Conviction trade in USDSGD

Base and Rally

USDSGD is one of the pairs that currently sparks my interest. After a decade long decline the exchange rate has based in the years following 2010 and subsequently shot out of that base with a powerful rally, appreciating from below 1.25 to a price of 1.45 at the peak.

But this rally did not continue and the rate has been sold back down to current levels around 1.30.

Liquidity level triggered

So to recap, I see a base, a strong rally and a vicious pullback in USDSGD which has run into an important level defined by the prior low at approximately 1.3150.

For large players, these are the ingredients to build a meaningful long position. Frustrate the long speculators and run their stops placed below the prior lows. Trigger short speculators who might play this as a short breakout trade. Collect all this short volume to stack up longs and reap profits in the coming months.

Outlook for my USDSGD scenario

In the end it’s simple. I am long and looking to stack up if more opportunities present themselves. But as always, I try to cover my butt. Trade small, very small in fact! This is long-term – sit back, relax and rejoice the carry you are collecting! Patience is key. Find a healthy balance between stacking up and taking small profits. Remember, no matter what you do, you will not have done the optimum!

Trade small

This trade, like any other, is uncertain. I might be completely off with my idea. But if that is the case I am confident my disaster recovery mode will get me out without much or any damage at all, because the sell-off in USDSGD has stretched so far already. This game is risky and the Mr. Market knows no mercy. Trade small! Trade small! Trade small! I can’t repeat it too many times. I have seen people puke up their account in no time!

Work the trade

Trade around your positions. Stack up only on great entries. My first profit taking areas are the highs at 1.3280 and 1.3340. That’s where I will trade around my position. Afterwards, I aim higher for 1.37 and above. This is going to be fun 🙂

Disclaimer: Don’t take this as investment advice. This is just my view of the market I am an amateur. Do your own analysis and take responsibility for your trade!

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