TIC Report and my CAD position
TIC data was released at 9 this morning and it was less than
forecasted. Net foreign purchases of long-term securities were
$69.8 billion. The forecast was for 80.2B. I thought that
this would have been bearish for the dollar but the dollar took off
after the release. I scratch my head sometimes and wonder why
what I thought would happen didn't. Either way, I don't care
which direction the price goes because I was waiting for a channel
break either up or down.
The dollar did well overnight and my
long USD/CAD position was up about 70 pips during European session
trading. Ahead of the NY session and the TIC report release,
some of the dollar gains were given back this morning. I had
moved up my stop this morning to 1.1143. I entered at
1.098. The USD/CAD actually hit the .250 fibonacci at 1.1175 and
then bounced off. This is where having multiple lots would have
helped. I was watching 3 fibonacci levels:
.250 = 1.1175 .382=1.1280 .500=1.1374
If
I had entered with 3 lots, I would have placed a stop order at the .250
for the 1st lot and held on to the other 2. This is all in
hindsight but something I thought about when entering this
position. Either way, when the prices started consolidating a bit
this morning, I was stopped out at 1.1143 for a profit of 45
pips. Should I have held on to the position longer? I don't
know. I didn't want to give back all the gains if the dollar
started to get pounded again. I figure I can go long again on a
break above the
.250 fib.
Popularity: 5% [?]
How Realistic Am I Being About Trading Full-Time
During my workout today, I crunched some numbers in my head to see what it would take for me to be able to trade full-time. I've tried to find these answers on forums like Moneytec. I know a lot of you may visit forex forums but I don't find them beneficial one bit. There is too much garbage to sift through. Someone on Moneytec asked if it is possible to trade Forex full-time and it wound up being a very long thread with no real answers. It was full of people stating that it was possible, others stating that you needed a million dollars in initial capital to do it, and pessimists stating that it was not at all possible. Now it may be that this is not an easy question to answer. I will attempt to run something by all of you and you are free to bash it at will. My assumptions may be conservative or even unrealistic. How would I know the real answer to this question because I have not experienced it yet.
Here are my assumptions:
- You are consistently profitable now
- You have a trading system that wins 60% of the time
- You make 10 trades a week
- Each winning trade averages a profit of 30 pips
- Each losing trade average a loss of 30 pips (Yes, this is a 1:1 risk/reward)
- You start with $10,000 in trading capital
- You do not risk more than 3% on any trade
- You are trading a standard 100K lots
- You will not pull any capital out of your trading account until you reach your full-time goal
The first thing you have to ask yourself is how many lots do I need to trade to make a standard of living that I am accustomed to? I live in the New York City area and for me to maintain my standard of living, I would really need to make $2400 a week. If I make $600 a week trading 1 lot, then I really need to be trading 4 lots at a time to do this full-time.
- 1 lot = $600 per week
- 2 lot = $1200 per week
- 3 lot = $1800 per week
- 4 lot = $2400 per week
- 5 lot = $3200 per week
You are starting with $10,000 in capital, can only risk 3% on each trade, therefore you can only trade 1 lot initially. Based on my assumptions, you are making $600 a week. How long will it take to be able to trade 2 lots?
You will need $20,000 to start trading 2 lots so you must continue to trade 1 lot until you make $10,000 more. Making $600 a week, it will take 17 weeks or roughly 4 months to reach your 2 pip allowance.
Now you have $20,000 and you're trading 2 lots per trade. I need to trade 4 lots and preferably 5 lots a trade to make a living doing this full-time. Trading 2 lots at a time, I'm now making $1200 per week. How long will it take until I can trade 3 lots?
You will need $30,000 to start trading 3 lots so you must continue to trade 2 lots until you make $10,000 more. Making $1200 a week, it will take roughly 8 weeks or 2 months to reach your 3 pip allowance.
Now you have $30,000 and your trading 3 lots per trade. How long will it take until I can trade 4 lots?
You will need $40,000 to start trading 4 lots so you must continue to trade 3 lots until you make $10,000 more. Making $1800 a week, it will take roughly 5 1/2 weeks or a little over a month to reach your 4 pip allowance.
So now you have $40,000 in your account and your trading 4 lots at a time. You are averaging a profit of $2400 a week. How long did it take you to trade full-time?
About 30.5 weeks, a couple of weeks more than a 1/2 a year.
Is this correct? I want anyone and everyone to rip this theory apart!!!
Obviously the key here is you have to be profitable before embarking on this journey. Just being able to do that could take years and years.
Popularity: 5% [?]
Preserving Capital
Greg made a comment regarding a trader that interests me:
Two books worth their time: Market Wizards, and The New Market Wizards. One of the traders interviewed made the observaton that on any given day trading is probably luck, but if the trader is consistently winning over time, it’s not luck. Another trader said the whole purpose of entering a trade was to preserve capital (he has never had a losing month.)
Entering a trade with the purpose of preserving capital is an interesting way to go about things. I will probably read more about this in the upcoming days.
For next week, I think I will change my exit strategy which may help with my early exits. Instead of entry of 3 lots and exit of 3 lots, I will start to use a multi-lot exit strategy, one in which is probably based on multiple targets. This will definately require more management per trade but if my worry all along has been with giving back profit, this may help curb it a bit.
This weekend I will also be working on formally drafting a real trading plan. I will post sections as they are completed.
Popularity: 1% [?]
Yen Swing Trade Analysis
TRADE
Date: Friday, February 24th
Entry: Short USD/JPY at 117.05
Reason for trade/setup: With a downward trend in motion, I was looking for a swing trade to short the USD/JPY. I was waiting for price to retrace back up where a minor Asian session breakdown occurred several hours prior at 117.10. The DMI indicator was used as confirmation that the existing trend was still in place.
Initial Stop: 117.19; the high of previous bar
Initial Target: 116.40
RESULT
Exit: 116.76
Reason for Exit: End of day
Profit/loss: +29 pips/ +$745.10 (3 lots)
Trade executed according to plan? yes
Outcome: This trade entry went exactly according to plan so much so that it surprised me. The price didn’t reach my limit and that didn’t surprise me.
Thoughts: The market doesn’t generate trades like this everyday and this setup would only apply to trending markets.
; "Forex swing trade")
Popularity: 5% [?]
