Price Action is widely known by trader because of its simpleness and effectiveness. We found a fact that there are many professional traders in the world using only naked charts to generate a stable income from trading. Today, we will take a look at one of the most compelling Price Action strategies – The Canadian Evening.
What is the Canadian Evening system?
“Canadian Evening” – the name says it all – is a type of break-out trading strategy developed for the currency pairs which have CAD as their counterparts. The interesting thing of this system is that it’s pretty simple, only using the horizontal lines to find entry points and doesn’t need to combine with any indicator, enabling us to avoid the confusion in analyzing.
How to trade Forex with Canada Evening strategy
This system is applied on 1-hour chart. We must build a price box from 17:00 - 2:00 counted on Ottawa (Canada) time (UTC-5) on every trading day using horizontal lines. The top of the box is the highest high while the bottom is the lowest low of the mentioned period.
Now, we will have to wait for prices to break through the box (the breakout is only counted valid if prices close outside the defined box). Then, we go to look for a “bump candle” which presents the price retest of the latest broken horizontal line. Note that if there are more than 4 candles closed after the breakout, the trading signal is ignored.
In case prices return inside the range, we will have to wait for prices to break again in the direction of the last breakout and open the position at the close price of the newest candle closing outside the box. The distance between the level of the broken horizontal line and the close price of the breakout candle must not be more than 15 pips. In addition, if there are more than five candles closed, the signal is also skipped.
The stop-loss should be set at the level of the other horizontal line with the maximum of 35 pips. The take-profit could be 35-60 pips. We will steadily trail the stop level if prices trade in expected direction.
The pros and cons of using the Canadian Evening strategy
Thank to the simpleness of this strategy, we found it easier to seek for evident signals. However, traders using the Canadian Evening system have to be very patient waiting for reliable trading opportunities by carefully observing the candle performances and fast grabbing the entry point. This may lead to a quick dispiritedness sticking to the strategy rules and cause traders to be emotional. Besides, prior knowledge of reading charts and technical analysis is also required to apply this system effectively.
The Canadian Evening is a very easy-to-use trading system, especially new traders. Proficient in using this strategy may help us stably profit from market. But as we already knew, there’s no system being right all the time, even the most well-developed ones. We must be patient enough to wait for the most reliable signals to enter the market. In addition, risk controlling and psychological managing methods must also be drastically applied to avoid being emotional when using this strategy to trade.