Double your Money with less stress: Key Long Term Trade

Trading Discussion Currencies
1

Hi.

I couldn’t find a forum quickly on babypips to discuss longer term trades but I thought I might post it here.

The Yen is at its ‘high’ of 87.315 against the USD right now and I think it is fair to say that it will eventually revert to its mean around 95 -105 against the USD. Obviously not overnight but if you are patient enough, I would say within a year’s time.

Here’s what I’d do with a micro account if you only have $2000 USD

Fund the account with $2000 USD
Buy $10,000 USD (10 micro lots) of the Yen @ or around 87

Wait several months or a year.

Good targets to Sell USD/YEN: 95, 98 or 105

At 105.00, Your profit would be $2013.04 USD

If you have a standard account, put down $20,000 USD and buy 1 regular lot of 100,000 USD/YEN

Don’t be greedy - Don’t by 20 lots if you only put down $2000 USD on the micro.

The reason why I said put down $2000 USD is because I’m betting that the USD/YEN won’t dip below the historical low of 75.00

The $2000 is the Buffer which prevents you from going out of the money.

Why?

Because if the USD/YEN dips to 80, the $10,000 floating equity is valued at $9153 USD, which means you still have enough usable margin will “buffer” you from going out of the money.

The margin you will be using is

-$100 (for the 10 micro lots) + -$847 ($10,000-9153) = -$947 USD

That is still less than half of the $2000USD deposit.

I cannot stress that THE MATH IS REALLY IMPORTANT for calculating probable and possible outcomes as well as protecting yourself from losing a lot of $$$. If math and probability/statistics is NOT your strength, at least try to brush up on it before trading.

Certainly the above option is a lot better than trying to get interest off your money at the bank CD with 0.10 or 0.25% interest. And a lot less stressful.

The same idea worked for the South African Rand in January 2009 when it was 10 Rand to 1 USD, and now it is 7.29 ish (has been floating around in the 7’s since September 2009. If you bought $10,000USD worth of Rands in January, it would be worth $13,626.21 USD right now, a tidy profit of $3626.21 USD. Not bad, eh?

I thought it would be better to trade like this and get an 40-100% return instead of trying to stress out 4 days a week staring at the computer. That is, IF You have the Patience to do so.

Your thoughts?

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N.B. I am not affiliated with anyone, not trying to sell you anything. I tend to do longer term conservative and very successful trades with the NYSE/NASDAQ. I have a background in math, engineering and business and I think its important to look at the big picture and swim the other way. Most people are lemmings.

2

And if you buy USD/JPY, don´t forget a SWAP at your favor.

3

Good explanation and Idea but people would not want to wait up to a year to double their money on something based on “past history”… people put their money aside to learn to trade and with hopes to double their money alot earlier in the year.

4

actualy doubling your money per year is pretty decent.

5

Why not just start with one lot and add another one every 100 pips or so?

6

Hi,

One thing ‘springs to mind’ here though:

WHEN do you decide to take your profits???

I cannot comment on your USD/JPY idea (you could very well be right about it reverting to its mean EVENTUALLY) but I can offer an educated opinion on the ZAR:

As I’ve posted on another thread: our government (in its INFINITE wisdom) has been ‘loosely dropping hints’ of late about an idea to peg the ZAR at around R10.50 ZAR to the USD. Using your ZAR trade example: you’d LOSE money if that happened (not to mention any interest that you may have paid over this long period). My point is: if a person was CURRENTLY in a trade like that then when would such person take profit??? What I’m saying is that while this may work for you: MOST people will ‘hang on’ UNTIL their trade turns negative (you know: ‘the last person in the bar trying to pull the waitress’ syndrome) unless they following just ONE of the ‘golden rules’ i.e. having a CLEARLY defined SL and TP BEFORE opening ANY trade (and sticking to these values of course).

Regards,

Dale.

7

That’s a gross understatement. People would murder for results like that.

8

This is what I do. Whenever I am in a long term trade, I add lots corresponding to Fibonacci ratios every time my margin balances out (200 pips for 50:1 margin) so If I take one lot initially on a projected 800 pip trade, 200 pips in, another lot is added, with the stop at the previous lot’s entry. 400 pips in, I will add 2 lots, also with a 200 pip stop. 600 pips in, you add 3 lots, all of the positions have the same profit target 800 pips from the original position. This allows you to leverage the “available margin” that you earn while your trade progresses, while taking virtually the same amount of risk.

9

Hello,

Here’s another idea for adding to positions (it’s commonly known as ‘pyramiding’): use a percentage of ATR to create your ‘entry intervals’ (NOT that I’m condoning the ‘method’ described in this thread i.e. just ‘sharing’ an old ‘tried and tested’ method of pyramiding is all).

Regards,

Dale.

10

pyramiding isn’t a good strategy really.

11

would you?

12

Hi,

pyramiding isn’t a good strategy really.

Well: it depends on the system being used to be honest. Generally speaking though: I’d agree with you. Many people add to winning positions WITHOUT moving their stops accordingly thus unbeknowingly increasing their risk by susbtantial amounts.

But I think we’ve moved away from the thread starters intention (possibly my fault).

Regards,

Dale.