TRIANGLE READY TO BREAK

In the picture below, we have a beautiful triangle forming on the Eur/Cad.  This is a 30-day triangle (time from the base to the tip of the triangle).  The rule of thumb is not to take a breakout in the last 10% of time, in other words the last 3 days on this triangle.  This allows us to watch for a breakout up to 11/9/05.  The base of the triangle is 500 pips.  I like to see a break of at least 10% of the pattern size.  That being said, a break above 1.4320 or below 1.4035 will indicate a trade.  A retracement of the 50 pip break and cross back into the triangle would kill the trade.  The set is as follows, buy entry order at 1.4320 with a 100 pip stop and a 400 pip limit (4:1 reward/risk ratio) with a simultaneous, mirrored sell order at 1.4035, 100 pip stop loss and 400 pip limit.  These limits are 50 pips short of the upper target based on the pattern and 50 pips late on the entry.  I would rather make 80% of the movement and be right more often than try for 100% of the price movement and be wrong a lot more. Because it has taken 3 weeks to form, it could take 3 weeks for the price to reach the limits.  If the pair breaks out, I will probably adjust the stops along the way.  If it does not break by the 9th, the pattern is void.  If I had to pick one direction, I would favor a short trade as commodity pricing has been rising and the Euro has been struggling.  The ECB meets tonight which could be the catalyst to break the price out of the triangle.  If you have questions about the pattern or trade please click on comment and the system will email me.  Feel free to click the email link below to forward this to friends or other traders.