Last night and today were uneventful ... and it bored me about as much as this post might bore you. Sticking with my Bollinger Band-PSAR-RSI strategy per my rules, I didn't see anything in the charts that induced me to take a short or long position in the EUR/USD exchange.
Actually, that's only partly true. Last night, I put in a buy order shortly after closing out a previous buy order for a profit. Doesn't make sense, you say? Well, you're absolutely right. In hindsight it doesn't make sense to me either.
It probably won't surprise you then when I confess that I sold that second holding for a loss about an hour later. This all happened late last night, so I started the day in the negative. Never a good thing with anything in life.
The second trade wasn't just out of boredom. Something in me felt I should be able to create a successful position everytime I look at a chart.
With some immediate self-reflection post-loss, I decided I shouldn't put in another order, especially to hold overnight, if I wasn't entirely confident. And I wasn't. I switched between so many timeframes desperately searching for a clue as to whether the price would soar or sink--all to no avail. I was leaning towards a long position, because the EUR/USD on the day timeframe has been trending upward. But I couldn't find chartology merit to support this inclination of mine.
Selling, or going short, didn't seem appealing either. There was no overwhelming price divergence that would've hinted at the possibility of a sharp reversal in price movement.
I'm pleased with my decision to not go long overnight because I would've woken up today with a loss. For most of the night, the price did creep upwards, but when the stock market opened this morning, the EUR/USD really started to move down in price. It might not have been a substantial loss, but it would've been a negative yield nonetheless.
I'm also glad I didn't go short. I thought it showed some restraint on my part not going against the current. It wasn't listed as one of my rules, but going with the flow/trend was always something I wanted to keep in mind with all of my trades. It's no coincidence that my most successful trades so far have been long ... since, surprise surprise, the trend on the day chart is up.
I have to admit, though, not trading is pretty darn hard. Willpower takes effort, and this little lady is pretty out of shape as far as mental toughness is concerned. When I wrote my rule about emotional neutrality in my forex trading, it never occurred to me that my toughest day emotionally would involve resisting the urge to trade.
In high school, I never took speech and debate as a class or an extracurricular activity. I don't enjoy the sound of my own voice or speaking in public. Small group discussions, without an audience, are more to my liking. I do have some a newfound respect for debate champions though. One in particular from Harvard, who was also a contestant on the Apprentice, said something that struck a chord with me: "Every good debater knows that there's a time to listen and a time to speak." I'm paraphrasing, but you get the gist. Perhaps I ought to get used to the idea that a good trader knows that there's a time to trade and a time to sit it out.
I've been checking back into the charts throughout the day--1 hour timeframes and higher--and I saw an opportunity for a short-term trade a few hours ago. I put in a sell order--going short--and eeked out a $250 gain. That now puts my account balance at $56,408.72, which is a little bit down from $58,058.72, my balance yesterday. I'll view the $1,650 not as a loss, but as my tuition for my education in the importance of patience and willpower in forex trading.
Wednesday, February 29, 2012
Tuesday, February 28, 2012
Preparing to Crash and Burn
I'm no pessimist. But I'm also no eternal optimist. When someone asks me if I see the proverbial glass half full or half empty, I want to answer "both" (I never do because the few times I have I was accused of dodging the question and then the conversation became awkward and strained).With my third day of trading almost behind me, I should feel mighty optimistic about my future in the forex market. In just three days (I took a day off for my 30th birthday weekend trip), I turned $50,000 into $58,058.72. Instead of bouncing off the wall, rejoicing in my success, I'm focusing on the "half empty" side of the glass. I'm worried about the "down" after the "up" for one reason and one reason only: I don't yet have a second parachute to back up my first one.
The first parachute in this scenario is me--my eyes watching the forex charts and getting out when things don't look to be going my way. Obviously this parachute needs her eight hours of beauty sleep and occassional breaks for food and my actual job. The thing about parachutes and skydiving is this: For the most part skydivers will only use first parachutes their entire skydiving career. Not having a second one on hand, though, is just plain stupid. When you need the second one, you really NEED it. I won't die if I only have first parachutes in place my trading career, but I would view a loss of all my hard-earned money as an equally crushing "game over" situation.
FXCM, the broker through which I have my demo account, has a stop limit / trailing stop loss option to orders. I just can't figure out how to use it. I thought working with pips would be the same as working with dollars and cents. Fidelity has a stop limit / trailing stop loss option and I use it quite a bit, so I thought FXCM's would be a piece of cake. Now the few times I've set up a trailing stop loss--in pips--I was almost immediately closed out of the position. Not the plan at all. Generally speaking I like a pretty loose buffer because I know everything market related comes with dips and pullbacks that are mere bumps or respites on the road up.
Am I doing quite well with my one parachute? Yes. Am I the stupid enough to continue without a second "parachute"? Hell no! So tomorrow I'm going to do something I haven't done once since entering the stock market game. I'm going to ask for help.
I received a welcome call on Saturday from a sales broker at FXCM I'll call "Paul." He left me a very nice message welcoming me to FXCM and offering himself up as a point of contact for all my forex trading-related questions and concerns. He may not be accustomed to newbies like me actually taking him up on the offer, but the sucker left his email address and phone number in a follow-up email shortly after the missed phone call with me. He'll be getting to know this newbie!!
The first parachute in this scenario is me--my eyes watching the forex charts and getting out when things don't look to be going my way. Obviously this parachute needs her eight hours of beauty sleep and occassional breaks for food and my actual job. The thing about parachutes and skydiving is this: For the most part skydivers will only use first parachutes their entire skydiving career. Not having a second one on hand, though, is just plain stupid. When you need the second one, you really NEED it. I won't die if I only have first parachutes in place my trading career, but I would view a loss of all my hard-earned money as an equally crushing "game over" situation.
FXCM, the broker through which I have my demo account, has a stop limit / trailing stop loss option to orders. I just can't figure out how to use it. I thought working with pips would be the same as working with dollars and cents. Fidelity has a stop limit / trailing stop loss option and I use it quite a bit, so I thought FXCM's would be a piece of cake. Now the few times I've set up a trailing stop loss--in pips--I was almost immediately closed out of the position. Not the plan at all. Generally speaking I like a pretty loose buffer because I know everything market related comes with dips and pullbacks that are mere bumps or respites on the road up.
Am I doing quite well with my one parachute? Yes. Am I the stupid enough to continue without a second "parachute"? Hell no! So tomorrow I'm going to do something I haven't done once since entering the stock market game. I'm going to ask for help.
I received a welcome call on Saturday from a sales broker at FXCM I'll call "Paul." He left me a very nice message welcoming me to FXCM and offering himself up as a point of contact for all my forex trading-related questions and concerns. He may not be accustomed to newbies like me actually taking him up on the offer, but the sucker left his email address and phone number in a follow-up email shortly after the missed phone call with me. He'll be getting to know this newbie!!
Friday, February 24, 2012
Long Term Great, Short Term Bad
Last night I almost went to bed defeated. Yesterday started off wonderfully trading wise. I woke up and found that my position long in the EUR/USD yielded a $5,000+ gain. For a $50,000 account, I thought that was pretty darn good. I took a look at the charts and sensed a pullback was inevitable. I didn't want to forfeit my 10% gain, so I sold all my shares and took the profit. For most of the day I avoided trading. Then some downtime in the nightime got the best of me, and I decided to apply my strategy to some short-term positions. What a mistake that was! Not only did I lose the $5,000 I had previously gained, but I also lost an addition $6,000.
I was all set to trot off to bed with my account sitting around $46,000 and no positions long or short for fear I would lose more. Then, I remembered Rule 1 (see Regrouping post): (1) Emotions, whether positive or negative, will be confined to the footnotes section of my trading story (i.e., although present and inevitable, they will not determine my trade actions). Combine that with my other rule, not giving up on a strategy until I make it work, and I had no excuse for not regrouping and reentering the game.
I switched out of the 1-minute chart and into the 1-day time frame. The trend was up. There was a green PSAR dot under the price. And the RSI was at 64, moving up, and had not diverged with the price. It wasn't a guarantee, but I felt good about going long.
I put in the order, had a great night's sleep--emotions in check--and woke up this morning to a wonderful sight: $9,000+ yield on my position. My account balance (equity) read $54,000.
Not wanting to repeat my previous day's mistake, I left my position alone throughout the day, with the exception of taking an $8,000+ profit around 1 pm. (I saw no reason to hold a position over the weekend.) Throughout the day I kept saying "no short-term trading." It wasn't an emotional decision. I merely wanted to reflect on why it was my strategy had been working great for me long-term but not short-term.
A bit about the strategy I employ: I'm trading on chart information--mostly because I want to. The idea of reading up on what's going on with the Euro, Greek bailout, strength of the dollar, etc does not appeal to me. I also think, as an emotional girl, it would be hard to squash my instinct to react to good/bad news and follow the emotional rollercoaster journalists unwittingly build for viewers. It's not always the case, but I assume that most charts, if set up with the right indicators, will contain some visual clues of a loss/gain of momentum before the price crashes/soars.
The indicators I use are: bollinger bands (default setting), RSI (default setting), and PSAR (default setting). When do I buy (or go long) a position? When the RSI is above 50 and moving upward AND there is a green PSAR dot under the priceline AND the price is hugging the upper bollinger band. It's not an exact science and I doubt any rock star chartologists are salivating at my technique, but for the past two days, on my long-term (i.e., overnight) positions, it's been working.
So what explanation is there for why long-term I'm kicking butt and short-term I'm getting my butt kicked? I'm really not sure. Perhaps it's that short-term trading requires more focus and attention on the price movements. And even with my rule about emotional detachment, I'm still susceptible to panicking when prices drop and feeling lucky and greedy when prices soar. At this point, it's probably a benefit to my bottom line that I'm stepping away from the computer after setting an order. One day, I hope to conquer the short-term trade. But for now, I'll stick with my long-term strategy and continue to analyze what's holding me back short-term.
I was all set to trot off to bed with my account sitting around $46,000 and no positions long or short for fear I would lose more. Then, I remembered Rule 1 (see Regrouping post): (1) Emotions, whether positive or negative, will be confined to the footnotes section of my trading story (i.e., although present and inevitable, they will not determine my trade actions). Combine that with my other rule, not giving up on a strategy until I make it work, and I had no excuse for not regrouping and reentering the game.
I switched out of the 1-minute chart and into the 1-day time frame. The trend was up. There was a green PSAR dot under the price. And the RSI was at 64, moving up, and had not diverged with the price. It wasn't a guarantee, but I felt good about going long.
I put in the order, had a great night's sleep--emotions in check--and woke up this morning to a wonderful sight: $9,000+ yield on my position. My account balance (equity) read $54,000.
Not wanting to repeat my previous day's mistake, I left my position alone throughout the day, with the exception of taking an $8,000+ profit around 1 pm. (I saw no reason to hold a position over the weekend.) Throughout the day I kept saying "no short-term trading." It wasn't an emotional decision. I merely wanted to reflect on why it was my strategy had been working great for me long-term but not short-term.
A bit about the strategy I employ: I'm trading on chart information--mostly because I want to. The idea of reading up on what's going on with the Euro, Greek bailout, strength of the dollar, etc does not appeal to me. I also think, as an emotional girl, it would be hard to squash my instinct to react to good/bad news and follow the emotional rollercoaster journalists unwittingly build for viewers. It's not always the case, but I assume that most charts, if set up with the right indicators, will contain some visual clues of a loss/gain of momentum before the price crashes/soars.
The indicators I use are: bollinger bands (default setting), RSI (default setting), and PSAR (default setting). When do I buy (or go long) a position? When the RSI is above 50 and moving upward AND there is a green PSAR dot under the priceline AND the price is hugging the upper bollinger band. It's not an exact science and I doubt any rock star chartologists are salivating at my technique, but for the past two days, on my long-term (i.e., overnight) positions, it's been working.
So what explanation is there for why long-term I'm kicking butt and short-term I'm getting my butt kicked? I'm really not sure. Perhaps it's that short-term trading requires more focus and attention on the price movements. And even with my rule about emotional detachment, I'm still susceptible to panicking when prices drop and feeling lucky and greedy when prices soar. At this point, it's probably a benefit to my bottom line that I'm stepping away from the computer after setting an order. One day, I hope to conquer the short-term trade. But for now, I'll stick with my long-term strategy and continue to analyze what's holding me back short-term.
Thursday, February 23, 2012
Regrouping
It's been awhile since my last posting. How long, you ask? I'll let you do the math on the dates below. Like with my bank account and taxes, that sort of arithmetic is depressing.
The good news--aside from my absence--is that I'm preparing to get back into the stock market game. I signed up for a demo account on FXCM.com, and for the past two days I've been practicing trading currencies.
My goals have changed a bit since my first post. Making money is important, of course. Like others, I don't want to consistently lose my hard-earned dollars and cents. But I find that goal in the context of the stock market too vague. Instead, I've been thinking of what goals and parameters I can implement on a day-by-day and trade-by-trade basis.
Here they are: (1) Emotions, whether positive or negative, will be confined to the footnotes section of my trading story (i.e., although present and inevitable, they will not determine my trade actions). (2) For every entry, I will have a clear and precise exit strategy, and I will stick to it no matter what. (3) I will stick to one strategy and will not abandon it and jump around until I've demonstrated some mastery of it. (4) I will devote a certain amount of time to my trading daily, but I will not let it consume too much of my daily time. And (5) I will also devote at least 15 minutes per weekday to updating this blog. Writing is just as important to me as learning this new skill.
The good news--aside from my absence--is that I'm preparing to get back into the stock market game. I signed up for a demo account on FXCM.com, and for the past two days I've been practicing trading currencies.
My goals have changed a bit since my first post. Making money is important, of course. Like others, I don't want to consistently lose my hard-earned dollars and cents. But I find that goal in the context of the stock market too vague. Instead, I've been thinking of what goals and parameters I can implement on a day-by-day and trade-by-trade basis.
Here they are: (1) Emotions, whether positive or negative, will be confined to the footnotes section of my trading story (i.e., although present and inevitable, they will not determine my trade actions). (2) For every entry, I will have a clear and precise exit strategy, and I will stick to it no matter what. (3) I will stick to one strategy and will not abandon it and jump around until I've demonstrated some mastery of it. (4) I will devote a certain amount of time to my trading daily, but I will not let it consume too much of my daily time. And (5) I will also devote at least 15 minutes per weekday to updating this blog. Writing is just as important to me as learning this new skill.
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