Been paper trading UK equities since the beginning of the year, thinking of making a switch to FX for various reasons. I just wanted to give a basic run down of my equities strategy to see if can be applied to FX.
It’s very simple, I look for reversals at support/resistance levels, and I use a 2% stop loss. I set targets with limit orders to close my positions when the targets are hit as I have a full time job (obviously as I am paper trading) and don’t want my targets being hit and the trend reversing with me being none the wiser and losing out. I use end of day data and daily bars…mostly.
What do reckon so far? I get the impression that maybe FX is more suited for day trading. Also I realise that interest is charged for holding positions over night, is this significant? Would this make my strategy unworkable? I could easily hold a position two weeks.
Take a look at the attachment of the EUR/USD, this is pretty much how I would use an equity chart, enter at the black arrow in March, have limit order just before the resistance level. I realise that executed correctly this would give me +/- 500 pips (less spreads and interest), which with a small amount of leverage would be a small fortune in a few days, therefore leading me to believe my thinking is flawed and a scenario like this in FX would be wishful thinking.
it looks to me as though you would be holding on to it for a month or two, give or take. It is reasonable to make 500 pips in a couple months trading like that. What I would suggest is backtest your stragie, and then forward test it. It sounds like you have a plan, just see how good it would work demo trading.
Demoing will also help you learn quite a bit on how you would execute it with a live account, when you would be trading and if you treat it as real (eg require performance from yourself) then you will have a slight idea at how your emotions are going to play in… although if you traded with real money in the equeties then maybe you allready know.
As far as times to trade its not unreasonable to trade for a set ammount of time after work! For example I trade between 8AM and noon, and again between 10PM to… well till I get to tired to trade, or untill I dont see any signals worth following up. I also check on my trades every now and then as the day goes.
