A while ago we opened a sell forex signal in USD/CAD. This forex pair has been in a downtrend for the last couple of weeks, so we decided to go with the flow, which is the right thing to do, usually.

This pair has lost about 400 pips during this period, so we can’t question with the market sentiment here. The sentiment is bearish and is strong. The gap lower last night when the markets opened is another sign that reinforces this idea.

But as you know and as forex books suggest, I don’t like to jump in anywhere in a trend. I wait for pullbacks in the opposite direction and then try to figure out when the pullback is complete. This reduces the exposure and increases the winning potential.

We’re back below the 20 SMA (grey) now

So, I waited until USD/CAD retraced higher. The price got close to the 50 SMA (yellow) as you can see but started reversing before reaching it. The buyers started getting scared and started closing their trades before touching the 50 SMA.

Although, one of the main indicators for this forex signal is stochastic. The price has reversed lower every time stochastic has reached overbought levels. It looks like it is doing the same now as we are seeing some selling pressure up here. The price has already started to slide lower, so we are on the right side now.