This month's ProAct Traders “Pay Your Mortgage Trade” idea is found in the CADJPY pair.
We see that we have created a nice down channel in this very large range. We have convergence on the pair which strengthens the bearish position for the pair. We are looking for an initial big move to the 0.500 Fibo @ 85.22. Watch for a significant bounce there before the resumption to the downside. Any pullback offers increased opportunity to add positions. The overall target from here is 612 Pips away @ the range bottom (80.40).
How to trade it? You will need to wait for your set-up to show up, for London & New York traders, that will mean waiting for the reaction now in the current area. Take your first entry and use the respective risk reward ratio to start trading this currency pair. We have preplaced entry orders (sell stops) on the break of each Fib and barrier to the downside and any rally should be considered an area to add to the position. DO NOT TRY AND CROWD THIS PAIR WITH TIGHT STOPS. Remember the “pullback is your friend” in route so use those to add to the position.
Be careful at the 0.786 Fibo @ 82.74.
The pair typically has pullbacks in the 120 pips range so every pullback could add an additional 120 pips to the trade with another position. Currently the ATR (14 Day - Average True Range) of the currency is 75 Pips per day, so this might take about 3 weeks with pullbacks!