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.