NZDCAD/Pair trade: Just short everything...

25 июл. 2015 г.

I like to go short, I find the best trades I take are shorts, not sure why, but it's true.
Here we have 3 short opportunities, which are linked by correlations.
The NZDCAD ratio chart, or exotic pair if you want to call it that is offering us a nice trend continuation opportunity.

I will use this as a way to hedge my exposure to a more aggressive and more of a 'long shot' trade that I want to take in USDCAD, which is a short under the last daily low (and a second entry a bit lower). The trend was strongly up but rgmov has peaked before the last top, and the time at mode trend signal has expired in the daily.
It's possible this is an intermediate correction before a new leg up, that I have no way to know (I do have a projected top target a bit higher) but it's looking like a compelling short sell right here, right now.

As for NZDUSD, everyone and their mother wants to find the market bottom, but that's usually a hard and risky endeavor, so I will short in the face of range expansion resistance, and a clear downtrend with a nice push up thanks to the gold short squeeze rally, which gives us a nicer entry and clear stop location.

Here's the entry and sl parameters (if you trade the individual pairs, I will be trading with no stop loss on the *usd pairs, and with a stop and lower leverage in nzdcad):

NZDCAD: Entry under last daily low, stop above the last highest high. Target is a retest of the lowest low at least.
USDCAD: Entry under last daily low, stop above the highest high, no tp but watch levels on chart. Second entry at 1.29157, same SL. Splitting this in two equal risk % is a good idea.
NZDUSD: Entry under last daily low, stop above the highest high, no tp. Simple...

If you want to trade the no SL pair trade setup, find the ADR of each pair (which is [atr(1)+atr(5)+atr(10)+atr(20)]/4) and then base position size on risking the desired percentage of your capital on the whole position. Adjust the smaller ADR pair position size by the result of dividing the larger ADR by the smaller one.

Here I get:
USDCAD: 99.5 pips per day
NZDUSD: 92.1 pips per day
So, 99.5/92.1=1.080347448425624.
Thus, we risk 1-5% on each side of the trade, but the smaller ADR one is multiplied by 1.080347448425624 to get the correct lot size.
That's how I trade these at least.

See related ideas for my longer term view on gold, and other important correlations. Special shout out to jangseohee, he brought the nzdcad chart to my attention again. His ideas are linked there too.

Good luck,
Ivan.