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?

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.

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?

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:

• AUDUSD
• EURCHF
• EURGBP
• EURUSD
• GBPUSD
• USDCAD
• USDJPY

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.

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!

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