Suppose a position trader realized that the BOJ policy of aggressive QE which was announced about a year ago when the USD/JPY was valued at 77.00 was going to lead to a massive decline in the value of the Yen. Now suppose he used 50:1 leverage and has $10,000 in his account and therefore was able to take a 500,000 unit or 5 lot position. He later closes the position a year later at 97.00, he would have made a whopping 2000 pips, or $20,000 per lot or a total of $100,000 thereby making 1000% on his principle.
During all this time all he has to do is check the charts periodically and noting that they never drop below his buying price of 77, all he has to do is sit back and wait one year for a 1000% return.
Now your scalper is going to try to kill himself looking for an “edge” and after 20 trades a day is only making a return of 5% a month.
What I don’t understand is why noobs who are new to FOREX who want to risk 50% of their account on one trade so they can profit 50% but who have a 99.9999999999% of losing there account if they chose to trade like this for more than a week, don’t just find a price which they think is the absolute LOW for the year, buy in and hold it for one year with the potential for a 1000% return. The most they can lose is 50% of their account because a Margin closeout is exercised once one’s account loses 50% or more of it’s value.
Yet because of ignorance people prefer taking 50% risks over and over with a 99.99999% of failure rather than taking on a Gamble where they risk 50% of their account and have a 50% chance of making a 1000% return.
The trick to executing this strategy is finding the absolute low for the year and finding the right currency pair. All it takes is timing and patience, nothing fancy.
This is definitely one of my Eureka moments. Realizing that the obvious and easiest path to success is often overlooked. I avow to be a position trader from now on. Killing myself for a measly 5% return a month isn’t worth it when the potential for 1000% return a year is possible.
You’re right in principle, but [i]knowing[i] that you’re at your absolute low for the year is impossible. If I’m wrong, then I’d very much appreciate it if you could let me know when we hit an absolute low that will hold for the next 12 months. On any currency, I’m not fussy.
And I’ll cut you a deal - I’ll give you 75% of the profits if you agree to cover any losses!
Yeah it could work. Still picking tops and bottoms is not that easy.
Nice strategy. I was actually thinking to put some big money in a second account and wait for great opportunities. For example right now EUR/USD or USD/CHF rates are interesting. They could move big but all depends how US economy will do in the next month. Or like when a few weeks ago JPY dropped down to 94. That was a great time to buy but still back then it looked like everything was possible and the pair could also drop further to 90 and down.
So yes there are opportunities here and there but nothing is sure in Forex.
Why don’t I do this? Because I am not patiente and I know I will start gambling my money. First I will make sure I can be profitable. As day trader. And that I can deal with all phycological isses and then…well then we will see…but it is a good idea!
It’s not luck. For Example I bought very close to the absolute low of the 97.75 for the USD/JPY. How do I know this is the absolute low for the year?
Well given that the FOMC announced that it will not taper and this was totally unexpected and the worse case scenario for the USD/JPY and the USD/JPY not only found support at 97.75 but managed to rally over 100 pips to 98.87. I can say with confidence that this is an absolute low for the year and for the next 10 years.
If you don’t believe me let time play out I guarantee you that in one years time I will have made over 300% on this trade.
I just did it today with the USD/JPY. I found the absolute low for the next year at 97.75. Opportunities like this don’t come around often. How many times does a moment like this happen in a year? The FOMC hasn’t thrown a curve ball like this in a long time that was totally against Market expectations.
Though the tricky part is getting into the Absolute low. When the news came out the USD/JPY dropped like a rock from 99.06 to 97.93. After pausing it started a retracement. This wasn’t the absolute low but the first green bar to make it’s appearance on the one minute chart was at price 98.11 while this wasn’t the absolute low of 97.75 it is close enough if your trading on a year time frame. I didn’t get in until about an hour later seeing that there was strong support at around the 98 level.
Finding the absolute low isn’t that tricky. When I see sharp decline losing momentum and green bars start appearing that’s when the low has been reached.
But it goes a little beyond that. My confidence that the Japanese Economy will never out preform the US Economy lies in the knowledge that Japan is resource poor nation, heavily reliant on imports, rising commodity prices will hurt it’s economy since Japan has shut down all its nuclear power plants and relies on Oil and other fossil fuels to provide all it’s energy needs, that and a steep demographic decline(low birth rate no immigration) and increased competition for resources from China make me believe Japan is doomed to decline.
The huge import/export deficit is an example of the fundamental weakness of the Japanese Economy. High Oil and commodity prices will kill the Japanese Economy. With increased demand from China and every country in the world employing QE look for Oil and commodity prices to continue to sky rocket.
I don’t see the US Economy ever recovering to pre-recession levels. America is a fundamentally different country than it was 6 years ago. More and more America will be a country marked by inequality as Wall Street Millionaires laugh all the way to the bank while Main Street struggles to make ends meet. That is after all what QE is about The Fed enriching Bankers because The Federal Reserve is a private bank posing as a pseudo government agency.
But in the end I see America despite being on the decline as being on a slower decline than Japan. America is richer in land, resources, people.
And don’t forget this the Petro-Dollar is backed by the largest Nuclear Arsenal in the World. What’s the Yen backed by Toyota and the super mario brothers?
This strategy is Universal it applies to any tradable financial instrument. Find a low and hold. The only problem is there may be only 1 opportunity like his a year but when the return is 1000% the pay off is more than worth it.
The last time there was a very good opportunity to buy at absolute low I was in College and had not money to trade. In 2008-2009 the stock market crashed and the S&P reached 600, that would have been a good chance to buy and hold, it was rather obvious that even at 700 it would have been a good price to enter. After all if the S&P could ever go to 0 what use would the USD be, besides toilet paper.
Bank of America dropping to $1 was another good opportunity to buy. Unfortunately I had no money or I could have made a 1000% return as Bank America stock recovered to $10 plus. Since I realized Bank of America was the largest depositor Bank in America I knew it was too big to fail.
You can’t lose 1000%. Trading on Fundamentals is about the trading of scientifically verifiable differences in two Economies. Your telling me Japan is going to reverse it’s demographic decline, change from being a resource poor country to becoming a resource poor country, and build up a forminable military overnight?
By trading on fundamentals I’m phasing out the noise and randomness of the short term. I am saying there is absolutely no identifiable trend in the short term? No, I’m saying that scalping is hard because even though there may be a pattern deviations will be happen and trend reversals will catch you off guard.
Trading is a Science. Successful scalpers are adept at finding short term trends. Fundamental traders find long term trends. But if you were to compare the two obviously the Fundamental trader who bought and held USD/JPY for 1 year and made 2000 pips is going to out preform even the best scalpers.
Well if you are following the conventional instructions that you hear repeated over and over… Only risk 1 to 2 percent per trade… This would apply to both scalping and position trading … So a 2% loss is a 2% loss… Just will take a whole lot longer to get there in a position trade.
The same strategy works on a shorter time frame. You saw the drop stall after the FOMC announced it wouldn’t taper and bought in at 97.85. Well today the USD/JPY is at 99.39. That’s a 75% gain within a 24 hour period.
It applies to any major market moving news. But obviously which direction you take will also depend on the currency pair. There is already a strong fundamental bullish bias in the USD/JPY and it’s apparent if one looks at the one year daily chart.
The only limitation is you have to wait for Market moving news. But I imagine the same applies to scalping, you want a high potential for significant price movement. The problem with scalping is it gets addictive and you always want to take a position.
The same strategy works on a shorter time frame. You saw the drop stall after the FOMC announced it wouldn’t taper and bought in at 97.85. Well today the USD/JPY is at 99.39. That’s a 75% gain within a 24 hour period.
It applies to any major market moving news. But obviously which direction you take will also depend on the currency pair. There is already a strong fundamental bullish bias in the USD/JPY and it’s apparent if one looks at the one year daily chart.
The only limitation is you have to wait for Market moving news. But I imagine the same applies to scalping, you want a high potential for significant price movement. The problem with scalping is it gets addictive and you always want to take a position.[/QUOTE]
