Monday, December 31, 2007

Forex Speculation?

Have you ever wondered what is meant by the term speculation?

It seems to be rather loosely defined.

Speculation is the process of selecting investments with high risk in the hopes of making a profit due to price changes. Apparently, if you use that which you purchase, such as consumption of a commodity, or if you purchased something in order to profit from dividends or interest rates, then it isn't speculation.

So, in summary, if you buy a financial instrument in the hopes that you will profit from a change in price, you are speculating. Obviously, forex trading is a form of speculation.

According to Wikipedia, speculators provide a valuable service to markets by adding liquidity. This allows the market to operate with more efficiency and it allows lower spreads between buy and sell prices. Or, in Forex terms, it allows a lower pip spread.

Are you interested in being a forex trader? Look around and read my blog. I write about my trading experiences as a Forex speculator so you can learn from my mistakes -- instead of making them yourself.

Sunday, December 30, 2007

Forex Trading Made Easy

Are you kidding me? Forex trading isn't easy, it's about as risky a financial endeavor as you can legally participate in.

Wait, let me rephrase that... foreign exchange trading is easy, success isn't. Yeah, that's right, that's my tag line. It's true.

If you are looking for the easy button, here are some platitudes for you:

  • Buy low and sell high.
  • Have inside access to national economic reports.
  • Witness a major international incident prior to the news reports.
If you are willing to work hard, be patient, and work to preserve your capital, then here are some more helpful suggestions:
  • Wait for a buying opportunity before entering a market.
  • Manage your risk via position size and stop loss orders.
  • Learn to recognize when you should not be trading.
Waiting For A Buying Opportunity
If you don't know how to recognize a buying opportunity, then you need to be playing with funny money still. Perhaps there has been a big movement recently. Perhaps there is a news release on the way. Perhaps you have noticed a trend and your indicators are giving you signals. Whatever the case, don't just throw your money at the market and hope for a profitable move.

Managing Your Risk
It's easy to get fully invested. Heck, if you are careless you can do this in one trade. If you aren't careful you can blow up your entire account within minutes. Sure, you do have to take a risk every time you enter the market, but you don't have to take huge risks in order to achieve significant returns on your money. Make sure you are around for the long haul because eventually the market will make a move in your direction.

When Not To Trade
Generally, when you are having a bad day, whether because of the markets or otherwise, it is a good time not to trade. If you are bored, stressed, emotional, desperate , depressed, or angry, you are very likely to make poor decisions. All it takes is one unlucky rash decision to lose your capital. The forex trading game is one that requires vigilance and discipline. Know yourself.

Anyway, today is Sunday, so I can't trade just yet. What do I do on Sunday? I think about potential trading strategies. I look forward to the day when I have real capital in the markets and am making a serious income. I review my previous ill fated forex trades. I write in my blog.

Saturday, December 29, 2007

Unplanned Forex Setback

Well, things have gone poorly just lately. Not because of anything that I've been responsible for, but because I was the recipient of an "insufficient funds" check. As the money I was planning to use over the holiday period was rudely removed from my account I was forced to withdraw a large portion of my Forex account.

I'm quite peeved!

Especially since I had some good in-profit positions protected by a stop loss. After I had to unload for a small profit the market continued to rise for a couple of days. Of course, if I was still in during the Thursday evening sell-off, I would have been taken out for sure, it still would have been at a higher profit level.

Oh well. There isn't much I can do about it. As it is, I'm searching for a job and hoping to soon be playing the Forex in a serious way. Up until now I have only been working with an extremely small capitalization. Upon resuming my career, which I expect to happen early in the new year, I'll be able to accumulate a reasonable stake and put my recent "education" to work.

Thursday, December 27, 2007

US Durable Goods / Jobless Claims

The numbers came out weak this morning.

While it appears to have caused some initial softness, I think we should keep in mind that a weak US economy gives the Fed additional room to lower interest rates without fears of inflation.

So, personally, I might consider buying into weakness...

Wednesday, December 26, 2007

AUDJPY With Bollinger Bands

Lately I've been trading the AUDJPY using only an EMA (exponential moving average) and SMA (simple moving average). The theory is that when the price is below these averages it will at some point return above it. This is generally true, even during a downturn, but especially so during an upturn.

I have been seeing some success with this, but it does have me hanging onto losers for some period of time, so that they again return. I continue to have trouble dumping a loser as soon as I recognize it as one... and it is probably something I should be working on.

In any case, I've added Bollinger Bands to my 5 minute chart. It seems to give an indication of when a price movement has reached the limit of movement with respect to recent volatility. While it is always important to realize that the past does not guarantee the future, it does give you an indication of timing with respect to entry and exit points.

Again, keep in mind that I am happy to accumulate carry positions in AUDJPY. This greatly colors my strategy and how I trade.

Friday, December 21, 2007

AUDJPY Overnight Upswing


I'd been getting into the AUDJPY pair during most of the week. Now, most of my small nibbles have been taken out on the way up, at a profit, while I've sunk some larger carry positions about 120 pips below the current price.

I like that!

Anyway, as you know, it's very hard and dangerous to bottom pick, but if you don't mind accumulating some (manageable) risk, then you can (hopefully) eventually reverse your losses and grab some profits and some carry positions once the market does finally come back to you.

The hardest part is to hold onto positions after the floor has dropped out from under you, again and again, on the way down. When the market rises while you are sleeping, you don't get the chance to get nervous about your profits... but you can set healthy stop losses afterwards -- and hope for a major uptrend continuation.

That is where I am right now. The market has opened and if the DOW decides to shoot up today, which it could, then I'll be smiling. If not, I don't mind hitting the stop losses and banking some respectable profits.

Good luck out there!

Thursday, December 20, 2007

Timing Market Entry

I've noticed that the Forex markets move both fast and slow.

If you are busy sinking money into some carry positions, the market might suddenly decide to go sideways, or perhaps down, for the next week. So, you go underwater and don't get to lighten your load on subsequent upswings.

However, if you are light in the market, a piece of news will drop and leave your jaw on the floor as you miss out on a quick 100 pip swing. Obviously, if you play the news, it will come in on the wrong side or the market with interpret it in a way that surprises you in order to throw you under the wheels of the money train.

In short, it's not easy getting into the market safely with any quantity of net asset value.

The problem really arises when you take small bites, getting into the market without risking all that much, and then find out that you were wrong. The market will wiggle around a lot, near your entry price, enticing you into thinking it will eventually recover, and then sink a bit more. If you put in a stop loss, the market will hit that, then bounce back up -- taunting you with a profit that you can't participate in.

It's simply devious.

So, how do you get into the market? How do you accumulate a set of carry positions that are in profit? When do you enter the market? What signals should you be following? As I've noted before, technical analysis of the carry pairs is very tricky, as they are driven by market movements. These pairs are happy to run roughshod over your trend lines any time the markets are euphoric, nervous or calm enough to lure you in.

My suggestion is for you to work out the resistance points. As you approach a resistance point you can see how the pair reacts. If it stops or starts to bounce, you might feel it worthwhile to enter a position. You are basically risking the pip spread plus the distance to your stop loss. You simply have to risk a small amount of capital in order to play.

The key is pick your entry points when you have the best chance of seeing an upturn. It's not easy.

Wednesday, December 19, 2007

Theoretical Investment Strategy

I like to think about things, twist them around, and come up with theories.

It strikes me, that as long as a market continues to move up and down, such as the AUDJPY, that every time you take a position, you are guaranteed a profitable exit if you are able to wait long enough.

This leads to some interesting theoretical strategies if you are using a trading platform that doesn't penalize you in any way for executing micro-trades.

For example, if you take a small position with a predetermined take-profit setting, then you know that over time you will earn the return you've selected. So, in theory, you can drop one of these positions into the market every five minutes and determine your eventual average earnings per hour.

At the same time, as a carry position, you know you will be earning interest while you wait for the position to close out with a profit.

Additionally, perhaps the best time to embark on this strategy is after a significant unwinding in the carry market? However, keep in mind, that if you blithely throw your money into the market you will slowly end up with a large and vulnerable position during a long term down trend.

An alternative to help alleviate this concern is to buy positions at what you think might be a bottom. Then, if you are wrong, wait until another 100 pips or so have fallen by the wayside before trying again. This will let you avoid getting a large position on the way down. If you aren't wrong, execute a grid strategy, buying a new small stake for every N pip rise.

It seems "wrong" to buy on the way up, but this also limits your total position. You will be taking profit on the lower positions and accumulating new positions every N pips. With the downward and upward strategies outlined above you can calculate your total position and your total drawdown for potential market movements.

As a bonus, this type of strategy would be easy to implement using some type of automated trading platform.

Tuesday, December 18, 2007

Overnight Trading

As I live in the eastern timezone, I get to trade overnight prior to the NY trading session on the next day.

Last night I was able to settle some AUDJPY positions around 96.7, 96.8 or so. At the moment these are nicely profitable while the DOW futures are simultaneously positive.

As far as I can tell, the US trading day pushes around the AUDJPY based on stock market movements. By this, I mean that any established trend can easily be broken as soon as the stock market does not itself follow any such trend. In short, reading your charts and so forth can be pretty misleading at this time.

However, a potential strategy ensues. There are underlying fundamentals based on both the AUD and the JPY. When the US trading day is over, these fundamentals can start to exert themselves on the AUDJPY pair. So, on a heavy US down day, it might make sense to acquire a little bit and hang onto it overnight. Basically, take a small bet. If it moves against you get out, of course, but if it goes your way, put a profitable stop loss under it and hope for a good day in the US.

This will probably be true as long as the US economy and the world economy are still considered to be different entities.

Personally, I take tiny sustainable nibbles on the ride down... getting a little bit of carry action. Then, from time to time, when it seems a bottom is possible (considering that a downward moving DOW pushes down the pair) I'll jump in with larger positions, hoping for that eventual correction or reversal.

Saturday, December 15, 2007

Weekend Forex Thoughts

Although it is the weekend, I can't help but think about trading.

One of the things I've noticed recently is that the EURTRY pair is much less influenced by Wall Street. The DOW is flying all over the place, dragging the AUDJPY and related pairs up and down the charts, while the EURTRY drifts sedately instead.

However, a caution, the EURTRY has historically had some very violent and large moves during unwinding events. You do not want to get caught unprotected during one of those events.

Another thing I am thinking about, as an early idea, is the concept of being strategic with the use of sub-accounts. When thinking about the carry trade it is obviously best to buy into positions when their has been a large drop, over some period of time, and the pair in question seems most likely to start drifting back in the direction of it's natural inclination.

Sub-accounts could allow you to segregate buy and sell activities by price range. For example, if a pair you are trading has historically had a maximal total movement of a couple thousand pips, then you might create sub-accounts with fixed amounts of capital and execute trades in them when the price is in a range that corresponds with a particular account. So, account ABCXYZ100 would be used for prices at or above 100.00 while account ABCXYZ090 would be used for prices between the 100.00 and 90.00 points.

This gives you a segmented absolute limits and the ability to fire and forget, since you won't have to look at the sub-accounts or wade through the open positions every time you look at your main account. I don't know, I certainly haven't put any serious thought into it, but don't discount the ability to "fool yourself" or "avoid" seeing things that could have an emotional impact.

Hmm, something else I've noticed, it's hard to reverse trades when you've been following a trend for a while. When it does turn, it is very easy to get caught trying to trade the previous trend -- which of course is costly. In this case, it's easier to start trading against the previous trend using a sub-account. In fact, it's also necessary, as a counter trade generally take you out of the countering position. Just don't go crazy straddling the pair as there is no point in doing that either.

Wednesday, December 12, 2007

AUDJPY Reversals

Wow, what a roller coaster!

Yesterday saw a massive downturn, followed by this morning's upturn... and then a slow fade back down during the day.

I'm happy to report I was able to recoup my losses from yesterday on the upturn, and then incredibly was lucky enough to unload near the peak. Sweet.

As you might understand, I'm a little nervous about committing capital to the market at this point. However, prior to the elephant known as the Fed getting involved, the market had been fairly well behaved and apparently establishing a bit of an up trend. At this point, who the heck knows...

Tuesday, December 11, 2007

Recent Non-Success

Today's fed announcement caught me with an unprotected position. Needless to say, as the floor dropped out of the AUDJPY market, I was given a bit of an unpleasant ride.

However, I didn't blow up my account, so hopefully things will settle down and drift towards "the middle" so I can get out without too much pain.

Sunday, December 2, 2007

Recent Success

Well, it has been a few days since then, so I can't remember the full details, but I was able to catch an up-trend with a significant amount of my net asset value slipped in.

Basically, when an initial foray is in-profit, I'm ready to put in more when the trend seems apparent and things are acting rationally. So, after a few ups and downs, perhaps within an up trend, I could have accumulated several slightly profitable positions.

If this continues for a while, it's easy to get a large portion of your net asset value into a situation where tiny profits are locked in (stop losses set above the entry point). Then, if the market doesn't drop low enough to take you out, or perhaps a news event occurs in your favor, you can grab a large profit over the next hours or days.

In any case, I like to do this with AUDJPY, buying in during an uptrend, willing to let some carry positions accumulate until the market decides to either reward me or close me out because of my protective stop losses.

I am thinking of looking at some other currency pairs. The carry pairs seem to be closely driven by the stock markets, and hence have an awful lot of volatility, whereas some other pairs might be a bit more manageable.

Tuesday, November 20, 2007

Success With AUDJPY

Finally, I seem to be able to make a few dollars. This is significant as it represents a ray of sunshine in my quest to become a Forex trader.

I'm still playing with a small account balance, but hey, if I'm able to grow this into a more serious stake, I'll be willing to trade with it.

Anyway, to give you what might be a trading tip or two, my process currently is to start out by looking at a 1hr chart, identifying any potential trends. Once I've scoped out this level, I'll drop down to the 15min chart, again looking to identify any apparent trends.

Once the above have been done, I'll use the 5min chart to look for entry points into the trend. When the market is "rational" then simply buy low and sell high.

Of course, it is particularly difficult to execute this strategy, and it is very difficult to know when the market will become "irrational", but you only need to be right more often then wrong if you do this right.

One hint, when you approach the end of a trend, a boundary between two trends, or major resistance levels, the market may or may not behave rationally. Trends often break, prices halt, drop or pop unexpectedly, and bets on the trend get even riskier than they are under the best of conditions.

Monday, November 12, 2007

Time To Accumulate A Carry?

The AUDJPY is down around 96.00 at the moment.

I've ridden the money train on the way down a couple of times. I don't know if there is a real term for this, but as it goes down, I add new positions as previous ones have profit protected behind a stop loss. When you catch a large down movement using this practice you can put nearly your entire account into play -- while only taking any risk on the last one or two entry positions.

Anyhow, that's a bit off topic for today. I'm thinking that it's time for me to try to accumulate some carry positions. I would of course have to buy when I expect an upturn or a correction and then place protective stop losses above the purchase price. Once again, the only real significant risk is on the last position opened since it starts out negative and needs a little bit of room to breath.

However, while I'd like to accumulate some carry positions, it seems to me that this will be an exercise in bottom picking. If we aren't at bottom and the positions are all protected behind a stop loss, then they will all be closed as we move towards a new low.

Wait a minute! That's not a bad thing. It means that if we are diligent in this strategy that eventually we will have a string of positions anchored down at a level near the eventual bottom, whatever it finally happens to be. Then, upon any potential future unwinds that close out our positions, we can reenter either at a lower bottom or very near where we were.

It sounds like a good long term strategy to me -- I just wish I had some serious capital to play with!

Friday, November 9, 2007

AUDJPY Unwinding

The yen is appreciating quickly at the moment, or should I say a short period ago. Luckily I was awake and able to scramble around in my account to keep things sane!

EDIT: It is still unwinding... now at 102.75 and holding. Oops, now approaching 102 and probably beyond.

AUDJPY Thoughts

I'm still trading the AUDJPY.

I've learned that the Dow Jones and the AUDJPY have a correlation based on the fact that people borrow Japanese Yen to invest. You can watch the AUDJPY rise and fall as the Dow rises and falls.

Hmm, what else have I learned?

I've also learned that I have a tendency to get too heavily invested. I guess I'd be okay if I had a larger capitalization -- assuming I did not increase my position sizes by the same proportion. You see, as a corrective trend gets longer I'll often see opportunities and act on them, and then be left positions I view favorably, though I can't get rid of them without a loss unless I wait.

Blah blah blah. Good thing for me to realize about myself as perhaps it will let me slow the trigger a little bit.

What else, oh yes, charting. I've been looking at common chart patterns, and have started to see them happen... and what do you know, at times I can make a prediction, for a reason, and watch it unfold. It's very exciting to see an opportunity, pull the trigger, and watch the pips roll in.

Friday, November 2, 2007

Bragging Rights on the AUDJPY

A nearly perfect day!
I just could not resist posting this. It represents a great day of trading the AUDJPY leaving me with both profits and some low priced carry positions. What more could I want?

I should note that I stayed with this pair for over 24 hours. The US Jobs report came out during the spikes outside the trend lines.

Trending the 5 min AUDJPY

I've been having a great time spotting trends on the AUDJPY today. Well, of course, I have to point out that trends are good until they change. However, with that out of the way, I've been able to pick up some trends, identify channels, and generally advance my knowledge and confidence quite a bit.

Sure, sure, I know, everyone can float in a rising tide, but check the charts today, things have been a bit choppy!

It's a powerful thing to see prices bounce off the "walls" of your trend lines for two or three hours. While maybe only an illusion this gives you the ability to enter and exit trades with a feeling of control. Well, a semblence of expectation at the very least.

Similarly, there is a chess-like pattern to this dance. If you've got a gain, there is going to be a drop. If you've seen a quick drop, there is going to be a gain. These aren't truisms, but you can rely on one of two things. If you have a long position, and the short term average is under the price, the price will either hit the other side of the trend line, or your position will improve in profitability.

When you can start to see some inevitibilities, while a trend holds, you can start to plan, have enough confidence to hold aside both greed and fear, and reap profits while the market stays rational. When it falls apart, it's time to start looking for the patterns in the sea of chaos...

Friday, October 26, 2007

Forex Scalping Information

Okay, I've been trying to find information on forex scalping and the pickings are mightly slim indeed. In fact, the so-called information on the net is so bad I'm going to write up a small post of my own... because I'm sure if you found this page you are desperately looking for some real information.

What Is Scalping?
Quite simply, very short term trading.

Why Don't Brokers Like Scalping?
Well, some brokers don't like scalping because of how they are set up. If they are not able to execute your trades quickly or efficiently enough then they risk being the source of your profits.

Does Scalping Work?
I've seen some people claiming that it works great as well as others claiming that it is impossible to do profitably. The reality is that if you can predict the direction that an equity pair will move, either up or down, then you can hop into the market and grab a few pips when it happens.

How Easy Is It To Predict Equity Pair Price Changes?
Well, that's the million dollar question! I don't have any books to sell or anything, but a lot of people claim to have solutions for you. Personally, I think if they really had solutions that worked they wouldn't waste time telling you about it, they'd be busy trading. However, in an effort to be informative, when you spend enough time watching a market (which is quite boring) you'll get a feel for it's current state and how it is moving. Often, until conditions change, you can be fairly accurate with your predictions.

Can Anyone Do This?
If you find a market maker that doesn't mind scalping, you can try. However, you must know how to place stop and limit orders with their trading platform. In particular, it would be very nice if you were able to have someting known as a trailing stop. As well you will want to understand the concept of leverage as it applies to a forex account. Basically, I'd suggest throwing $100 at a starter account and playing around, carefully, until you've made enough bad decisions to learn how things work. After that, you should have the tools needed to try out various strategies.

How Much Effort Is It?
Scalping is very time consuming. You have to spend a lot of time watching the markets, to the point that it would be difficult to do well if you had an existing full time job. Also, scalping is very demanding from a psychological point of view, as you will have large amounts of your capital ready to put into play, but you may have to wait hours before you spot a good entry point. Then, upon entry, you might find you are back out with a small loss in no time. Alternately, you might get a small profit, take it, and then watch the market skyrocket after your exit. The shorter your trading is the more attention it will take and the more nerve wracking it will be.

Are You Scalping?
I'm thinking about it. I've been opening up a grid strategy to catch swing trades, but I have noticed that using half of the scalping mentality to accumulate positions in trends may be able to have a significant positive impact on my results. I guess I'll end up letting you know how things work out.

Monday, October 22, 2007

Grabbing Some USDCAD Pippage

Well, it's about time!

It looks like there is some strength in the USD happening (or perhaps it has already finished happening) at this point. Am I vindicated?

Who knows. As I've seen posted here and there a few times, everyone trades alone. You have your convictions, systems or maybe even a dartboard, and you play as your guidance and resources dictate.

However, recent weakness in the USD does make it hard to determine where the real bottom may be. Is it at 0.9650, 0.9600, or 0.9500? Have we hit it? Only time will tell if we have truly found the bottom or not.

As I was saying not too long ago, eventually we will be at the bottom of what will become a large uptrend in the USDCAD. Presumably, at some point, we'll be back in a position where the exchange rate hits 1.0000, 1.0500, 1.1000 or more. Sometimes things move quickly, but it might take years.

What to do?

Wednesday, October 3, 2007

USDCAD Is Playing By My Rules

Okay, I've blogged recently about the USDCAD approaching a low.

I know there are always skeptics out there, and I'm not trying to sell you anything, but I will suggest that this pair is now fairly easy to trade.

When it shows signs of weakness, dropping significantly, buy it. When it approaches parity, sell it. It may or may not be at bottom yet, but nobody really believes that the Canadian dollar should be valued much above parity with the US dollar.

So, now that I'm in a long term play on the pair, it's time to scalp some profits out of movements below and back to parity. I don't care how long it takes the greenback to recover as long as I can make my pips over and over again while I wait.

The trick, or so I think, is to find relatively safe ways to squeeze cash out of the market when everyone else hasn't figured it out yet. Once everyone is trying to do exactly the same thing... it will stop working.

Widening things out a bit, where do you think we are with the USD? It has fallen to lows that haven't been seen in thirty years. Do you believe the USA is going to fall out of prominence and become a third world country over the next few years? I don't.

Guess what that means! That means we are sitting at the beginning of a very long rising trend, but we just don't know when it is going to start. It might start in a month. It might start in a year. Who can say? However, if you are a swing trader, it might be time to start sneaking in a bit of cash on the greenback when you spot moments of weakness. If you are patient I'm sure there will be lots of little dips and spikes you can exploit.

If you are a long term player, you may even want to consider some USD based carry trading strategies...

Friday, September 28, 2007

USDCAD Edges Lower

Okay, if we were at bottom a few days ago, it was only a soft bottom!

Right now, according to the charts I'm viewing, this pair is trading at 0.9925, which is nearing a penny below parity. I can hardly imagine what such a drastic change in rates, worldwide, truly means to the state of global economic affairs.

Perhaps the current administration has done the unthinkable? Perhaps the US predominance in global markets is about to evaporate?

Thursday, September 27, 2007

USDCAD Once Again

Okay, I think it is nearly safe to say that the USDCAD has hit bottom.

Heh, actually, it's probably not safe to say, but it has certainly found some support at and above the 0.9950 level. I think that the downward pressure from speculators has now eased.

I also think the downward jump has been overdone.

However, assuming I'm right, and I'm finding that often I am, I don't know how long it will take before the elusive traders and speculators our there will change their opinions. It could be months before anything significant happens.

I'm playing a long swing trade on the USDCAD. I expect the Canadian dollar to return to normal levels once everyone focuses their attention on other areas. Perhaps this will happen when one or two signs of strength show up in news reports from US sources.

Friday, September 21, 2007

Missing the USDCAD Bottom

Well, I'm not sure if the USDCAD has finally hit bottom or not. It's around parity today which is pretty much what people were talking about.

Now, I did purchase some before parity. So, I'm underwater, holding my breath, wondering how much time it might take before I'll notice some buoyancy and float back to the surface.

I guess this makes me a swing trader, because now I'm looking at holding my position for a long time, until the market swings a good distance. That's okay, as I've said many times this is a live and learn situation with an extremely small amount of capital involved.

Honestly, I think the world markets are on crack when they think of Canada as predominantly a commodities play. Don't they realize that a large segment of the GDP comes out of the manufacturing and export sector? Who are they going to send exports to with the Loonie hitting massive highs?

Also, while there are massive oil reserves, they are in the form of tar sands. It will take decades of massive development before these can be exploited. In short, the dollar is now way overvalued and the Canadian economy is going to suffer for it. Somehow I expect these facts to show up and force a USDCAD correction.

Wednesday, September 19, 2007

Financial Excitement

There has been a lot of frenzied action since yesterday's Fed rate cuts.

Personally, I've activated an account with OANDA. They allow very small accounts and any size of trade. Also, you can trade less common currency pairs at reasonable spreads. For example, during normal trading, the spread on the EURUSD is usually 0.9 pips. That's great!

Anyhow, more experiments under way.

I've got some interesting ideas that I can try safely using OANDA. If I strike it rich, I'll reveal semi-cryptic clues...

Friday, September 14, 2007

Bottom Spotting the USD/CAD

Down and down it goes, where it will stop, nobody knows.

Just how low can the USD go compared to the CAD? Parity is an option. Below parity is an option. However, there have to be some fundamentals that come into play here. The amount of trade between the USA and Canada is huge!

Traditionally, the USD has always sat above the CAD.

Anyway, I'm not sure parity or below is realistic. I'm starting to dip my toe into this market. I've got a small stake which represents a "water mark" to help me gauge future expectations. Somewhere, presumably within the next 500 pips, we should find the bottom. From there, we should see lots of volatility and false starts, allowing for profit in the short term.

It should also provide for profits in the long term once the USDCAD starts trending towards a more appropriate historical level. Unless of course there is a large fundamental change happening. That's possible, but flying under the radar still.

The EUR/TRY Carry Trade

I'm dabbling in the EURTRY carry trade situation.

Due to the difference in interest rates you can pocket a bit of change as long as you maintain your short position. Obviously, however, nothing is free. The EURTRY market has a lot of volatility complete with sharp price spikes on the order of 1500 pips!

This means that you cannot leave a position completely open or you will risk the value of your entire account. However, it's possible that such a volatile market will make it impossible to execute a stop loss at the exact point you want or at the point spread you expect. Danger, Will Robinson, danger.

On the other hand there is no guarantee that another spike will happen in the short term future. You can certainly place a short sell order way up in the stratosphere and if you are lucky enough to grab it you might be lucky. It's also possible the spike will be much higher than a previous spike and you'll get burned. Alternately, the spike price could represent a new trading range and not offer you a large profit. There are no certainties - only risks and potential rewards.

Shall we play a game?

Thursday, September 13, 2007

Trailing Stop Strikes

Well, whether it is a small correction or not I have no idea, but the USDJPY has gone down enough to remove me from the market. So, my profits have been pocketed and I need to look for opportunities to get back in.

The same is true for my AUDUSD holdings.

I'm starting to look into the USDCAD, in the long term, but there is always the risk that the US dollar will take a dump when the Tuesday interest rate news comes out. It would be hard to imagine that we could get to parity, or that we could stay there for long, but there is always the chance that the war in Iraq will push us there. I see an incredible load of debt being heaped on the USA combined with an inevitable drop in spending when the war ends.

On a different note, I find myself sitting on the sidelines. I don't like being on the sideslines, but I don't want to keep throwing money at a market to see if I can a place where it will stick. That costs too much. Maybe I'll investigate some carry trade ideas. For example, the EURTRY is appealing, though very risky.

Riding the USDJPY Train

Well, imagine my surprise to wake up to a hugely profitable swing in the USDJPY.

It's too bad that I wasn't awake during the action. I could have increased my position on the way through and grabbed stupendous gains from it. Anyway, I cannot complain, as I've added almost 10% to my account.

Isn't it great when you accomplish great things in your sleep?

Of course, I should note that I did have some losses on this pair during it's downtown nearly a week ago.

Wednesday, September 12, 2007

Minimal Participation

Sure, you want to have as much capital as possible involved in an upswing, but it's painful having a stake while the market slides.

Unfortunately, you have to keep dipping in your toe. At the apparent end of a long slide, or when a correction appears to run its course, it's time to dip in that toe. What happens when you end up tossing your coins into the fray and the market rejects your advances?

All you can do is repeat the same. On a downturn, open up a new position. On an upturn, release the last toehold and climb down a notch. At some point, perhaps in a day, or in a week, assuming the overall trend does not reverse, you'll have to catch and ride an upswing. Heck, even if the overall trend does reverse you should still catch an upswing if you are patient.

Then, as I blogged about previously, during the upswing you want to maximize your involvement. You want to jump in, safely, as your locked in profits rise, to ensure that all the losses from toe dipping pale compared to the wins you eke out on the return. Winning a multiple of the amount lost will be worth it.

You have to play to win... but you certainly don't have to put a lot into it until you see that you have the upper hand.

Riding the AUDUSD Upswing

I've been riding the recent AUDUSD increase.

Now, I have some competing issues on my mind. As the AUDUSD hits new highs I have to worry about corrections. However, if this instrument is going to continue rising, I'd hate to not maximize my participation. See my previous post about having to play to win.

Anyway, while a more experienced Forex trader might not have to "figure this out", I've finally stumbled on a strategy that I like.

As a current position moves into some level of profits I'll slap a trailing stop on that position. This locks in some quantity of profits, at my choice, that I can relax about no matter what happens in the market.

With that profit locked in, I can enter a new position and immediately set a (trailing) stop on that as well. This new position can have a total risk less than the locked in profit above though it doesn't have to. In any case, this lets me choose the risk level I'm taking.

If the new position gains enough, I can adjust the initial trailing stop, if desired, to lock in more profits, and then open up another position. This way I can ride an up trend with increasing participation while having any losses limited to a precise value on a single open position.

Of course, this can be modified, if I feel like being riskier, but since we are near recent highs I don't feel like taking larger bets.

Gun Shy

I'm still a little gun shy.

I see little dips and corrections, which is only to be expected, and my stress levels go through the roof. That's what I get for playing across the recent job reports news last week.

All I can do is remind myself of various cliches. You have to play to win. No risk no reward. Buy low sell high. No guts no glory.

I suppose all this concern is healthy. It will certainly remind me to limit my downside and not to take inappropriate risks.

Tuesday, September 11, 2007

You Have to Play to Win

Well, now that I've exited most of my positions profitably, I'm paranoid. What if I put in some more cash and the market takes another massive dump? Heck, it has been a long upward run so I'm sure a correction is brewing at some point, right?

You have to play to win.

If I sit on the sidelines and fret away the day I'll get nowhere. What I need to do is participate in a guarded way. What I intend is to open up a new position, which immediately places me slightly under water, and then sell my current open position once the newly opened position is profitable. Of course, I intend to buy these new positions during moments of weakness -- which is where the fear factor comes in.

What if the moment of weakness is not just a moment, but instead the start of some massive retrenchment?

Anyway, when the new purchase is above water, I don't have to sell immediately upon achieving profitabilty and I can always use a trailing stop on the items that have moved significantly above water. The trick is that I want to increase my share of revenue earning movements without having to take undue risks. However, I do have to continue to take risks if I want to make profits.

Every Day Feels Like Sunday Baby

I don't know if you'll remember it, but there was a commercial on CNN a while ago that had this song. It would talk about stocks, making money and how great trading the NASDAQ was. Something like that anyway.

Well, when the markets are moving in your favor, every day feels like Sunday.

Yes, indeed, my pip grinding slogfest has been ongoing since Friday, but things have improved so much since then that I've recovered all my original losses and have been pocketing "here a pip, there a pip" at all hours of the day and night.

For example, at 3:00am, I'm catching an upswing or topping up during a short term downturn in a strong trend (e.g. AUDUSD).

Anyway, I don't want to give the impression that this is easy. It goes against every instinct in your soul when you see your positions dropping, your margin reaching dangeroud levels, and candlestick after candlestick dripping red. Stop loss strategies or not, at some point you need to be able to jump into the tide and try to start swimming... and you will have to wonder if every correction is the start of another onslaught.

Oh my, wherefore art thou precious capital?

I guess if I wasn't playing around with an extremely leveraged (200:1) tiny account with hardly any funds that life would be easier. However, do I have the discipline to not get into situations of margin mismanagement? Can I jump into a larger balance? What about opening up multiple accounts in order to segrate risks or risk strategies to appropriate capital levels?

Anyhow, I'm happy to be crawling out of the basement, but I want to try and capture the raw emotions, the ups and downs, that trading can evoke.

Grinding Out the Pips

Well, I've been grinding away at my open positions. Catching the tops of candles and buying in again at the bottom. I guess that means I'm fairly good at reading the short term charts with respect to top and bottom behavior.

I've got several dozen trades in the past couple of days. It's probably a little too much work to bother transposing all the data.

Suffice it to say that I had some extremely stressful moments, but that I held on through that sticking to my expectation that there would be a turnaround. I've been having success as the USDJPY, AUDUSD and EURCHF have been climbing out of their recent friday collapses.

I did get a phone call from my provider. They want me to upgrade to a fully paid account, a standard account, to the tune of $3000 or more. I don't think so. I'm pretty happy, for now, with my $100 account. I did add another $200 to the account to make sure I didn't run into a margin call. I'm not sure they'll like the idea but I'd really like to work like hell to turn my $300 into $3000.

If I can do that, then I can handle a standard account. Right?

Sunday, September 9, 2007

Trading Begins in Three Hours

Not that anyone is counting.

Anyhow, I'm looking at my account report and I've noticed that I don't seem to be accruing any rollovers. Perhaps this is a feature of a trial SuperMini account as compared to a standard account?

I'll be forced to look for a new trading partner that doesn't penalize small accounts if that is the case.

Trading Begins in Five Hours

Given the recent news based rout of the Greenback I am expecting some heated trading and movement when the markets reopen.

Everybody has had time to fully digest the news. Everybody has had time to analyze their charts to the Nth degree.

I'm going to step out on a limb and predict some short term rebound in US currency. However, at the same time, the recent volatility might put some fear into the market. So, between fear and greed, which will win?

Saturday, September 8, 2007

Forex Review: Taking Stock

The weekend is a good time to review what happened during the last week, take a look at long term charts, and to think about new trading strategies for the future.

As a relative newcomer to the game I'm taking my first good look at the idea of rollover. Basically, when you make a trade, it doesn't really involve your own money. You borrow one currency (the base currency) to exchange it for another (the quote currency). The margin deducted from your account for the trade can be thought of as extra money to ensure you can afford to buy back enough quote currency to pay back the original base currency lender.

Anyway, without getting into the details of timing, you pay interest on the currency you borrowed and earn interest on the currency you bought. If there is a difference in interest rates, and their often is, you can earn revenue for as long as you hold onto the quote currency. Of course, the reverse is also true, such that you could be making net interest payments too.

As for trading strategies, looking at the long term charts shows me that there is a lot of uncertainty and volatility in the markets these days. This spells risk. Times are dangerous. I've seen it suggested that now is a good time not to risk trading on the Forex if you are an inexperienced trader. This isn't going to stop me from playing with my tiny account though.

Personally, I'm looking at the USDJPY as a source of opportunity. Yes, as you know, opportunity is a synonym for risk in the arena of investment and speculation. The question is, how low can the USDJPY really sink? Is there going to be a fundamental change in the financial status of Japan with respect to the USA? As always, you have to consider your ability to stay in a position that doesn't move in the direction you want, and how much risk to your capital you are willing to allow.

Friday, September 7, 2007

Trade Free Weekends

It looks like The Rookie has survived another week. Although, I have to admit I'm holding my breath on a few underwater instruments this weekend.

In particular, the USDJPY took a heavy knock on the jaw and is lying face down waiting for the three count. Maybe the weekend will be long enough to let the coach clean up a few wounds while the dollar catches it's breath for the next round? Get up Rocky, get up!

The Australian dollar was showing a little strength. Better yet, the AUDUSD was bobbing up and down and I was able to shave some pips here and there right up until the last couple of trading minutes. A couple of extra dollars in the account can make a big difference -- not so much for the value as for the extra margin buffer.

Personally, I was disappointed by the EURCHF. Cheffy, my pet name for the CHF (pretty clever, I know) was busy chomping on the Euro's nuts from the moment the US jobs report came out. Come on, we don't need the Euro to be a surrogate for the US dollar. Anyway, I'm just grousing because it would have been nice to see a little more traffic going in the opposite direction to the recent stampede.

Speaking of stampedes, the EURUSD was feeling pretty uppity. I'm afraid a large portion of my potential gains were penned up via some, in retrospect, cautious limits. That's really too bad, but as my last post said, I got some learning out of that too. Maybe one of these days I'll know enough to catch a bit of ka-ching here and there.

Heck, I guess I was spread all over the place. Pretty aggressive for a complete rookie if I think about it. Anyway, the GBPUSD was a bit ambivalent about the recent news. Sure, it left the dollar in the dust for a while, but the pound suffered from a guilty conscience and came back to offer encouragment. However, by the end of today it was tired of waiting up.

I'm thinking that once I can clear out of my current positions I'll move to trading within a basket of somewhat offset instruments. Heck, I'm sure I can figure out tons of ways to give away bits of money here and there. Most importantly, yes, it's still fun. I'm still stuck to the screen like a fly on a lightbulb. Yes, I am aware that usually this isn't too good for the fly. I'll change my analogies when I'm a cash magnet.

This Business Is Tricky

I'm learning. Every day I'm learning.

Some fundamental news came out this morning. That was great, and I got some profits because of it, but at the same time I had limits on a lot of my positions to help ensure that I'd get out of positions and free up margin room.

This means I've left a lot, and I mean a lot, of gains on the table. That's too bad.

In the currency exchange market, finding the right balance between caution and greed is tricky. You really don't want to exclude yourself from massive movements in your favor. At the same time, if there is no massive move, or if it isn't in your favor, you'd had darn well better be protected.

Exchange Rates Differ From Stocks

There is an important difference between Forex instruments and stocks or bonds. The nature of this difference requires that you adjust your thinking.

When you buy a stock, the presumption is that with inflation or growth that the stock will eventually always climb. That, at least, is the goal.

Trading on exchange rates is a different ballgame. The rate of exchange is a ratio representing the relative value of the two currencies. It simply is not possible to expect one currency to appreciate relative to another indefinitely. For example, if the exchange rate between two currencies widened a lot then trade opportunities would be created to adjust this imbalance.

Obviously, with a plethora of fundamental variables and widespread speculation it will be difficult to determine the range, but you can theoretically consider Forex instruments to be variable between some unknown high and low exchange rate. Personally, I would prefer to rotate my charts 90 degrees, label each side with the currency in question, and then have the line move from left to right as the relative exchange rate adjusts.

At the same time, I'd like it if instruments were mirror imaged. By this, I mean that we should not be limited to buying and selling EURUSD, for example, but instead that we should be able to buy and sell both EURUSD and USDEUR. Yes, I know all of this is semantics, and it would require work for the market makers to either support this or have the trading systems perform on the fly translations, but it would make things less susceptible to common misconceptions.

Or so I think today. With a bit of time I'm sure I'll buy into the current way things are done if for no other reason that it is the way it has always been done. Also, at that point, why should newcomers have it easier than I did?

Thursday, September 6, 2007

Rookie Survives

Well, the so-called sideways market just took a major jump down across a fair number of currency pairs.

I added some equity to my account just to make sure I would not suffer a margin call in situation that I feel comfortable waiting out.

I need to be careful though. If I add equity just a few more times I won't be playing with peanuts -- at least not according to the small quantity of assets owned by this financial rookie.

Looking At Me Sideways

The market has been rather docile today. Well, at least in the currency instruments that I have been nurturing.

What is going on with all this sideways action? The Forex gods must be crazy!

Without getting into particular positions and so forth, here are some things that are currently sitting on my piled-high plate:

Presumably I'll be able to lighten my load during the overnight session or tomorrow before closing. I'm still not all that comfortable sitting on a pile of open positions all weekend long.

New Strategy Yields New Results

Since the currency market was soundly trouncing me I've adjusted my trading. One thing I have done is move to a slower chart. I'm now trading on the 1hr charts instead of using anything smaller. Another thing I've done is spread my risk across different instruments.

With this, I've found I'm more able to judge movement potential. I'm also able to be more patient when I have some items on the rise and some items going down. Since the market often moves back and forth, over time, a large percentage of my positions are becoming cashable.

A Couple Trades

Okay, time to show that I'm not absolutely wrong 100% of the time. So much for the inverse signal idea... damn, foiled again.

B CADJPY 109.36 -> 109.61 = 2.17
B EURUSD 1.3645 -> 1.3658 = 0.30

I had a fair amount of margin on my account and figured I'd unload the EURUSD on a spike so I could leave myself a bit more wiggle room with respect to other open positions.

Wednesday, September 5, 2007

Amazing New Signal Devised

Based on recent performance this new signal operates at near 100% efficiency. From now on I'll blog about entering long and short positions in near real time. Whatever I do, just do the opposite. You'll be rich in no time!

I highly recommend grabbing my blog feed.

Understanding The Advertising

Now that I'm playing in the currency trading world I have a much better understanding of all the Forex advertising floating around. As a rank beginner plenty of the ads are hard to understand but a few are geared towards you:

  • Learn how to trade
  • Trade with us
  • Commission free trading
This can help you enter the market while advertising that talks about pips, signals and so forth may not be relevant yet.

Once you are trading, experiencing ups and downs, you become intersted in some related services that will purportedly solve your problems:
  • Real time signals
  • Secrets and strategies
  • Lower pip spreads
These advertisements are all about helping you know when to trade and perhaps to ease your search for profits by lowering your pip spread.

The reason for all these services is that technical analysis can be hard work. Sure, the computer will do a lot of it, but you still have to look at a lot of charts for various currency pairs within various timeframes, spot market trends, find support and resistance levels, recognize key signaling events, map out price point targets for expected movements and then hope the market doesn't find a reason to ignore all your work.

The more of this that is automated, or at least heavily guided, the less time it takes to work through various scenarios. Anyway, as I'm happy to point out, I'm no expert, but I'm slowly learning and experimenting with a small real money account. At this stage I'm just hoping to share my efforts and and give other potential beginners some things to think about.

I Was Right!

Okay, so it's too late now, but dammit, I was right! Every single open position I had to unload is now in the money. Of course, that aforementioned $ss chapping is in progress too.

Anyway, rest assured that I'm laughing about the whole day at this point.

Tuesday, September 4, 2007

Definitely Getting Spanked

Hey, it's important to have a good attitude, so don't get me wrong. Right now I'm in the process of being spanked for being in the wrong side of the forex market. Again, if you are just dropping by, I'm only dealing with a $100 account. It's not that big a deal and I get to learn a lesson.

I should close my EURUSD position and take a hefty percentage loss.

However, it would really chap my $ss to see the market reverse and spank me again while I'm sitting on the sidelines. The lesson is that I need to let go of the position, work harder to not get "caught" on the wrong side of a movement, and simply not fret over any such losses.

Time to accept a 40% loss and move on.

If at all possible, try to learn from my experience, before you are forced to learn it with your own money.

Okay, I just closed out all my open positions, got over it, and opened up a single contract on the other side. Let's see if the market has gotten tired of spanking me yet.

By the way, a lesson within a lesson, writing about my situation and what I know I should do about it, made it easier to do so. Oh no, this might mean I have to reveal every screwup I make in an effort to get better at this. Talk about humbling.

Getting Spanked

Oh oh. I might be about to get spanked. It's really strange, because you look at things and come to a conclusion, but the market certainly doesn't have to give a damn about any of your thoughts, calculations or conclusions.

Today I've been selling the EURUSD at the top of some price spikes. The only question is, are these really spikes are just some short term pauses on a large upward movement?

So, I have competing issues to deal with. The price going in a direction counter to my position and my "determination" that it will go in the other direction significantly due to a correction. So, if I don't get into the market to take advantage of movement I can't make money, but if I do get in, and reinforce my position to take advantage of it, I risk more and more.

This is exciting!

In the end, right now, I know I'm a beginner. I'm able to write off my entire $100 initial investment if it comes to that. Then again, if I'm right...

Monday, September 3, 2007

Holiday Doldrums

Well, I wasn't sure whether or not to take it seriously. What, you ask? The Forex educational material talking about what days and times to do your trading.

In terms of trading, today was a very boring day.

Very little movement. What movement there was happened at a snails pace. Maybe next time I won't glue myself to the market during a holiday.

Reporting Some Losses

I guess since I crow about profits, I should also disclose some recent currency trading losses. I mean, that is the whole game right, win some and lose some. The key is to make sure you regularly win more than you lose.

B EURUSD @ 1.3643 S EURUSD @ 1.3649 = 0.60
B EURUSD @ 1.3638 S EURUSD @ 1.3605 = -3.30 (S)
B EURUSD @ 1.3634 S EURUSD @ 1.3619 = -1.50 (S)
B EURUSD @ 1.3630 S EURUSD @ 1.3619 = -1.10 (S)
B EURUSD @ 1.3627 S EURUSD @ 1.3619 = -0.80 (S)
B EURUSD @ 1.3611 S EURUSD @ 1.3617 = 0.60

The four stop orders were the positions that I had left open over the weekend. I recently blogged about leaving those positions open without having any stops in place, so I was happy to add them in when the market reopened.

What does get frustrating is that it seems that the price will drop right down to your stop point, sell, and then rebound back up. I guess this is the whole point of developing discipline. I know it is imperative to protect your capital but it still can be annoying to see this behavior.

Perhaps my new found ability to set price alerts will let me analyze things in time to decide whether or not to remove a stop order.

Onward with my Forex education...

Discovering Price Alerts

Okay, so I'm no genius. However, I am admittedly a rookie, so that is no fault of mine.

Anyway, I've just discovered the joy of setting price alerts. I can have my system play a wave file when one of the items I'm interested in arrives at or crosses a certain price point.

The value I currently see in this is that it can alert me to a situation that might represent an opportunity. When the alert is sounded I can then focus my attention on recent technical issues and see if a decision to buy or sell will be appropriate at the moment or in the near term future.

For example, I've set an alert on EURUSD at 1.3610 as I think it might indicate an impending short term buying opportunity.

Oh, I should also mentioned that I've found out how to close a certain position, though it is so obvious I'm embarrassed that I didn't recognize it right away. You simply click the "close" column on your list of open positions, duh.

Sunday, September 2, 2007

Phew! Weekend Survived

As I blogged recently, I had left myself in an open position with no stop order. If some world news event had occurred and greatly changed it's value, I could have lost up to the current total of my account. I could also have made a good deal of change too.

However, upon opening a few minutes ago the price raised a few pips. So, no major changes and I've had time to add stop orders to those open positions that were unprotected.

Now I can leave the house!

Tick, Tick, Tick

Only three and a half more hours...

Impending Day Trading Resumption

I can hardly wait. In another five hours, approximately, the Forex currency trading markets will start another week of operation.

Will my open trades bust my account? Sure, it's only a SuperMini, but I'd rather not simply throw my money away. On the other hand, perhaps the EURUSD will go up and I'll end up looking like a hero? The suspense is awesome...

I've been doing my best to learn more about Forex trading, reading up at, as mentioned in a previous post. Quite honestly, I'd love to find out that I have the discipline and the ability to be a full time trader. Nothing would please me more than to give up the day job.

Okay, I'm rambling, but if I do blow up my account, I'll fund it again with another $100 deposit. I've only been trading for about half a week now, and I've learned first hand about the importances of stop orders, trailing limits as well as paying attention to when exactly the markets are open.

Hey, I'm sure I can find other ways to screw up, but that is how you learn! Or, on the other hand, if you are reading along, maybe you can learn from a few of my mistakes and save yourself from some costly early mistakes. Tick, tick, tick. Can I trade yet?

I should also mention that I am interested in having multiple simultaneous accounts. You see, while I am day trading right now, I am also interested in trading over longer periods of time. Both types of trading involve different risks and potentially a different level of capitalization to remain in the market. Also, the trading platform I am using will close out a position if the opposite trade is made, which could close out what was supposed to be a long term position.

Look, only 4 hours and 45 minutes remaining until trading time...

Saturday, September 1, 2007

How To Become A Currency Trader

If you are anything like me, you probably imagine that it is difficult to become a foreign currency trader. Perhaps there are rules, regulations and other hoops that have to be jumped through. Maybe you need large amounts of cash in order to get started.


Becoming a Forex currency trader is incredibly simple!

Get A Demo Account
As I beginner I'd suggest you sign up with Oanda. Not only do they have a good reputation but they offer other advantages for a beginning trader as well:

  • You can sign up for a live account with very little initial capital.

  • You can execute trades of just about any arbitrary (small) size.
Of course, you can start with a free demo account before getting a live account. Just about everyone will recommend you do so, including me. However, at some point you need to trade with real money to learn about the psychological aspects of trading.

So, that's what I did. I started with $100 in my account and was off to the markets. Sweet, I'm a forex trader!

Learning To Trade Foreign Exchange
If you have a demo account, enter some trades. See what happens. Then, after the results come in, search for information about what happened. You'll find some helpful advice in blogs, such as mine, as well as various tutorial and forum sites. I would suggest that you buy a book or two on forex trading, technical analysis and perhaps something concerning the attributes of successful traders. I've listed some books that I found helpful on this blog post about getting a forex education.

Trading With Real Money
Don't rush to trade with real money. One of the most important things to realize is that there is always another opportunity -- there is no need to let the fear of missing out intrude on your good sense. In fact, the issue of psychology is immensely important in trading and once you move to real money trading you'll realize this very quickly.

Frankly, though I counsel otherwise, I wasn't be able to trade realistically while not actually risking my own money, so I started trading with a tiny account, funded with $100, almost immediately. Personally, with a few dollars on the table, I found that my interest level, formality and trading style were all upped a notch.

Trading Sessions
Except for weekends the markets are open all the time. However, different periods of time often have different characteristics. This is because trading in currencies generally follows the business day around the world from timezone to timezone.

Account Safety
Oh, I should mention, these days Forex trading with a reputable company (such as Oanda) is quite safe. While there are large risks and large rewards, my risks are essentially limited to the capital that I have put into my account. With wise strategies I can limit risks further, but as a beginner it is comforting to know that I can't lose more than I let sit in my account no matter how foolish a beginner mistake I might make.

I should stress that you could lose all the capital you put in your account, so do not start out with a large account with the idea that you will only conduct small trades. At the very least, create some sub-accounts and keep the majority of your capital out of harms way until you have blown up your play money account, learned a few lessons, and know how to protect your capital.

What You'll Learn
Above and beyond the simple mechanics of opening an account and executing trades there are tons of things you'll need to study to become a successful trader. These include:
  • Reading candlestick charts.
  • Interpreting indicators.
  • Support and resistance levels.
  • Fundamental economic analysis.
  • National economic news events.
Each of these issues can span multiple chapters or perhaps an entire text depending on the depth of information being presented.

I also invite you to read my blog. I started out from scratch and can address issues in a way that can be helpful for a beginner. Please feel free to ask questions and I'll do my best to point you to useful information if I can't give you a good answer myself.

Friday, August 31, 2007

24 Hours A Day 6 Days A Week?

Well, that's true, but not.

Apparently the markets are closed from Friday at 4:00pm EST until Sunday at 5:00pm EST. I don't know about you, but that sounds like a 48 hour closure to me. Sure, there is only one day that trading does not occur, but that is semantics.

A 48 hour closure means that you can trade 24 hours a day for a period of five days straight.

A minor point, but I'm sitting here in an open position and I'm going to have to watch world news and events for two entire days!

New User Mistake

Well, don't do this!

I fell asleep last night before putting a loss limit on my USDCDN position. I could have lost my entire account balance if something disruptive had happened. Bad investor, bad.

However, upon dragging my sorry behind to the computer, with much trepidation, I found I was in the positive. So far, FOREX is my friend. I know the shoe will be dropping soon... especially now that I've been reading up so much and know how clueless and careless I really am.

B USDCDN 1.0554 S USDCAD 1.0560 +1.42 (TL)
B USDCDN 1.0545 S USDCAD 1.0595 +0.47 (TL)

Anyway, when I noticed I was in the positive I promptly put on a trailing stop, which theoretically allows me to continue to profit in a rising market as long as keeps rising. Of course, the market promptly dropped and my orders were executed at prices that kept me in the positive.

Fun stuff.

First Use Of Limits

Surprise, surprise, I've been involved in yet another trading session. This time, due to my reading, I decided to add a stop and a limit after completing my purchase. I'd never done this before and wasn't sure how easy it would be to do. One more small step on my road to knowing what I'm doing:

B USDCAD @ 1.0565
S USDCAD @ 1.0571 (L)

While not all that exciting, I should mention that I only risked $3.00 due to the stop order (which was not used). So, with that amount of money risked I earned $0.57 profit. In reality, more was available to be made, but as this was my first limit trade I set the limit low and was able to observe it in action.

Cool stuff!

Thursday, August 30, 2007

Another Trading Session

I've been doing some reading, while waiting for prices to move up and down so I can get in and out of the market, so it's possible that I'll start to use industry terminology within the next few weeks.

The best introductory site I've found so far is the offering. As I learned just the other day, a pip is a single movement point in the price of an issue being traded.

Anyway, during this reading I realized how the candlestick charts work. I also realized that I'm trading on a 5 minute chart. Now I'm armed and dangerous! Well, okay, I'm feeling lucky. This sessions trading went like this:

B EURUSD @ 1.3622
S EURUSD @ 1.3637

This puts another $1.50 into my pocket. Of course, keep in mind that I'm learning on a $100 SuperMini account... so this is a nice percentage point gain.

Lucky Morning Session

This morning I was quite simply very lucky. I had been having network troubles and was not able to watch my position closely for several hours:

B EURUSD @ 1.3625
B EURUSD @ 1.3612
B EURUSD @ 1.3606
B EURUSD @ 1.3603
B EURUSD @ 1.3597

When I did finally get my network fixed, I was sitting pretty with:

S EURUSD @ 1.3650 (x5)

Wow, I'd just turned $100.33 into $121.03 in a morning. Can you believe the ~20% return on investment in such a short period of time? However, that means it is just as easy to burn that much money as well.

Anyway, I have to tell you, when I was watching my positions, seeing them all underwater at one point was a bit nerve-wracking. All I can say is that I watched the charts and felt the direction and then, by luck, hung on long enough to see it happen that way.

You'll notice that I'm not employing any "sophisticated" ordering strategies at this point. Beware, lucky novice at work!

First Evening Trading

While I'm sure it will prove my amateur status as a trader here are some details of my first evening with my new toy:

B EURUSD @ 1.3656 S @ 1.3657
B EURUSD @ 1.3647 S @ 1.3651
B USDCDN @ 1.0620 S @ 1.0619 ***

Yeah, big time gains. Approximately $0.33 in my pocket after an evening of anxiously watching the charts.

I learned an important lesson on the USDCDN trades. First, the spread, or the difference between the buy and sell price is 10 points for this issue. Second, when you click the buy or sell you absolutely must verify that the price shown is a price you are willing to sell at. I had intended to sell my position at 1.0623, and thought I had, until I noticed that my income was a lot lower than I had expected.

About This Blog

Well, believe it or not, I just signed up for a FOREX account. I plan to blog my experiences (whether gains or losses) and perhaps help introduce some other people to this interesting world.

Late last night, on the spur of the moment, I decided to create an account, jump in, and get my feet wet. I'll blog about the details later today, but while a little bleary eyed this morning I was $0.33 ahead.