Trade Ideas

How to Trade CADJPY

By Rob on December 4, 2017

Reading Time: 3 minutes

Trading CADJPY can have some interesting results, particularly when you stop to think that although CAD is in positive interest (1%), JPY is negative (-0.1%). What does this mean for your trade? It basically means that you’re in for higher returns when you play things the right way. But it’s getting to that right way, it’s learning how to trade CADJPY that makes all the difference.

Look To The Past

When we begin looking at how to trade CADJPY, we need to look to the past. Not just last week, but the week before too. It’s essential to see what the trends are before we commit to anything. In this case, we can see that there was an outside bar taking out both the high and the low of the previous week. The cycle shows that there are higher highs happening each week, as well as higher lows. This will help us choose where to place our entry point and stop loss.

We can see an upward trending market, and since it has happened for three weeks in a row, it seems a safe choice to go in a little higher at both ends on our own trade.

But We Don’t Want To Do That

To be completely sure when it comes to knowing how to trade CADJPY, it’s far better to place your entry point above the highest high, but also below the lowest low rather than above it as you might think. You don’t want to run the risk of leaving the race too early by misjudging the signals. Just so you know, this is the standard entry for pin bar reversal, so it’s something to bear in mind for future trades too.

Check The Smaller Time Frames

On the weekly timeframe, you can see that the trade won’t actually be triggered unless there is follow through after the break of the trend line, making the trade an even safer one altogether which is great when you’re learning how to trader CADJPY.

How About An Advanced Entry?

For some, looking at the weekly timeframe and determining whether there will be follow through or not isn’t how they want to look at a trade. Therefore, they’ll be trying something different; they’ll want an advanced entry. In this case, that means coming in at the midpoint. That’s not such a great idea – in our eyes – because it can cause some serious issues. Look on the four hourly:

You’ll see that there has been no higher low. If you place your trade on the midpoint, you’ll trigger earlier than placing it on the higher high, but you could easily catch the trade in a downward trend, leaving you with a decimated trading account (or at least a diminished one) at a new lower low.