Day 5: 26th Aug 2011

Last day of the first week of trade. What a mixed bag of feelings. Carrying a loss from the day before was an issue hanging on top of my head and was bullish of the EUR donning the same pattern today. I was right..... to a certain extent.

Holding long positions of EUR overnight certainly bore fruits... but unfortunately I dump them all way too early as EUR continue to show strength throughout the day. Although my change to short EUR position seem to pay off towards the evening, the market shift and shift way too fast to make decisions. At one time EUR was fluctuating from 1.4320-1.4400 so furiously that I was making quite a tidy sum! I was about USD300+ to the good then but things turned ugly thereafter.

After Bernanke's speech which said ABSOLUTELY NOTHING.. I mean, he talked but to me it meant nothing. And get this, when Bernanke says nothing at all, EUR soars! GBP soars!!! CHF plunges!!! Now, tell me... how does this make sense? By economic terms, when Bernanke says nothing with so much ambiguity... that means US is not going to print more money, hence the value of USD against other currencies WILL NOT depreciate... BUT, what the heck? It collapses against the Euro, hitting a high of 1.4500! Of course I am sore! When it climbed from the zenith of 1.4320 till 1.4410... I thought this is crazy... I started shorting my positions but it continued to climb! I cut my losses at 1.4480... I do not think I want to further subject myself to uncertainties. It just doesn't make sense.

And with Bernanke not giving calmness to the market, except he made some remarks that Governments must take charge of the economy and not to leave the responsibility of management of the economy to the Fed, together with the Fed has MANY tools to address the economic uncertainties without mentioning them.... I really wonder if all these statements mean anything at all? And how can the markets react with such vigour to a statement which meant..... NOTHING?

Anyway, what I was so sore about was cutting losses to the tune of USD260 over the last 20 minutes of my trade. It just trimmed my gains for the day back to something more believable. I achieved my forecast for week 1 actually.... End week balance of USD383 in my kitty with a 50+% gain today... could have been 150% but, lets be real.... I lost all of it due to:

1. Inexperience.
2. Greed

Now,

I realize something, when a position is making money, hold it. Do not cut it for the gains. I have this itchy finger to click tendency when I see some trades making money.

Secondly, NEVER... NEVER go against the trend. This was the mistake that I seem to be making everyday... except for a brief moment in today's trade in the morning through to late afternoon when I was FOLLOWING the trend I was pretty much in the comfort zone.

FOLLOW THE TREND AND DO NOT BE GREEDY

Day 4: 25th Aug 2011

A day that brings to perspective what forex trading is all about. BRUTAL.

The losses in GBP that I carried from yesterday seem to be recovering from a lowish of 1.6350+ to 1.6390+... at that point I was down by USD80+ or so... I got greedy and hoped for better, worse, I got in another 0.3lots.

Then nightmare seem to unfold in many ways not really imaginable... It dropped back to the 16350 level and my losses then was a harrowing USD190+... I was contemplating cutting but it was way way too much to cut. It would mean wiping off my entire gains and part of my capital. I pondered... Keeping these positions stifled me from taking new positions that can help me recover my losses. As I pondered, luckily GBP recovered to about 1.6370.. at which I dumped my entire investment without second thoughts and reathelize a loss of about USD130+. On top of that, well, my inexperience shows. I inadvertantly close a position in USDCHF which was losing about USD12 at that point.. and it hurts.... bad.

After freeing my positions, GBP seem to recover back to the 1.6380... and I was like... DAMN! But moments later, the free fall came and GBP sank to 1.6250 levels and I was for once glad I cut those chains lose.

After removing my positions in GBP, I started taking short positions in EUR which was still high at 1.4430+ levels... I thought it might just drop just like the day before. Waited... waited... waited.. then it happened. I sold all the way down to 1.4400 levels and recovered some of my losses. Then when I thought it was safe to start accumulating EUR at 1.4380 level, it dropped like being weighed down by lead till 1.4320+ levels. At that level I was out of bullets to keep buying as it may weigh heavily on my margin should I continue to buy. So, my buying stops at 15pip interval down till 1.4356 and I was staring at complete whitewash should this one drop again like the GBP.

Fortunately, by 11pm or so, it has recovered some parity till 1.4370 level where I sold off some positions before hitting the sack.

Lessons learnt:

1. When you are trying to get out of a deep hole.... do not DIG any further.
2. When sentiments go down... it may continue to go down
3. Read more. Technical analysis goes a long way to help one to cut losses and to reposition for the next assault.
4. Despite all the bullshit.. I think luck and timing is the key.

Was not feeling well too today, was in bed for most of the day and I do not think I will trade much tomorrow either.

Day 3: 24th Aug 2011 (Actual Trading Day)

Now I am getting a wee bit confused.... its day 5 of me on Forex Trade but in actual fact it has only been 3 trading days... so from now I will rename it to Day 3.

Today has been a bag of mixed fortunes. At day's end I still register a gain in profits of close to 27% returns, but a caution today, I cannot trade as much as I like...

Reason: I took up GBP positions today and at first sight, it wasn't a bad decision, just a bad day. For most part of the day GBP was trading between the range of 1.6490 - 1.6540, a healthy volatile range. It has been edgy as I waited for it to go down to close my earlier positions but it hovered stubbornly above the 1.6520 level. After some time when it does go down and after I have cleared my positions, I thought, well, no news is good news... well, never thought the news of Bernanke making a QE3 announcement this Friday would cause any trauma to the market. QE3 is a term the Yanks use for Quantitative Easing, whereby the government buys up bonds and bills.... in simple layman terms, print more money to pump prime the economy, and it seems to be in fashion right now, the 3 merely indicates that this is the 3rd ROUND! Now, how can printing money cause the USD to appreciate? Beats me. Anyway, I was buying positions at 1.6486 all the way down, thinking that it would appreciate back to the 1.65 level... unfortunately, that was not to be. It plunged down till 1.6320 level and I was staring at holding losses of USD190 which almost wiped out my entire profits for the last 3 days of trading with a free margin of USD100+. Safely, I thought, lets incur some swap cost and hold till the next day.

End of trading day 3:
Balance: USD335.72, Profit for the day: USD70.65, Percentage gain: 26.65%

Hanging over my head is my total of 2 standard lots of GBP bought at an average of 1.645 or so. Well, there is still room, but, I will start praying.

The good news is its starting to recover the morning of day 4 but still early to tell or sell as the lowest I bought was about 1.6381... just imagine the look on my face when it dropped till 1.6320. I wanted to buy further but looking at the margin, I thought, lets keep it safe, I wait.

Day 4 will be crucial as I do not intend to incur anymore swap cost but on the other hand, I would still want to target some gains to be consistently making everyday. Praying for the best and preparing for the worst... still wondering what is the worst or how it looks like.... well, I hope I will never find out.

Key news that probably spook the market:

1. Bernanke's Jackson Hole's Friday statement on QE3 rollout.
2. Steve Jobs quit Apple but stay on as Chairman
3. Stock market continue to recover, CME implemented higher margin restriction on trading of Gold. Gold dropped from its records level to 1740/oz from a high of more than 1880/oz.

Day 4: 23rd Aug 2011

The day started quite well, with the thought of a meltdown in EUR and GBP, I made a mental note that I should buy. For the record, when I first traded EUR was trading at about 1.4450 and GBP was going at about 1.6540. After the night, EUR was trading at 1.4300 region and GBP was going for 1.6400 region.

So, mental note it was and as the day wore on, it is soooo important that I am reminded and stick to my mental note.... my rule of thumb of 30% of margin got thrown out on the second day of trade and I did exactly the opposite of what I should do according to my mental note.

I guess its easy to go wrong as you see, you deduce the unfolding graphs... I start to take up sell positions on GBP and EUR. Was making quick 20cents, 30cents right until 3pm or so when Europe market opens... all hell broke loose. EUR and GBP was galloping upwards and to my dismay my sell positions are now holding a rough USD140 losses and coupled with my margin, I was freakishly close to a margin call! On my second day of trade! So, in desperation, I transferred another USD50 into my account to keep it alive. Mounting losses grew till about USD190 with free margin of only USD25/- well, there are two things I could do:
1. Deposit more money to my account
2. PRAY
I thought, well, I have done the first... now I do the second...

Changes to the golden 30% rule. Now this is mine.

TRADE WITHIN 30% of YOUR MARGIN BUT BE READY WITH 200% of CAPITAL TO BE INFUSED INTO ACCOUNT IF NEED BE

After that event, I realized I have learnt a few things:

1. Get your strategies in place to MITIGATE losses.

2. Market flies and wait for no man. Decide and act FAST.

3. Do NOT PANIC.

A few ways that I do to mitigate losses:

Lets assume you hold multiple SELL positions. Assuming you bought a total of 5 lots and you accumulate all the way upwards, hoping for it to come down but it did not... and you realize that any more purchases, you would breach the 30% golden rule... and with losses climbing with each purchase that gone awry, you are accumulating paper losses faster than you can say SHIT. My method would be to counter the flow... stem the loss by taking a couple of BUY positions... even at a high price. This would stabilize some of your losses should the price keep going upwards and a potential to make some margin capital from the gains from your BUY positions. While fluctuating and volatile markets make good trading ground, its either make or break under such circumstances. So, my rule no. 4 is BE BRAVE... then again, it is sometimes foolhardy to adopt this stance but again, when I look at the graphs, I made some quick decisions, best and worse case scenario.

Today was a classic case, I look at the situation that I am in, then I realize that my worst case scenario is another 50% of losses... while the best case scenario I can make 180% of profits... at present I am already losing 80% of my capital, so my risk? Lose USD170/- and I am done with FOREX. So I kept my composure or the lack of it.... I started counter SELL by BUYING... along the upward cycle I sell and wait for the breather to BUY again... continued for the next 30 minutes before it was time to fetch my darling wifey from the LRT station... at that time, I was staring the following details on my screen:

Balance: 239.47, Margin: 45, Free Margin: 50++ and a current trading loss of 170++

Looking at it, was a vast improvement of just a few moments ago, where my free margin was about 25++. Not a rosy picture, so I thought of either putting another 50/- into the account or I "restructure" the account further... since I wont have the opportunity to monitor my open positions for some time. By restructuring, I cut and realize some losses and keep a couple of BUY positions to hedge against potential losses.

So, by the time I got home about 8pm, surprise greeted me.... GBP and EUR DROPPED and my position has reversed! I was UP by a bit... but still UP nonetheless...

End day position: USD265.07 and still register a gain of USD45.40 giving a modest gain of 20.7%.

I think I cannot complain. By the way, I still do not know the reason for the spike in GBP and EUR... :).

Day 1 of the REAL DEAL - 22nd Aug 2011

Morning started with me transferring USD100 into the account of one Mr. Nim who acts on behalf of IKO Fx... hmmm... things have changed.. I am depositing money into a stranger's account.. just because the website tells me to...

After depositing, I text him my details and I decided to call him and have a chat. A chat we had and he wished me luck in my trade. Pleasantries exchanged, I noticed my account being credited with USD100... and... well.. here goes... nothing... anyway, I just comforted myself... with their exchange rate of RM3.7 for USD1, I am merely burning RM370, which could easily have gone off in 30 minutes up in Genting, so what the fuss.

Within minutes of trading, I realized the following:

1. Do not worry nor fret. Opportunities will come again and again and again, just like the stock market but this one comes more rapidly and more intensely.
2. One needs to have clarity of mind to trade. Furious trades, exit after making 10cents, 20cents or 50cents. It can come very fast.. well, in the same vein, it can go as well, but most of the time, the opportunity comes back.
3. Do not panic.

Well, I trade only on the free hours or minutes that I get in between office work. Not that much of time but I think all in all I locked in some 8 hours of trading till about 2.30am the next morning. Well, I have time to burn waiting for Manchester United v Totenham Hotspurs that starts at 3am on Tuesday morning. Forget about the fact, that I will be sleep on Tuesday.

My trade ends with a gain of USD49.67 on the back of an intial investment of USD120, well, you put in USD100 and after some trade, IKO credit a free USD20 into your account! Well, on that score my returns for Day 1 was hefty 41.39% of investment!

Events and issues that I noted on my first day of real trade:

1. Not too sure if it is the case, the matter of Gadaffi's fall although not substantiated, just that news that filtered through was that of the rebels holding a large part of Tripoli actually triggered a meltdown of EUR and GBP. Well, I did not notice the others as my trade lies mainly on EUR/USD, GBP/USD and to a much lesser extent USD/CHF.

Certainly I would have made more than the 41% of not for this event as I was buying EUR adn GBP. Cursed my luck, but trust me.. more of these darn moments will surface in the course of my endeavour.

Day 3 - Sunday! 21st Aug 2011

Woke up cheery and was alone at the balcony looking out towards the city and the skyline of KL was as usual.... HAZY... at 7am.. I had a lot of time to do some thinking and soul searching.

Switched on my laptop and clicked on OPEN LIVE ACCOUNT! Wow.. taking the first step into the real thing.... so to confirm some of the stuff I already know.. read thru the website end to end and got the comfort that well... can do la.... so I filled in all the details and get it ready for trade on Monday!

Switched off my laptop and I started thinking about the entire thinggy and devising strategy after strategy and doing projection after projection.. well enough of the crap... can't wait for Monday.. Monday.. Monday...

19th Aug 2011

After all the hoo ha.. hoo ha... I downloaded IKO Fx client onto my laptop and there I go started trading on Demo platform with USD1000.

Of course, first time ma... learning to click on buttons and all the wrong buttons.. buy, sell, sell, buy... niamah... keep pressing wrong and I cant seem to find a way to close my positions... after some time, I realized that the button was in front of me all the while... really NIAMAH! Keep finding right click, left click.. all don't work. Okay... that sorted, but I keep making mistake of understanding what buying... buying into? What currency la??? EUR/USD... when I want to buy, always click sell... when I want to sell...always click buy... sure sure... I am going to hate this.. but I persevered on for the next half hour or so and I got it quite sorted out. Now, studying the history! Damn! What a load of stupid documents with so many lines going up and down, some curved... some black some white... (well, these are the candlestick charts) hmm... like I am some kind of guru to be able to decipher all the mumbo jumbo... nevermind that just trade...

So after some mistakes, I decided to delete the old account... overtraded and huge losses... what to do? keep buying and selling and dont know how to close... so I create a new account... AGAIN. Well, long story short, I traded from 4.30pm till about 6pm that day for the first day and I make a tidy USD216/-! On my demo account! That felt good but DAMN! Not real money!

Anyway, weekend looming and I have a movie date with my family... going to watch RISE OF THE PLANET OF THE APES at Pavilion at 9.15pm. So better not be late!

End of DAY 1.

Why Forex Trading

I have chanced upon this form of investment from a long long time ago, unfortunately back then I was told to deposit in thousands of USD into the account to start trading. Since then, I have not revisited it nor even gave it a second look. I have gone pretty aggressive into the stock market, hoping that with the knowledge I have, there could be an avenue for extra income to supplement my meagre take home pay... however, as fate has it, I have terrible luck in it and economic doom seems to follow me in each and every foray I make into the stock market.

So, I cool off stock market for a while and while I was seeking out investment opportunities, many came and I came off unimpressed. For the past few years though, we were bombarded by some high flying forex traders that claim to have the "secrets" of making money in forex trading... I was like.. WOW! All the while I thought most will get burnt beyond recognition in this risky market and some enquiries made to them made me realize that, "ITS FUCKING EXPENSIVE" to attend your talk and training! I never bothered to attend.. after all I thought I would never have enough money to even start investing in Forex Trade.

Time pass and I was introduced to a chap who explained that I can start forex trade with only USD1... I was like yeah.... then he showed me a copy of his profit statement of 20% returns per day of trade bla bla bla.... the rest being imcomprehensible load of gibberish statements... and I go again like... oh yeah.... what about the losses? Then just one statement from him that makes it clear and that really caught my imagination.... "Trade only 30% of your margin"

Now, how that became the mantra, we shall talk about it later. That had me all caught up... I did the financial projection and calculation and hours of research to clear the rust off my head on forex trading. I Googled for hours and I came up with this thought that I MUST at least give it a try despite all the negative perception that I have on Forex Trading... which could be just myths and some unfounded scare which I have been hearing all these while.

Then I approached this friend again and clarified with him further on how the mechanics of transfers, deposits and withdrawals.. well, an accountant by profession like me are always bothered by how much money leaves my pocket and how it travels and most importantly, how do I get the money that I supposedly own back to my own pocket again! After getting all those sorted out, I thought, well, time to try trading..... DEMO MONEY... well, not yet my own la... try try first ma... so I signed up with IKO Fx. I know, I know there are many platforms in the market.. I so happen to choose one that this friend of mine trades on.. so at least I can confer with him ma.. should I need more information or clarification.

So, my adventure or misadventure into Forex Trading starts! Date stamp: 19th August 2011. I shall note down my experiences and feelings on every trading day so that it can act as a repository of knowledge as well as experience that could be shared and be reminded regularly.

Ok.. ok.. back to the "trade 30% of your margin". Well, forex trade gives you this leverage of 1:500, so for every dollar that you trade you get a leverage of 500. Eg, if you put in USD100, you will have USD50,000 to trade. And trading goes from as small as 0.01lot. 1 lot in this case is USD10,000, so 0.01 lot merely indicate that you trade USD100. For every 0.01 lot it is USD0.10 of your margin. Hence, if you deposit USD100 into your trading account, by rule of thumb you can invest up to USD30 of your margin... (ie 3 standard lots).. so there you go... Forex Trading for Dummies. Lets TRADE!