Wednesday, June 2, 2010

USD/CAD +38.1 pips

Hi everyone, thanks to Jason and Domenic for the invite to contribute to their trading blog.  Best of luck this month in reaching your financial goals!

Most posts of mine will simply be a brief breakdown of my previous trade and accompanying chart.  But first let me talk about what I am trading and how.

I have been trading FOREX off and on as a personal trader for over 5 years with mediocre success - normally just breaking even.  I have always stuck with trading technicals and basing my positions on price movement with very few indicators.  I am aware that big financial announcements affect currencies (Monthly non-farm payrolls, interest rate changes, etc.) but I decided about 3 years ago to stay away from attempting to "trade the news".  Since I got back into trading FOREX seriously in March, I have still been having little success so I decided that joining this blog would help me to stay true to my trading plan.  I'm continuing to learn lots about the mental and emotional discipline needed to achieve some form of consistent profits in this market.  If I can get to the point where I can start paying my apartment rent from my monthly FOREX profits, I will accept a victory towards my eventual goal of being a successful and profitable currency trader.

For the month of June I think I have made a substantial change to my trading strategy.  For the past 6 months I have been trading exclusively from 5m and 1m charts.  I was doing this mainly because I felt impatience in waiting for any of my positions to develop and I felt that I could be successful in trading from these shorter timeframes.  Well I haven't been anywhere near as profitable as I thought I would be by June 1, so after taking a look at other scenarios that may work I have figured that trading a 1 hr timeframe actually displays a much better trend than on the shorter scales.  It's all such a learning experience, right?  Anyway, here's my strategy that I would like to commit to trading for June.

TREND ALPHA JUNE
  • 1 hr timeframes on 8 major currency pairs.
  • Trade in direction of trend as indicated by 100 & 200 EMA indicators.
  • Open trade when price retraces to a level of resistance.
  • Close trade when price reaches a profitable level of resistance/makes a substantial gain (like a price spike) OR the trend reverses.
  • Allow one additional trade to be opened on same currency pair to cover, if initial trade isn't looking profitable.
  • Small leverage per trade, one currency traded at one time.
Pretty straightforward, but all the successful action takes place in executing properly.  My hope is that this blog will assist me in being honest with myself about obeying my rules and trading my plan.


This was trade # 1 for June and I picked up a modest 38 pips on the downward movement.  My entry was perfect and my exit was decent as well.  Not a big move, but I took profits and made a positive step in the right direction for a new month and a new strategy.  My starting balance for June is small money = $50.  My broker is FXCM and the charts are from their trading platform, Marketscope 2.0.

4 comments:

  1. Welcome aboard. As I am unfamiliar with currency trading I was wondering if you could clarify a few things?

    1) What does a pip represent?

    2)What hours do you trade the FOREX market?

    3) With $50 what size are your trades? Is there leverage involved? What is your risk on a trade like this in dollars?

    Thanks

    ReplyDelete
  2. 1. From Reference.com - In finance, a percentage in point (pip or point) is the smallest measure of Price move used in forex trading. For instance, if the currency pair EUR/USD is currently trading at 1.3000 and then the exchange rate changes to 1.3010, the pair did a 10 pips (smallest units) move. The pip is the smallest measure regardless of the fractional representation of the currency exchange rate. Thus, 1.3000 to 1.3010 is the same move in pips terms as 110.00 to 110.10.

    2. From Dailyfx.com - Given the global nature of currency trading, the market is open for business around the clock, 24 hours a day. As a general rule, a specific currency will usually be most active when that particular market is open. For example, the GBP and its related pairs, while active and tradable 24 hours per day, tends be most active and widely traded during the hours when the London market is open. Meanwhile the JPY and its related pairs will be more widely traded during the Tokyo business day.

    The market hours for the major FX markets are as follows:

    London – 3 AM through 12 noon Eastern time (~35% of total FX volume)
    New York – 8 AM through 5 PM Eastern time (~20% of total FX volume)
    Sydney – 5 PM through 2 AM Eastern time (~4% of total FX volume)
    Tokyo – 7 PM through 4 AM Eastern time (~6% of total FX volume)

    When the London and New York markets are open and trading simultaneously, more trading opportunities often present themselves. While there is an overlap between the trading hours of the Tokyo and Sydney markets, it is not as significant as the London and New York overlap due to the significantly lower overall trading volume.

    Weekend Trading

    While the FX market technically never closes, virtually all of the major banks and trading entities do close for the weekend. The volume over the weekend is so small that it tends not to offer much trading opportunity for traders. While some activity can occur depending on fundamental news that may occur over the weekend, generally any movement in the currency pairs is negligible, and trading liquidity is extremely thin, making trade execution difficult and spreads very wide. Hence, the FXCM Trading Station (that's my broker btw) closes at 4 PM Eastern time on Friday and opens again at 5 PM Eastern Time on Sunday.

    3. My current strategy uses trades at 1k leverage per trade, or for every pip the price moves I gain/lose 10 cents. My risk is very low as I am dealing with small dollars right now. My account with FXCM is a micro account and it is the smallest amount I can leverage for any trade through them.

    Hope that all helps.

    ReplyDelete
  3. Will, glad to have another contributor to the blog. I don't know much about Forex so hopefully I'll learn something along the way. I have found that posting my trades on the blog at initiation has helped keep myself honest. Everybody knows my positions and history at all times so there is nowhere to run. Because of my experience on the blog I can name several things that enhanced my trading that I never used before. I now use stop losses, designed entry and exit points, and technical analysis as an input for trade ideas, whereas previously I never used any of these. It's obvious to me now that before I wasn't trading, I was just wagering.

    So on your first trade for June where you made 38 pips, does this mean you made 38 x .10 = $3.80? And if so, is this considered a ($3.80/50) = 7.6% return on risk?

    ReplyDelete