Short USDZAR Profits Big

4,700 pips won on a single trade. Striking when the iron is hot, is what exactly we have been doing. For the last couple of weeks, we've bagged a couple of decent trades; pretty damn good trades actually, if we spared you the modesty. We won some 1,300 pips on USDTRY, are riding on about 3,300 pips on USDNOK, and today booked a huge winner on USDZAR - a currency pair most retail traders probably never even heard of until now.

In today's truncated trading piece, we'll talk about our most recent trade on USDZAR. The South African rand (ZAR) has been a prime candidate in our eyes for quite some time now. We just lacked the opportunity to jump onto the long EMFX bandwagon as we've either been distracted or not confident about going in fairly big on an exotic currency.

We've traded quite a number of lesser known currencies (some can be called exotics) such as the Turkish lira (TRY), Chinese offshore yuan (CHN) , Swedish krona (SEK), Norwegian krone (NOK) amongst others. The rand is the latest to be added to the list. For traders that don't know abit exotic currencies, they are usually offered to be traded against major currencies chiefly the USD and EUR.

Spreads are much wider on tha exotic pairs as liquidity is correspondingly thinner. Spreads often adjust depending on the session of trading. For instance, the spread on USDZAR is usually the tightest during mid-European trading, while that of USDCHN is tightest just before Central Europe opens for trading.

Exotics have given us a much wider breadth in the FX markets. Specific exposure which cannot be gained using more traditional currency crosses, can be attained with proper planning via exotics.

Before we continue, it is important that you understand all of the trading content we put out on these pages are real trades on a real account that we trade ourselves. We're using real capital and trading live prices. You can find out more about our trading system here. You can also view our entire trading journal here. In publishing such articles, we want to help traders from all walks of life better understand how successful traders approach the markets, and translate ideas into actions.

Trade & technical details

We entered our short USDZAR trade last week on 6 April, at a price of 15.1200. The trade lasted for approximately 5 days and was closed earlier today via a take profit buy limit order at 14.6500, netting a profit of 4,700 pips (+3.11%).

Because of the price USDZAR trades at, this would be an equivalent of ~340 pips on a pair like EURUSD.

We don't have much to comment about other than to say that the trade was highly motivated by technical factors, and that our entry was a tad premature (in hindsight), but we knew where our risk-reward profile stood and believe we still had a risk advantage even though our entry point was off.

We were satisfied with the trade management as we were able to (correctly) ride out some drawdown before the trade earnestly went in our favor. Our objective was well placed, and we would call this trade an overall success with certain aspects that can certainly been improved on.

In the chart complex below, we've explained in detail everything you need to know about this short USDZAR trade. 

  Note: These 2 charts are themselves 1 hour outdated prior to trade closure. As of writing, our short USDZAR trade has already been closed out.    We have also included the actual trade ticket of our conclude USDZAR short trade.   Our single short position on USDZAR was initiated on 6 April last week at a price of 15.1200. The trade has since been closed via a take profit buy limit order at 14.6500 resting inside our primary target, netting us a gross profit of 4,700 pips (+3.11%).  The top pane (4H chart of USDZAR) depicts the macro picture in which we shorted USDZAR in. The main motivation for our single short USDZAR trade was a pullback into our key pivot zone, where we were confident sellers would be willing to offer into. On a higher time frame, we had been bearish USDZAR on a price action basis and were looking for a good opportunity to get short. In this chart, we have highlighted why 15.12-19 was a key area for us. Not only was it a key pivot zone, it was also a strong area of prior support turning resistance, and would therefore act as a good pullback selling area. We decided on 14.6500 as our primary target, and it turned out to be a good selection.  The bottom pane (1H chart) provides a zoomed in view or our entry location and the rest of the price action that transpired. In hindsight, our entry was premature and at an inferior price as the initial reaction off our sell level was tepid. Price action proceeded to trade well above our sell level, and did so in an impulsive manner (1H context). We stuck to our short position because despite the rally deep into our key pivot zone, price still remained in a down trend and within our margin of error on the larger time frames. The rally above our sell level turned out to be a false breakout and price eventually rolled over in a corrective advance, what we would typically at the latter stages of corrections. Notice the 2 formations of Head & Shoulders - one demarcated by a distinct neckline, which failed as sellers offered hard once we got a breakdown of the consolidation (right most shoulder); this consolidation was also a Head & Shoulder by itself, interestingly. 

Note: These 2 charts are themselves 1 hour outdated prior to trade closure. As of writing, our short USDZAR trade has already been closed out.

We have also included the actual trade ticket of our conclude USDZAR short trade.

Our single short position on USDZAR was initiated on 6 April last week at a price of 15.1200. The trade has since been closed via a take profit buy limit order at 14.6500 resting inside our primary target, netting us a gross profit of 4,700 pips (+3.11%).

The top pane (4H chart of USDZAR) depicts the macro picture in which we shorted USDZAR in. The main motivation for our single short USDZAR trade was a pullback into our key pivot zone, where we were confident sellers would be willing to offer into. On a higher time frame, we had been bearish USDZAR on a price action basis and were looking for a good opportunity to get short. In this chart, we have highlighted why 15.12-19 was a key area for us. Not only was it a key pivot zone, it was also a strong area of prior support turning resistance, and would therefore act as a good pullback selling area. We decided on 14.6500 as our primary target, and it turned out to be a good selection.

The bottom pane (1H chart) provides a zoomed in view or our entry location and the rest of the price action that transpired. In hindsight, our entry was premature and at an inferior price as the initial reaction off our sell level was tepid. Price action proceeded to trade well above our sell level, and did so in an impulsive manner (1H context). We stuck to our short position because despite the rally deep into our key pivot zone, price still remained in a down trend and within our margin of error on the larger time frames. The rally above our sell level turned out to be a false breakout and price eventually rolled over in a corrective advance, what we would typically at the latter stages of corrections. Notice the 2 formations of Head & Shoulders - one demarcated by a distinct neckline, which failed as sellers offered hard once we got a breakdown of the consolidation (right most shoulder); this consolidation was also a Head & Shoulder by itself, interestingly. 

We have included the trade details and some brief technical analysis in the charts above and won't be repeating the same narrative here.

Once again, only our Premium Subscribers are updated in real time on our live trades, so be sure to hop in the bandwagon if you want a part in the fun!

A few notes

Like most of our previous trades detailed in our Trading Journal, this short on USDZAR had strong fundamental backing to it. We usually don't take trades of lengths greater than a day unless we have some sort of fundamental view on the markets in question. As our approach relies heavily on the synergy of fundamentals and technicals, we'd like to always have the best of both worlds as much as possible.

In brief, this trade was an outright high beta short U.S. dollar play. We know we've been overly repetitious about this, but we were (and still are) bearish the USD. Our portfolio has reflected this view with various degrees of intensity over the course of the last month. If you noticed, all of our recent trades had elements of dollar bearishness, and their respective idiosyncrasies as the remainder.

In conclusion, we're very happy about how this trade went; from inception, to trade management, to exit. This will definitely not be the last time we're trading the rand.

Once again, subscribers to our Premium Signals Service were kept updated in real time on all of our positions and had exclusive first hand insight to our trading activity as it unfolded. Many of them were short USDZAR with us and have profited heavily as a result. Congrats to those that did!