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!

Thursday's Bernanke Dive

Well, as per my previous post, Bernanke maintains his negative signal status.

I'm happy to say I was trading the AUDJPY downwards today. I don't usually trade the downside, as I don't like the chance of being caught in a negative interest income position, but with Bernanke on the microphone, I just couldn't resist.

I also had some very well behaving trend lines on the 1hr and the 5min charts. With both charts suggesting a drop from top of trend to bottom of trend, and Bernanke speaking, I got in at the top and got out at the bottom as the day ended. A very nice day...

Profitability rating: ~10% NAV

If only I wasn't trading a nano account (when I'm profitable anyway)!

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.