The 85% correlation between the USD/CAD and the price of crude oil makes trading the Loonie a convenient substitute for the relatively expensive crude oil futures contract. Each might go about this in his own way, but I am thinking it would be a good idea to keep on eye on the crude futures chart and the Loonie both, when attempting this strategy.
That way, when your position in the USD/CAD starts going wrong, you can check to see if the crude prices are moving a different way than you wanted and take corrective measures. For example, this morning, oil prices were up, Canadian trade balance was up. Loonie was stronger. It tested $1.1550 and bounced. I expected it to do a normal bounce and continue settling lower, but it bounced over 100 pips, thus stopping me out. Crude prices had fallen from the time of the bounce. I wasn't watching. So now I will watch. Just a tip.
I seem to be the kind of trader that would benefit from the discipline of a no-loss stop once the trade has gone in my favor say 30 or 40 pips. While this is not entirely satisfactory, it has the advantage of not losing money on the trade.
That way, when your position in the USD/CAD starts going wrong, you can check to see if the crude prices are moving a different way than you wanted and take corrective measures. For example, this morning, oil prices were up, Canadian trade balance was up. Loonie was stronger. It tested $1.1550 and bounced. I expected it to do a normal bounce and continue settling lower, but it bounced over 100 pips, thus stopping me out. Crude prices had fallen from the time of the bounce. I wasn't watching. So now I will watch. Just a tip.
I seem to be the kind of trader that would benefit from the discipline of a no-loss stop once the trade has gone in my favor say 30 or 40 pips. While this is not entirely satisfactory, it has the advantage of not losing money on the trade.
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