March Was a Losing Month Trading Forex

March 31, 2008

Trading for the month of March is over and it was a loser for me.  I lost 3.2% of my total account balance.  I don’t consider this a set-back though.  It’s just part of trading forex.  I’m up 13.3% for the year so I feel good about my chances going forward.  I did make some mistakes and one particular trade sticks in my mind.  Last week, I was certain that a trade would eventually setup according to my rules and I pulled the trigger before it was confirmed.  The setup never occurred and I lost.  I also got a little too "discretionary" with one of my systems and really missed some great trades.  In April, I won’t enter a trade before my setup has been confirmed and I’m going to take trades that one of my systems generate without overthinking it.  

Overall, I stuck to my trading rules as I had the previous two months.  This month didn’t work out like the others but I’m still not going to change a thing.  I’m on-track to reach my 18-month to 2-year goal I set before 2008 began.  

To see all my trading graphs updated as of today, go to My Forex Graphs

I hope you all had a great month trading.  As always, feel free to comment and let me know how you all did.

Forex Position Size Calculator Bug Fix

March 30, 2008

There was an issue with the position size calculator at http://www.forexcalc.com that came to my attention last week when determining the position size of the CHF/JPY.  For example, when selecting CHF/JPY, the calculator needs the current price of two pairs, the CHF/JPY and the USD/CAD.  The bug was preventing the output of the second pair needed to determine position size, in this example, the USD/CAD.  The pairs affected were:

CAD/CHF, all pairs with CHF in the base, all pairs with DKK in the base, and the HKD/JPY.

This has been fixed.

My Forex Trading Mood Is Better This Year Than Last

March 25, 2008

I was in gloom and doom mode around this time last year (2007).  Without getting too personal, I had just concluded a divorce so that definitely had a lot to do with it.  My advice would be to stay away from doing anything that involves risk, especially trading forex when you’re going through a life changing event.   Here was a post from last year:

Is my forex trading dedication waning, are my priorities shifting, or have I come to a realistic conclusion? I’m talking about the time I actually spend sitting at my computer trading.  There was a time when I was getting up way before the crack of dawn trying to trade the European session at 4 a.m. EST.  I also used to watch the charts closely during the Japanese session.  Those times are over though.  The time I actually sitting in front of charts has lessened by the month at this point and I’m not sure that’s such a good thing for someone at my stage of learning. 

I get a lot of emails like, "why don’t you do this or why don’t you do that" but the reality is that I just can’t do most of those things. Some of these "things" are trading the news and trading shorter-term charts.  I certainly appreciate the feedback but can someone with a limited amount of time actually be a trader? I’m not sure but maybe I’m taking the wrong approach to all of this.  Maybe someone short on time shouldn’t be trading short-term charts or trade news releases.  Maybe I shouldn’t even think about day trading. 

I’ve been trading a daytrading system for a while now mainly because it was a set and forget system.  I could set my orders, stop losses, and profit targets and wake up most of the time to find the trade already complete but this certainly doesn’t give you any flexibility.  Particularly, I’d find it very difficult to implement a breakeven requirement to my trading plan unless I automate this via a Metatrader broker.  So do I have to give up trading 30-minute and 60-minute charts and move toward 4-hour, daily, or weekly?  Perhaps I will have to do that. 

Some things remain the same as last year and some are different.  I’m still trying to be a forex trader but with a lot more success.   I still don’t spend a lot of time sitting in front of my computer trading but this is by choice.  I have strategies and plans that fit my trading personality now so I can scan charts quickly and know whether there’s a possible trade brewing.  I no longer sit and search for a trade.  This is the worst thing that you could possibly do and a common mistake inexperienced traders make.   I’ve modeled my trading style around my schedule and this allows me to day trade.  It is possible to day trade without sitting and staring at a screen in the middle of the night and all morning.  I find that my best trades are those that occur when a chart is nowhere in sight.  

I made my best trade of the year this month.  I traded jobs and left Bear Stearns two weeks before the blow up.  This will probably be the best trade of my life.

Success?  Time will tell.  Persistence… 

Read more posts like this at http://www.forexproject.com

technorati

March 24, 2008


Technorati Profile

Forex Watchlist for March 24, 2008

March 23, 2008

Here are the currency pairs I’m following for possible short-term trades:

SHORT

USD/JPY
USD/CHF

LONG

NONE

Secret Rhythms of Forex Time Zones

March 23, 2008

I’ve mentioned in the past that I don’t trade the Asian session.  This year though, I have opened GBP/JPY positions.  No other pair I’ve observed has as much volume as the GBP/JPY during this session so if I like what I see, I won’t hesitate to pull the trigger.  But other than the GBP/JPY, most other pairs don’t exhibit the volatility that a shorter term trader would prefer.  

Asian session characteristics:

  1. quietest, least volatile of the three Forex trading sessions
  2. account for 15% of daily turnover
  3. typical 20-30 pip ranges for the EUR/USD
  4. spreads increase
  5. price action more due to Australian and New Zealand economic announcements than Japanese

The European trading session is a better time than ever to trade the volatility of the Forex market.  I trade this session more than any other and find it suits me.  I know most times at what price I’ll enter a trade so a lot of my positions trigger automatically sometime between 2 am and 5 am EST.  Many times, they’ll also close automatically during this time range without me ever knowing because I’m asleep.  This suits me because it prevents me from micromanaging positions which I sometimes have a habit of doing.   

European session characteristics:

  1. London is the heart and soul of FX and has over 200 market maker dealers
  2. 35% of daily trading volume
  3. whipsaw moves
  4. spreads decrease
  5. some observe the first price move during this session to be false as dealers run stops and explore support and resistance levels

I trade the US trading session but not as much as the European.  I’m strictly a technical trader and since the US economic announcements move the Forex market like no other, I don’t feel that comfortable.  I used to trade more during this time but found that Forex brokers made it more difficult to properly manage a position (platform slowdown, increased spreads, wild swings.)

US session characteristics:

  1. account for 25% of daily turnover
  2. 10% of turnover from Greenwich, CT, the hedge fund capital of the world
  3. some observe that all price action that occurred during the Euro session is reversed
  4. the focus turns from European economic news to US economic news

Source for some of the information came from the article titled, "Secret Rhythms of FX Time Zones" at http://www.sfomag.com.

Explore these additional posts at Forex Project relating to Forex Time Zones:

  1. Is Trading The Asian Session a Waste Of Time?
  2. Most Volatile Pairs during Asian Session

New Forex Trader Graphs

March 20, 2008

I’ve added a new section to the site that will display all different types of graphs of my performance.  Currently I have:

  1. Monthly Profit/Loss in USD - This graph shows my profit/loss in USD for each individual month.  A month is treated as a totally separate entity from every other month.
  2. My Equity Curve – a graph rebased to a starting level of $20,000 USD.  This shows my rolling profit/loss in USD from month to month.   The value of the last data point on the graph will show my most recent capital amount.
  3. Monthly Profit/Loss Percentage - This graph shows my percentage gain or loss for each individual month. 
  4. Rolling 12-month Profit/Loss Percentage - This graph will show my rolling percentage profit or loss for a 12-month period.   The value of the last data point on the graph will be my total profit/loss percentage for the year. 

I don’t know how much I’m going to increase or decrease these numbers after this month.  I’ve had an up and down month on the positive side.  I currently sit at +3.0% for March with no open positions.

The link to the graphs will always be located under the "Trader Rich" menu and is titled, "My Forex Graphs." 

Trading Forex on a Mac or Linux

March 17, 2008

My primary computer at home is a MacBook Pro running OS X 10.5.2 (Leopard.)  My other two computers run linux.  There is not an unvirtualized Windows PC anywhere to be found.  Despite this fact, I can trade Forex using any broker trading platform and use any charting software available.  

Why let anyone dictate the type of computer or operating system you’re going to run?  I like Mac’s.  I like Linux.  Windows XP was O.K. but Microsoft’s latest release, Windows Vista is an absolute nightmare.  With that said, there are two predominant types of forex trading and charting applications that are offered by forex brokers:

  1. Java-based broker applications like those offered by Oanda, Forex.com, and GFT Forex.  I don’t know of any full-featured charting applications that are java-based.  These trading and charting applications can run on any operating system that have java installed.  You can run these applications on Windows, Mac, or Linux.
  2. Windows-based broker applications like those offered by FXCM.  All of the full-featured charting application like Metatrader, eSignal, and Xtick only run on Windows.  Your only option is to run these on a Windows XP/Vista machine.

Virtualization is getting more popular in the Enterprise and even on the desktop.  If you don’t have a clue what virtualization is, read the Wikipedia entry at http://en.wikipedia.org/wiki/Virtualization.  All you really need to know is that virtualization allows you to run Windows on a Mac or Windows on Linux and vice versa.  You can run Windows alongside your Mac or Linux at the same time without rebooting.  Before I get into what virtualization options you have, let me show you a screenshot of my Mac Desktop.  That’s Mac OS X with Metatrader (a Windows only application) running.

metatrader mac os

You can also do the same thing pictured above on a Linux workstation.  

You need virtualization software installed on your Mac or Linux machine to do this.  You have two options:

  1. Parallels 
  2. VMware Fusion

I’ve used both options and they’re very similar.  VMware has been around for a long time and are the market leaders in virtualization in the enterprise.  They were late to the game supporting Mac OS though.  Parallels specialize in virtualization on the Mac so are ahead of VMware in this respect.  Therefore Parallels has a slight edge feature-wise.  Both products offer a fully functional 30-day demo.  On Linux, VMware definitely has the edge and has been running virtualization technology on top of it for years.  Just recently, Parallels announced that it too can run on Linux.

I’m not going to get into all the features and benefits of virtualization but another great feature besides being able to run Windows applications on Mac and Linux are snapshots.  They are kind of like backups of your Windows machine but are very quick (a minute at the most for me.)  Parallels describe snapshots as enabling "you to erase mistakes and recover your virtual machine from system crashes and viruses with the click of a button." It really does this.

Virtualization allows you to remain flexible with the computer hardware and software you choose to trade forex with.  You don’t have to put off buying that Mac or Linux machine just because your broker or charting provider only support Windows.  You get the freedom to do whatever you want. 

FXCM to Offer Metatrader

March 17, 2008

fxcm metatrader

This came as a complete surprise to me but I absolutely welcome it. FXCM announces they will offer Metatrader in 2008.

FXCM plans to introduce the MetaTrader online trading platform in the beginning of 2008.Because many traders have expressed an interest in this trading platform, we would like to keep them informed of our progress. Please complete the form below if you would like us to send you information about the upcoming release of MetaTrader.

http://www.fxcm.com/metatrader-platform.jsp

How a Stock Meltdown Today Further Confirmed My Intuition

March 15, 2008

I opened 23 positions in January, 19 positions in February, and 11 so far in March.  There were approximately 22 trading days in January and 21 trading days in February. March will provide 21 trading days.  It’s pretty clear from these numbers that I average about 1 trade a day.  I’m not trading everyday though.  Trades sometimes come in bunches and on some days, I open multiple positions.  It’s also clear that I’m a forex day trader.  I attribute this to my personality.  I’ll be the first to admit that I’m a bit impatient.  I accept this and therefore design my strategies based on my self-evaluation.  This is the only way I can see doing it.  Fight yourself and it will show in your bottom line.  

Until I actually broke down the numbers above, I felt like I was "under" trading this month.   "Under" trading to me means that I’m missing trades that my systems are generating.  The simple fact is that every month I miss trades that my systems generate.  So I’m not strictly a mechanical trader because I do use discretion in my trading or maybe it can be called intuition.  Intuition usually turns out helping me a lot more than it hurts me.  How do I use intuition in my trading? Quite simply, sometimes a signal I get just doesn’t feel right.  In this case, I won’t enter the trade.  Sometimes if I’m already in a trade, I’ll get out before it completes.  I’ll admit that sometimes it may be due to fear but many times, it’s just gut feeling.  After today’s total meltdown of a certain financial firm’s stock (they were all over the news), I now believe that I should trust my intuition even more.  I worked for this financial institution.  I left the firm two weeks ago.   There were a lot of contributing factors to why I left but every January of every year, I could have left the firm but I never did until this year.  Luck?  Maybe but maybe not.  

I think intuition should play a role in every trader’s decision-making process.  How do you know if intuition, logic, fear, greed, or other emotions are expressing themselves in your trading? The key is to find the right balance which will come with experience.

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