Breaking into the Forex

Bad Assed Trader:  I have started trading the Foreign Exchange (Forex or Fx) which is, I have to say, much more exciting than the stocks and shares.  Which means you can lose your 1% in minutes rather than days...

I am trying to stick to just a few currency pairs as I've been advised that it's best to become a specialist in just a few.  I liked the look of the EURGBP (Euro against the pound) as it seems to me that the long term trend is clearly down and although it has recently been going up it looks like it's just turned and is heading back down again.  I have done the analysis, drawn on the trend lines etc and so was looking for an opportunity to use one of the strategies I've been taught.

A pivot (bounce) trade came up on Nov 23rd which I took.  The complicated thing with Forex is you have to check four different time frames when you're trading intraday (in and out of a trade within a few minutes or hours).  But I was very careful to check that the four hourly cycle showed the price was about to come down and the hourly one said the same.

There was news that morning which had taken the price artificially high.  I don't trade the news itself as I'm not an economist, but if the news helps to set up a good trade then I'm not objecting.

And so I entered, live at 9.20am and sold the euro against the pound. It wasn't really a very good trade when I look back on it as I'd neglected to check that there was further news to come which meant the price went up a bit and then faffed about for a couple of hours which was a bit tedious.  But then, suddenly, price started to tank and go my way and I was able to sit and watch the money tipping into my account all the way to £113 when I clicked the close trade box followed by "buy" and exited the trade.  I had made my full one percent and was pleased I hadn't jumped out too early.

I'd like to be able to end my blog on that high note, but alas, life is never that simple in trading.  Any faint hearted look away now.

Buoyed with my success I did, the very next day, place two trades.  One on GBPUSD (called "cable" on account of the cable that was used under the Atlantic) and one on the New Zealand dollar.  I figured the pound would go down - and so it did.  But not at 6am when I put my trade on for it to go down (short).  Instead it went up down up down up and by the third up it had stopped me out - because I had moved my stop loss down a smidgen.  If I'd left the stop loss I would have made the 1% as I did guess the direction of travel which then happened at 8.05am when the price dropped by 60 points - a lot more than the modest 20 points that I was targeting.

Oh well, that will teach me not to fiddle with the stop loss prematurely.

And then the New Zealand dollar.  Well, when I look back I can see why I shouldn't have traded it long (to go up) as it had recently had a lower high and so the uptrend was turning.  So I can't say I at least guessed the direction of travel as I actually got it completely wrong - I bought the bloomin thing and then watched the price tank and take me out within a couple of hours.

The net result of those two days was a loss of just over £60 and a sense of humility.  Must try harder. But not put off at all.

Having said that, I'm now on holiday in Phuket and will spend the time doing analysis and maybe some back testing of strategies to improve my technique.  One of the traders I met recently said not to trade near Xmas and he meant from late November as the banks do odd things in the run up to the holiday.

Having said that I could do a teeny bit of trading with the Asian markets now I'm in a different time zone....