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NZD/CAD Trend Prepares for Short Term CCI Crossover

NZD/CAD Trend Prepares for Short Term CCI Crossover

2011-11-17 19:21:00
Walker England, Trading Instructor,
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The NZD/CAD is an often overlooked currency cross. Currently the pair is printing four month lows below .7800, off over 600 pips from its August high of .8416. As momentum increases and the NZD continue to weaken relative to the CAD, trend traders will look for opportunities to enter in on this directional trade. My preference is to utilize multi time frame analysis with a CCI execution trigger to take advantage of further breaks lower.

Technically, we can size up momentum continuations by first using a 30 minute chart and six previous days of data. Looking back one trading week, we can glimpse into the strength of the trend and its direction. Below, I have blocked off trading from November 9th – 13th and the 13th – 16th. Price should continually be seen printing lower lows and lower highs during these time frames, while trading under the 200MVA. If this analysis points to continued downward potential, we can move down to shorter term charts for execution.

NZD.CAD_Trend_Prepares_for_Short_Term_CCI_Crossover_body_Picture_1.png, NZD/CAD Trend Prepares for Short Term CCI Crossover

Once we have found our trend, we can move in and look for execution signals using CCI on 5 minute charts. My preference is to look for pull backs on the indicator to overbought levels (+100) in a downtrend. This allows me to sell at better prices as the pair resumes moving to lower lows. Stops will look to be set outside of the 200 MVA while employing a trail to lock in profit as the trend continues. Using a fixed trailing stop is preferable in this scenario as to lock in profit as our trade goes in our favor.

NZD.CAD_Trend_Prepares_for_Short_Term_CCI_Crossover_body_Picture_2.png, NZD/CAD Trend Prepares for Short Term CCI Crossover

My preference is to sell 2 lots of the NZD/CAD on a CCI crossover back below overbought levels. Stops should be set outside of our 200 MVA for approximately 75 pips on both positions. Our first limit should look for a minimum of 75 pips for a 1:1 risk reward ratio. Lot 2 should maintain a 75 pip stop with a 75 pip fixed trail.

The steps above are the basis for my London – New York day trading program, found inside DailyFX Plus. To learn more, download the London – New York trading PDF linked below.

Additional Resources

Day Trading PDF

Trading the Trend

---Written by Walker England, Trading Instructor

To contact Walker, emailinstructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com

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