbled at some positive gains. Then the data came in a bit worse than expected and the rate shot up to 1.016. I got some more profit and reduced some losses and sat back. Maybe we will see 1.02 again today, I mused. But guess what? The loonie remains loony and the rate plummeted to test 1.006. I got through the test and is back at 1.01 as I write. I will see where the duck has landed later this afternoon.
Well my position is much reduced and I am happy to watch this mad patient try to climb out of the asylum. It is not putting me into the cookoo's nest, though. I am due to travel today and wanted to have nothing major still trading. That I have achieved. My account stands balanced for today, which is a tad better than minus US$1000. Not good trading tactics, I have to admit though. A lucky escape some may say but you have to ride some waves like this one. Had I been on the other side of the deal I would be getting more of the Tiffany earrings my wife so loves. At least I don't have to buy a set of false diamonds from a dollar store.
****
A post script to my fellow blogger at http://www.onlinefxtrading.net/. He has been chronicling how he is doing with his trades and his "strategy". His profits on his practice accounts are of the order of US1-20. That is, however, not what trading is about and if he wants to make money doing it dollar by dollar won't do it. He has to learn that very hard lesson of sitting with a deal a longer time than a move of 1-10 points. Get used to the up and down of 25-50 point moves. It's good for toughening the nerves and developing the discipline of respecting a deal. If one is nervous then a wide stop-loss will give more comfort.
I am learning to leave the dog to sleep and accept that sometimes a burglar comes in and takes all my goodies. But I am finding that most times the dog does a good job, if well positioned and the goodies stay safe. So, I trade with a bit more of a sanguine air. I am making a bit more than I am losing this month (up 30 %) and hope that it continues that way. Yes, I am miffed that I tightened a stop-loss with Euro:US$ and found myself closed out by 2 points. Leave well alone, eh! But in the big scheme of things you have to let that go. And I did.
Happy trading!
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