Short USDNOK Pays Off Well

Update: Our second short position has been closed out at 8.0850 via a buy limit take profit order, for a profit of 2,360 pips, or +2.83%.

 The supporting trade ticket for our second short position on USDNOK. This trade was closed out earlier on via a take profit buy limit order at 8.0850. This netted us a profit of 2,360 pips, or +2.83%.

The supporting trade ticket for our second short position on USDNOK. This trade was closed out earlier on via a take profit buy limit order at 8.0850. This netted us a profit of 2,360 pips, or +2.83%.

Update: Our base short position has been closed out at 8.1650 via a buy limit take profit order, for a profit of 3,010 pips, or +3.55%.

 The supporting trade ticket for our base short position on USDNOK. This trade was closed out earlier on via a take profit buy limit order at 8.1650. This netted us a profit of 3,010 pips, or +3.55%.

The supporting trade ticket for our base short position on USDNOK. This trade was closed out earlier on via a take profit buy limit order at 8.1650. This netted us a profit of 3,010 pips, or +3.55%.

It's been a rough week for the markets but that doesn't stop us from sitting on more than 3,300 pips of floating profits on our 2 USDNOK short positions. Recall that just last week, we closed out our USDTRY shorts for a handsome profit (fully documented in our trade journal). What we didn't publicly reveal was that we were already short USDNOK well before we published that article.

There's a lot that could be said about our current trading books. There's a lot going on and it reflects the busyness in our heads. No surprise here as we've been getting some crazy moves across the various markets we monitor and trade, especially in currencies. We won't go into the details in this piece but will briefly explain why we took the trades going long the NOK (Norwegian krone) against the USD.

 The respective trade tickets on our 2 USDNOK trade, as of 2 hours till the U.S. close on Friday, 8 April 2016.

The respective trade tickets on our 2 USDNOK trade, as of 2 hours till the U.S. close on Friday, 8 April 2016.

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.

Technical & trade details

Before going further, it's good to understand more about the trades we took on USDNOK. There are 2 shorts; one entered almost 2 weeks ago at a price of 8.4660, one entered earlier this week at a price of 8.3210. The former was and remains our base trade for this trade complex, and the latter was an add-on commensurate in notional size to the base position.

The charts below do not fully reflect the price action of USDNOK as they were taken around 36 hours ago. USDNOK is trading lower that 8.26 as of writing.

This means that our 2 trades are currently floating on an unrealized profit of about 3,300 pips. In context of a pair like EURUSD, that translates to about 400 pips net. Not too shabby.

  Note: Charts are snapshots on 4/6 (Wednesday) and are roughly 2 days behind as of writing.   These charts depict the technical basses on which we entered our 2 short positions on USDNOK. The top pane shows the daily chart of USDNOK and provides a macro view of our entry points, our primary target, and key technical factors at play.  Our first short position was at 8.4660 and was initiated about 2 weeks back. This trade was a classic sell on a corrective retrace into our key pivot zone, an area which also acted as a clear neckline support for the huge "Head and Shoulders" formation on the daily timeframe.  The lower pane shows the 4H chart of USDNOK and pinpoints where and when we entered our second short position. This trade was an add-on to our base position on the pair, and was initiated earlier this week at a price of 8.3210. Entry was based on another classic retreat to our micro intraday pullback selling zone, and also a clear test (and false break) of a key support turned resistance level all the way back from mid March.  Finally, our primary target is still some ways lower. As long as sellers remain in firm control, we will be maintaining our key target area beginning at 8.15.

Note: Charts are snapshots on 4/6 (Wednesday) and are roughly 2 days behind as of writing.

These charts depict the technical basses on which we entered our 2 short positions on USDNOK. The top pane shows the daily chart of USDNOK and provides a macro view of our entry points, our primary target, and key technical factors at play.

Our first short position was at 8.4660 and was initiated about 2 weeks back. This trade was a classic sell on a corrective retrace into our key pivot zone, an area which also acted as a clear neckline support for the huge "Head and Shoulders" formation on the daily timeframe.

The lower pane shows the 4H chart of USDNOK and pinpoints where and when we entered our second short position. This trade was an add-on to our base position on the pair, and was initiated earlier this week at a price of 8.3210. Entry was based on another classic retreat to our micro intraday pullback selling zone, and also a clear test (and false break) of a key support turned resistance level all the way back from mid March.

Finally, our primary target is still some ways lower. As long as sellers remain in firm control, we will be maintaining our key target area beginning at 8.15.

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!

Why we shorted USDNOK

Our first objective on shorting USDNOK was to be exposed short the U.S. dollar. We've mentioned several times on our journals and also on our social media profiles that we were (and still are) bearish the greenback, and would be building up a series of positions on our portfolio to capitalize on this view. In this vein, shorting USDNOK was equivalent to shorting USDTRY - our dollar exposure would therefore only be viewed as a broad play.

Our second objective was much more specific - and that was to capitalize on the strength in crude oil, and henceforth currencies that are inherently linked to oil prices. Currencies such as the Canadian dollar (CAD), Mexican peso (MXN), and Norwegian krone (NOK) were prime candidates for us. We decided to go with NOK because we felt there was great potential in betting against dovish central bank policies of lowering interest rates (nearer to zero to deeper subzero), potential that had already been exemplified by both the euro and yen.

Recall that both the EUR and JPY are up substantially against the USD, and also against most major currencies despite extremely dovish polices of the ECB and BoJ, respectively. Recognizing that this unorthodox phenomenon was fresh and somewhat novel, we decided to take the risk and went with being long NOK against the greenback.

And on oil, regular followers will remember what we said about retail shorting oil throughout one of the most vicious rallies it has seen in a while.

The combination of a weak dollar (technical and fundamental aspects), and the surge in oil prices (on the heels of ardent disbelief that oil prices were justified above $40), led to a massive success on our short USDNOK positions.

Concluding

We plan to hold both shorts until our primary target is realized, contingent that the trades remain qualified. We may decide to add more exposure to this position but will be playing it rather conservatively going forward.

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 USDNOK with us and are sitting on a decent amount of profits. Congrats to those that did!