Sunday, November 30, 2008

AUD/JPY Trading Week

Well, the last couple days weren't as good as the first portion of the week, but they were still positive. I'm not complaining!

Thursday and Friday were positive by 0.4% and 1.1% respectively. So, for the week, that gave me a NAV gain of 23.2% in total.

If you've been following along you know that I only have a tiny total account size. However, the current plan, now that I seem to be able to generate profits, is to grow the account to a meaningful size.

Honestly, my account will have to grow by an order of magnitude, and then double after that, before I could expect to drive revenues that would replace my income. While that might take a few years I really am not in a rush...

Let the trading week begin!

Wednesday, November 26, 2008

AUD/JPY Trading Review

Guess what. Some of the books that I bought have had an impact on my trading. I know, I hear the phrase "No shit, Sherlock" echoing out there. However, so many of the Internet generation want everything to be fast, easy and online that I just have to stress the value of more formal information.

I bet you'd also be surprised to hear how many traders are starting out in their teenage years. It's just another Internet game to them!

Anyway, if you are a crusty old bugger, just bear with me as I talk about things that any sensible trader should already know.

So, back to the topic at hand, my trading week. No, better yet, my illustrious trading week. Here's the scoop:

Sunday Session: +4.1%
Monday Session: +7.7%
Tuesday Session: +2.9%
Wednesday Session: +4.5%

While today isn't over I did go flat not too long ago. Obviously, I may do some more trading before the end of today's session.

Anyway, something to think about. I'd do better if I was more patient. I find myself jumping into the market and then waiting for it to go against me a little before turning around and going where I expect it to go. I guess I'm always trying to get the jump on the market and not waiting for confirmation.

Sigh, more homework.

Tuesday, November 18, 2008

Forex For The Small Speculator

Today was a banner day for me... trading the AUD/JPY with a return of more than 10% NAV. The market simply walked up and down my trend lines bringing me profits with every pass. How come this doesn't happen more often?

Anyway, as a small time speculator I thought I'd outline some issues that we face compared to some of the larger traders:

  • We trade in very small lot sizes
  • To make any meaningful revenue we may trade with a large percentage of our NAV.
  • Carry trading strategies may be meaningless
Each of these issues is something that we need to think about and potentially make some adjustments to compensate.

Small Lot Sizes
If you want to trade in small lot sizes you need to find a broker that doesn't charge you an arm and a leg for the privilege. I trade at Oanda and they let you trade with any lot size without any adjustment in spreads. I recommend them and I'd give a referral link if they had an affiliate program.

Trading Large NAV Percentags
There is nothing wrong with trading a large percentage of your NAV as long as you know what you are doing. It's a problem if you are trading this way because you keep acquiring positions as the market moves against you. It's okay if you take a measured defined risk because the market has entered a condition that you have decided represents an opportunity. It is very important to get out of losing positions once you know that your market position is unfounded.

Carry Trading Becomes Useless
If you only have hundreds of dollars in your Forex account, then there is no point trying to take advantage of carry trades. If the market didn't fluctuate so much it might be worthwhile, but in all likelihood you'll make a few bucks here and there and end up wasting your time. So what if you make 200% over a year, you still only have several hundred dollars in your account.

Concluding Thoughts
When you are trading relatively large positions relative to your account size, it can be exciting. You'll quickly win or lose tens of percentage points. If you are good you'll be able to build up a bit of a nest egg before too long and then start trading more appropriately for the size of the account you've built up. Quite simply, as your account gets larger the need for large risks dissipates.

Get out there, take your time, make sure the market sets itself up for you just right, and then stomp around and rip a few dollars out!

Sunday, November 16, 2008

Getting A Forex Education - Forex Books

How many of us in the Forex market simply jumped in the market and started trading? I know that was my path. I tossed a few dollars in an account and figured losing it would be a paid lesson in how the markets work.

I can't say that this hasn't been a valuable path. I've learned some good lessons along the way:

  • it's important to let go of losses early so you have enough capital to sink your teeth into an opportunity that does work.
  • No indicator or strategy has all the answers -- stop looking for the holy grail of trading
  • The market can easily whipsaw you to tears if you aren't careful
  • If you place close stops they will often be taken out before the market goes your way
Really, the list of anecdotal learning is endless and difficult to put into words. However, I recognize that this isn't enough to make me a successful trader, though from time to time I'm starting to taste success. It's finally time for me to bite the bullet and learn more about trading.

No, don't worry, I'm not going to buy some silly multi-thousand dollar Forex training course. That would be stupid. Forex trading is very related to trading in general and there is no shortage of information on either subject. To make a long story short I've purchased four books recently:
  • Currency Trading for Dummies
  • Swing Trading for Dummies
  • The 10 Essentials of Forex Trading
  • Technical Analysis for Dummies
All of these were available at a nearby bookstore -- so I didn't have to order something online and wait for delivery.

More importantly, let me list the credentials of the authors of the above books. Respectively, they are:
  • Mark Gallant: Chairman and founder, GAIN Capital Group. Brian Dolan: Chief currency strategist,
  • Omar Bassal, Head of Asset Management, NBK Capital
  • Jared Marinez, FXCHIEF and founder of The Market Traders Institute, Inc.
  • Barbara Rockefeller, International economist and trader
My advice? Never, ever, fail to look for the ideas of experts. Even if you don't agree with everything they say, which is appropriate, they should be able to increase your understanding and improve your own thinking.

I've had some days with a NAV appreciation of 10%, 20% or more. I'd like to have a lot more days like that... and I don't think that online sources created for the purpose of flogging affiliate commissions will do that for me.