For the past 10 years I had been working away at my USD forex account. It’s been a real roller coaster ride that has seen me struggle hard at times and battle back at others. Bottom line, I got out when I did and while I was ahead in the game after 10 years. I didn’t reach my target but I hung in there and did okay.
I have since taken that money and deposited it into my stock brokerage in USD. Being a Canadian and being that the current exchange would yield me a nice accumulation of CAD, my plan was to move it into CAD at the best possible rate(s) and invest in the TSX. I believe that over the next year or two, it might prove to be a good opportunity to make some money given the current economic situation in the world.
Well, I like the current exchange rate a lot but I don’t love it. So, yesterday I took USD300K and sold it for CAD @ 1.36120. It got me just over CAD408K. I placed another order a short time later to take that CAD408K and buy back USD. The trade triggered @ 1.35950 which got me a profit of USD$368 before about CAD$16.00 in commissions. Ok, a USD$352 profit. Not terrible by any means.
Today, I sold USD400K @ 1.36125 which got me CAD$544,500. Now, I have an order to buy back USD with that CAD @ 1.35750. Should this trade execute, it will earn me USD$1,105.00 before about CAD$20.00 in commissions.
I know this pair and I know the range that it usually fluctuates within. Should the pair go haywire and I get stuck with one currency or the other because it loses value, I am ok with that. Both currencies are good to have and I can invest with either. If the CAD weakens against the USD, then I may simply buy CAD with all of it and not look back. (Perhaps if it rises above 1.40 I will pull the trigger).
I am writing this because I feel 1000X safer doing what I am doing now than the type of trading I did for the past 10 years! Yes, you need a lot of money to make a nice return but that is the case in both types of forex trading. But now I don’t have to worry about swaps and ridiculous swings and deals with other currencies and get caught with my pants down and have all my money tied up for months on end. Completing trades with between USD200K-USD500K every couple of days can yield a pretty nice return even after the pair fluctuates only a few pips. Now, when I take my profits, they are real profits. I don’t operate with a deficit in my open trades of USD100K-USD500K like I did before in my previous trading life! These are clean profits in either USD or CAD. It’s a nice way to make some $$$ if I am not keen on investing in stocks at the moment.
Hi Capper, this takes me back some 20+ years just before the Euro was created. I was resident in the Middle East with much spare time and lots of savings being banked each month. I used to listen to BBC world services and we had a large sum of USD denominated currency in a Swiss bank account. The GBPUSD was quite choppy at the time and being a Brit overseas spending effectively in USD, my sentiment mirrored your own. So after checking with my wife and business partner we used to phone our banker in Switzerland and place telephone orders buying USD or GBP, the collateral being the currency on deposit. We had a few successful trades on a row, the last one being a gain of USD 6,000 for a two day GBP to USD then back to GBP. Our banker politely asked why we were doing that with all our assets instead of using “margin”. At the time the bank was happy to lend us five times our deposit, meaning we could trade at the $1M+ level. We thought about that a lot, then one trade we missed (thank God) would have lost us $24,000 in 24 hours. What dawned on us is that though it’s easy to make $6,000 in 2 days, it’s also equally easy to lose $24,000 in one day. We promptly stopped “trading with our life savings” and decided that this figure should be no more than 5% of our wealth. Today, twenty years later, it is less than 2% of our wealth, and we were ever grateful for having come to that conclusion ourselves, in reality, than via any financial advisor or book. To think you could win or lose a brand new car in a day is a sobering thought, even for anyone fortunate enough to have that amount of currency. Think how many years and hard work it took you to get to where you are now, and think about how much of that total amount you are prepared to lose. You may rethink your future strategy. Risk management is not just for a trading account, it is for all of your portfolio, and it took us a couple of loss making sessions in trading for that to hit home. Best of luck with future trading (and investing)
Hey Mondeoman, thanks for sharing this. I think your post makes complete sense, however, would have been better directed at my previous investment methods. Leveraging ridiculous amounts of money in a forex account in USD was much much riskier than what I have been doing as of late. The difference between what I did then and what I have been doing recently (physically buying and selling between USD and CAD) is tremendous.
You see, I am not overly concerned whether I end up with CAD or USD. I am happy and willing to invest in the Canadian or U.S. markets (or both). In fact, I don’t like buying US stocks with CAD and vice-versa. That’s because the I would get the forex rate at the time of purchase which isn’t always favorable. I would prefer to exchange currencies when I choose to do so.
Yes, there is imminent risk that after I buy or sell either currency that it could tank in value against the other. But as I mentioned before, if I get stuck with USD, then I will simply invest with it. If I get stuck with CAD, then it’s my primary currency as I live in Canada. Am I going to mess around with any other currencies by buying and selling them? Not a chance! It is just that I feel like I am in a win-win situation right now. If I sell a large amount of USD to acquire CAD, and then the CAD drops a lot in value, not a problem, I will hang onto it and invest with it if I choose to. On the other hand, if the USD drops in value, I have the option of re-buying it and making a nice profit.
This is not a long-term strategy by any means. I really believe that I can get much greater returns other ways. But just to clarify my situation. Thanks again for the info.
And the thought of not getting taken out with a stop loss by scalpers is comforting, too. When you buy the underlying, not trade it, the stop loss is set at zero, whilst the underlying can never go to zero. I have this same feeling of comfort buying Crypto currencies, not trading them. Though trading them in the near future is probably on the cards. When I am settled with my Crypto investment goals.
Crypto is an area I know nothing about! I rarely ever used stop losses when trading before making a trade. However, I would often put a stop-loss in after my trade reached a level where it allowed me to. Again, this was all dependent on whether or not I was willing to take the risk and wait. When I was making trades of 1.0, 2.0, or more, and I was in a position to take profits on those trades, I often would take the profits and shut them down. If I believed there was more money to be made on such pairs, I would place new orders around that closing level to re-open new ones. I found that about 49 out of 50 times or more, if I didn’t take my profits, they would disappear due to the volatility / fluctuation and I’d be back at square 1. So it was a constant game of that. Often times my trades would go into a deficit because I didn’t usually use stop losses. My account could be down 250k or more at any given time. However, there were a lot of times that I could have closed all my trades and shut down my account and I would have been finished well ahead. Operating with a deficit all the time wasn’t the issue. The important thing was to keep making gains, building my account balance, and hopefully the equity would take care of itself.
I would like to think I knew what I was doing when I was playing with most of my life savings all those years! There were some very dark times but I managed to get out and trade my way back over time. Could I have made more money on the stock market? Probably, but hard to say.
Now, I am looking for new ways to make the money I have work for me. I think there will be some opportunities in the stock market as another major recession could be looming. If a second or third wave of this covid crisis happens and / or continue to spiral downwards, it may result in a huge economic depression and another climb back to economic normalcy. Who knows but I believe there will be opportunities.