Short USDCAD, MY MOST DETAILED ANALYSIS
I've been in a short position in USDCAD for a few days now. This entry was based on my analysis of the failure In price from the DAILY HIGH price level of 1.46853 back on January 20th 2016 (top WHITE LINE). A price range/channel was formed when this price level failure hit a low of 1.20620 (bottom WHITE LINE), giving us a potential area that price is seeking to retest. AKA, whoever was buying there has either already been selling & taking profits OR they are waiting for price to return to that level so they can buy more at the original price they felt the USDCAD is worth. Since this move in price took about a year or so to form, it will most likely take a year or so to return to the level. This could potentially happen faster in the event of some catastrophic world event in which investors engage in extreme selling of the currency pair.
LONGER TERM, the GREEN line marks the next major support level that price will seek to retest if the white line at 1.20620 cant be held. This will simply be a signal that the majority of traders don't think the USDCAD is worth buying at that level. Price will continue to fall until the majority of buyers agree on a fair price that the USDCAD is worth.
ADDITIONAL LINES I'VE DRAWN:
The GOLD line identifies the support level that formed the most recent high (top WHITE LINE) of 1.46853. In my analysis style, this tells me that 1.28301 (GOLD line) was an area in the past where a lot of buying took place, moving price to new highs. This level could be retested & hold, signaling a move back up to retest that high (top WHITE line). However, a failure of this level will more than likely see price fall at least back to the bottom WHITE line in efforts to retest 1.20620 to see if the majority of traders think the USDCAD is worth buying at that price.
The BLUE lines are just drawn to show you guys the diagonal channel within this parallel WHITE channel. Breaks & holds of diagonal channels inside of parallel channels are just helpful indicators of price reversing.
I also have a 50EMA simply because I know a lot of traders use it. Also, it helps for intra day trades if I just want to make a quick trade for some income. Simple rule, price above the 50 means price is bullish, & below means I should be shorting. I plot the 639SEMA simply because of harmonics & price's natural tendency to gravitate to & from this long term moving average. Nothing special, just a harmonic of nature.
CONCLUSION
Buying at the bottom of channels & taking profits at the top is the most simplified way of trading. The larger the channel, the more profit potential. For example, I could short 2 positions to enter the trade. I could sell 1 position at the bottom white line just to take the money & go on a nice vacation, while I wait for other trades to show potential for entry. Because I took 2 positions, I'm still able to remain profitable in the trade in case the bottom WHITE line fails & price moves lower to retest even more historical lows (i.e. the GREEN line). Buy the lows sell the highs is really all it takes to make a decent living or some extra money.
LONGER TERM, the GREEN line marks the next major support level that price will seek to retest if the white line at 1.20620 cant be held. This will simply be a signal that the majority of traders don't think the USDCAD is worth buying at that level. Price will continue to fall until the majority of buyers agree on a fair price that the USDCAD is worth.
ADDITIONAL LINES I'VE DRAWN:
The GOLD line identifies the support level that formed the most recent high (top WHITE LINE) of 1.46853. In my analysis style, this tells me that 1.28301 (GOLD line) was an area in the past where a lot of buying took place, moving price to new highs. This level could be retested & hold, signaling a move back up to retest that high (top WHITE line). However, a failure of this level will more than likely see price fall at least back to the bottom WHITE line in efforts to retest 1.20620 to see if the majority of traders think the USDCAD is worth buying at that price.
The BLUE lines are just drawn to show you guys the diagonal channel within this parallel WHITE channel. Breaks & holds of diagonal channels inside of parallel channels are just helpful indicators of price reversing.
I also have a 50EMA simply because I know a lot of traders use it. Also, it helps for intra day trades if I just want to make a quick trade for some income. Simple rule, price above the 50 means price is bullish, & below means I should be shorting. I plot the 639SEMA simply because of harmonics & price's natural tendency to gravitate to & from this long term moving average. Nothing special, just a harmonic of nature.
CONCLUSION
Buying at the bottom of channels & taking profits at the top is the most simplified way of trading. The larger the channel, the more profit potential. For example, I could short 2 positions to enter the trade. I could sell 1 position at the bottom white line just to take the money & go on a nice vacation, while I wait for other trades to show potential for entry. Because I took 2 positions, I'm still able to remain profitable in the trade in case the bottom WHITE line fails & price moves lower to retest even more historical lows (i.e. the GREEN line). Buy the lows sell the highs is really all it takes to make a decent living or some extra money.