Help - how do you get out of this!

Beginner Questions
1

For the first time in two weeks I have actually (almost) made a profit of $100 today before close. Yay!

The reason for this is that I have stopped trading my beloved USD/ZAR and have been trading the USD/JPY using the MACD indicator and this seems to be working well for me EXCEPT for one thing:

Like an idiot in the beginning I misread the indicator and (of course) instead of just buying one lot I bought three lots the wrong way.

All the way up I made profits on all my trades but of course the three positions detailed above are now in a huge loss situation. Just before the market closed I managed to buy three positions in the opposite direction so that I did not get a margin call (yes I know - I have once again ignored everything on babypips.com but you have to give me credit now as at least I am trying to use indicators etc. etc. and not the shotgun approach which has cost me at least $4000 thus far).

I do not like to use stops or trailing stops because my dealer rapes me when I do.

I refuse to write off the little bit of gain that I have made.

What would you do?

Anybody?

As I said before the pair is the USD/JPY.

Basically I sold USD and bought JPY at around 117.43 (3 lots)
Just before close I sold JPY and bought USD at 118.05 (3 lots)
The rate at close was sitting at 118.08

The thing that I am most worried about is if I am learning to read some of these indicators correctly - on the hourly and daily chart the rate is going up all the time although graphs of the shorter time frames were contradictory to this but nevertheless helped my to make my first little profit!!!

What is the best thing to do in this situation? Cus (cut - at first I actually made a spelling mistake) your losses now (which would wipe out my profit and then some) or just forget about them (they are effectively hedged for now) and carry on trading until you have made up for the loss and then write them off or what?

If the USD/JPY was trading in a certain range today (Friday) would it be safe to assume that on Sunday night when Tokyo opens the rate will go down and I can possibly make something on the down and cut the losses at a minimum (if any)?

What is good practice in this situation?

Regards,

Dale.

2

If this is a live account, Good luck on getting advice. :frowning:

No one wants the responsibility of anothers loss. :o

If this is a demo, look at the bright side. You know what not to do.:smiley:

:slight_smile:

3

As far as I’m concerned I’d get the hell out, remember there will be many more days for profit, as long as you learned something from this trade, consider the money (if it is live) educational cost. However, in taking the loss you have to also remember it could go back down, so you have to be prepared for that. However, the market may open way ahead or way behind where it is now. Anyways, that is just me, I give you my best on that ugly *****.

4

Dale,

Monday 2 bits of news the minutes for the Bank of japan, i’d expect most to have stated they are going to hold, bad for the yen i think it will loose value based on this report. I dont think we’ll be seeing another rate rise for some time.

2ndly US new home sales out monday, if existing home sales suprise is anything to go buy this may be temperarly good for the usd dollar.

Now i’m not a news trader, but i’ve given you 2 things i believe you should be taking note of trading this pair.

My guess i’d like to be long when the news comes out.

Finally regarding the stops put them somewhere where they will stop you out behind sensible support, check the 4h or day charts for this. But i’m sure i’ll get agreement when i say this, use stops they will keep you in this game for a lot longer.

Finally if you dont trust your broker to honour them etc, then look for another broker, there are loads that wont screw you on petty things like that.

5

Well, since you asked…

I would ride out my trades according to whatever rules I had set in place. I would then firmly REFUSE to trade another real, live dollar until I’d spent at least another month in a practice account figuring out why I’m still trading like a noob.

After losing $4,000 in a live account, I wouldn’t go back to trading real dollars until I’d shown at least a couple month’s worth of profit trading demo.

That’s what I think I’d do.

6

I can’t thank you all enough for the replies.

To start with - yes - it is a live account - and yes - I have lost $4000.00 in two weeks!

But I refuse to give up and let this get the better of me (I actually don’t have a choice - this has to work for me. It’s either this or something illegal and it can’t be something illegal because I am one of those people that WILL get caught).

At this time I wish to make a few points.

As far as demo trading is concerned:

On two seperate occasions I traded using demo accounts from various different companies and on both occasions over about a two month period I made an absolute fortune with all of them.

Demo trading in my opinion is not the same as live trading so I don’t see the point. In demo trading Market Orders are ALWAYS executed immediately and at the EXACT current bid/ask price; Entry Limit Orders are ALWAYS executed THE MOMENT that the price is reached; Stops and Trailing Stops are ALWAYS executed at EXACTLY where you have put them. Not so in the real world.

As far as taking others advice is concerned:

I certainly would never hold anybody responsible for a loss incurred by myself when acting on their advice.

I need the advice and input to learn.

Now to the problem at hand:

I just wanted to know what others would do in a situation like this because this is not the first time I have landed up in this situation and I can guarantee that it won’t be the last time. My immediate reaction in this situation (up until yesterday that is) has been to write off the losses when I started getting anxious about how big they were becoming only to find that had I just left them alone those losses would actually have turned into profits within a day or two and that is the main reason (if not the only reason) that I am down so much to date.

Since these positions are effectively hedged is there any reason to actually worry about them. I mean they are not affecting my margin in any way now and, other than the fact that I will pay $1 a day Cost of Carry, is there any other reason to panic that I am missing here. Maybe I’m missing something and that’s what I’m trying to find out.

I suppose the real question here is ‘to hedge or not to hedge’. When is it a good idea (if ever) to hedge a position? I mean I have been trying to make sense of hedging but not matter which way I try to analyse it I don’t see the point - you win in one direction whilst losing in the same direction or that is at least how I understand it. Admittedly in my situation right now it is ensuring that I don’t land up being margin called but that surely cannot be the only reason to hedge a position.

Anway - all input is appreciated - and if I make or lose money because I took your advice then that is my problem not yours.

Thanks again,

Dale.

7

What I am going to start doing - but havent yet - is hedge while I’m on a trend as it begins to reverse(or slight retrace), so you have profit, and when it dips, just cover the position, make some profit, then exit, and sell more when it comes down (if it comes down). I think the main thing about trading is just milking the winners and when things don’t go your way get the hell out of there. Also maybe a good idea would be to hedge when the news comes out instead of exiting the position. Actually thank you very much for this thread. It has got me thinking - looks like today will be a good night to study this idea. Sorry, I feel like I’m talking to myself ona post (maybe I am:o ). But I think hedging is only effective if you are winning or losing by only a small amount. The reason is hedging doesn’t make or lose anything (only doubles the spread). So If for instance the trade started to go against you a little bit, you could hedge and if it eventually turined around back to where it came you could exit the hedging position and take the profit from your signal. However, This is just my speculating right now, I never thought about hedging until this point, but, I will now research it and see if it fits into my system. Thank you again for starting this thread.

8

No problem shadow - anytime - I’ll send you the bill (I had better make it clear that I am only joking)!!!

Regards,

Dale.

9

In which case I would proceed to trade actual money, but only one tenth (or less) of what I expect to trade full swing. I would trade with the reduced according to my plan and observe, keeping a journal the same way as I did when demo trading, and making adjustments after each full week’s worth of trading.

After I verified that my (possibly adjusted) sytem works with real money, then I would proceed to trade the full amount I wish to profitably expose.

10

Hi Dale,

First of all, I just wish to clarify that I am VERY new to forex ( started 3 months ago ) , and only traded with demo account so far. So I am not very sure that I am giving a correct suggestion. :confused:

I would see three possible ways for your situation ( which you already mention 2 of them in you post )

  1. Close your position now and take the loss.
    I would prefer option 1 as lossing $100 profit + all the spread is less risky
    Pros : You dont have to worry about it and you can concentrate on new trades.
    Cons : Obviously, you loss you profit and all the spread.

  2. wait for the USD to come down to a level where you can close the hedging position and hopefully you can still maintain your profit if the price go in your favaourable direction.
    I will execute as below :

    Assuming USD/JPY goes up to 120.00 on Monday, just leave your position untouch.
    wait till it come back down to 118.10 ( I dont know how long it will be , days, week or month !! ) , close your hedging position ( which is sold JPY and bought USD ) , since you open the position at 118.05, the 5 pip difference is to cover the spread. assuming the spread is 5 pip to open a position )

    From this point on, if the price keep going down , then you will make more profit.
    BUT if the price go up again, then you will risk even more capital.

    Pros : Less risky compare to option 3.
    Cons : you dont know how long you have to wait.

  3. Close your position that sold USD, IF you think USD will move up a lot.
    Pros : This will reduce the waiting time as opposed to option 2.
    Cons : The price will have to moved 62 pips ( 118.05 - 117.43 ) for you to breakeven.

Again, this is only my humble opinion and appreciate other expers would correct me if I have given the wrong suggestion.

Happy trading !! :smiley:

Regards,

babytrader

11

Thanks everyone for your input.

I have read and re-read each and every reply and am still not sure what to do.

Needless to say I have in the interim ‘made’ about $141 since Friday afternoon BUT I am still sitting with these open (but hedged) positions which are netting me a nice little $255 loss!!!

I have looked at all the graphs over different time periods and the one glimmer of hope on the horizon is that the Commodity Channel Index run on the daily chart is telling me that the pair is WAY overbought at the moment so if this is correct then I theoretically have nothing to worry about right???

An opinion on the direction of this pair and my statement above would be much appreciated.

Regards,

Dale.

12

Here is something to read, I think it’s very sound advice.

Amazon.com: Boris Schlossberg’s Amazon Blog

13

IMHO: Your posts appear somewhat…emotional. You seem a bit pressured. Consider not trading for a while. Review your trading plan and signals. Review your trade management and risk/reward parameters. Approach it again from a fresh perspective.

14

Thanks for the replies and in particular the blog - very interesting and good advice.

I think I have pretty much answered my own question of ‘How to get out of this . . .’

The answer: simply patience!!!

I have sat and watched this pair the whole day and traded a couple of very profitable lots.

My loss on my ‘problem’ lots actually went down to almost $50 and then it occurred to me - just hold on. It might be costing me a $1 a day in interest but I think that by justing holding on to those positions they will eventually either break even or turn a small profit.

This has been my problem up until now and has cost me plenty - impatience! The moment I see a loss climbing I closed the positions and in each and every instance had I just left the darn things alone they would all have made profits.

Anyway - on this particular problem I have these loss positions hedged so there is not much I can do but sit and wait.

So far though - I’m quite proud of myself. Aside from the problem lots above I have made $145 since Friday on a $500 account. That’s about 29% if I’m not mistaken and I accomplished this by just following MACD!

Regards,

Dale.

15

Dale,
Did you say you made $145 on a $500 account? Is this the same account in which you were holding positions that were down $255. Did you also say in a previous post that you have lost $4000 so far in this account? Sincerely, I do not think “patience” is the answer you seek? With all due respect, it may be a good idea to reevaluate your methods. Protect your capital.

16

Well - it’s a long story but yes - intially I lost about $4 000 but I was doing everything wrong. I was insistent on trading the USD/ZAR pair simply because I live in South Africa and THOUGHT I knew where the Rand would always be at. In addition to that I did not even look at a graph, know what indicators were, or anything like that. Basically I was gambling - no other word for it. The one good thing about trading the pair is that a slight movement made huge changes to the bottom line but as big as the profits could have been - so too were the losses. In my own defence though - had I just left those positions alone I probably would have made a killing but started panicking when the ZAR started strengthening and kept opening positions and then closing them when I saw losses and this just kept happening until I was getting margin called every movement. Had I stayed in there i.e. been patient things would not have gotten so bad. On the other hand had I not messed up the way I did and made money in the beginning I probably would have poured more money into the thing thinking that I had discovered the ‘pot of gold’ and only then found out that it just is not that easy and probably would have lost a lot more.

I actually contacted my trading company and asked them to transfer whatever money was left back to me and close my account because I could not take it anymore. They were kind enough to transfer it back to me immediately.

I then sat down and had a look at all of the tools available to me on the trading platform and, of course, spent hours reading through these forums etc. etc. so I changed my mind, transferred $500 back to my account and started trading last Friday with just $500.

So no - I’m still down the $4 000 but yes - since starting again with the $500 I am right now sitting with a balance of $693.56 (this of course not taking into account my problem lots which I am confident I will be able to get out of at break even or at a profit sometime in the near future).

Put it this way - the problem lots I am not taking into account for the simple reason that it was my first trade on Friday and was confused about whether I should have been buying or selling based on the direction of my MACD cross. It was a pure mistake which of course I now do not make anymore. I also learned from it because this happened when the price was at its low limit for the day so I may have been able to correct my mistake by at least breaking even on them but there was no more room to move down and the JPY just started weakening from there.

I’m figuring I’ll stay with the little system I am using until this Friday. If I can show a consistent profit I will then go for $5 000 and hope that I can keep it up. The way I figure it - if I was trading with $5 000 in my account now I would then have made $1 935.60 by now - almost half of what I’ve lost so far - and that in two days.

Put it this way - since Friday - other than my problem lots that I’m sitting with at the moment - I have not made a single non-profitable trade. Sometimes I’m just making $0.85 profit, sometimes $5 or so, once or twice about $11, but over time this all adds up quite nicely.

Anyway - good point - thank you to everyone who is so helpful on this forum - I would have given up by now - and be broke - but, although it is early days, I really do believe that I can make this work for me.

Regards,

Dale.

17

I’m confused here, how will patience solve the problem? It seems you are in a hedged position with a permanent loss of 118.05-117.43 pips (plus the spread likely). Sure the cost of waiting is only the carry over, but you will eventually have to make a decision.

And yes, the loss is permanent, you can close one of your positions and hope the market goes in your favour, but this is equivalent to opening a brand new position and being right. What I’m saying is that recovering losses and making new profits is equivalent as far as your account balance is concerned.

So if you wanna pay the carry over until you are ready to make a good decision on the market direction, that would be wise, but waiting for the situation to rectify itself is not even a possibility in this situation. G’day and G’luck

18

Now you are confusing me.

All I’m saying is that if you look in March the JPY has ranged from around 115.20 right up until 118.40 so all I’m hoping for is that at some point it gets to around the 117.00 or so mark and I’m out with a profit.

The only other thing I can think to do is to wait until I have bumped the balance up to $1 000 + the amount of the loss on these lots and then get rid of them at a loss - the idea being that I will have at least doubled my money after taking the knock.

If I’m really lucky somewhere on one of the other threads in the forum an analyst mentions the possibility of the JPY going down to 115.00 or so before beginning another rally - so - here’s hoping!!!

What do you think?

Regards,

Dale.

PS - The only thing worrying me of course is that every single indicator on every single chart on every single timeframe is telling me that the JPY is weakening!!!

Actually - would someone mind taking a look at their USD/JPY Daily. Would I be correct in saying that there is a clear ascending triangle forming / formed and that this could mean that a breakout is imminent which could go either way but usually up?

19

I definitely enjoy reading your posts dpaterso

I think it’s great that you’re so eager and determined to do this. it definitely sucks that u had to lose 4000 + but i bet you learned more in the last few days than (when did u start?)…

as far as advice, maybe 118.35 will show some resistance…

20

I agree with pippy123, I think losing money in forex is the way to learn the most. Of course it is only useful if you learn from it, because if you don’t make mistakes, there is no way to advance. Face the problems head on an conquer!