Reminiscences of a Forex Trader

[alphahavoc]

Sunday is coming to an end. Everyone in my family have gone to sleep. Now that, there is no one to disturb me i can think with full concentration. I begin planning my trade for the coming week. First question that pops to my mind is “Which Currency pair should i trade for the coming week?”

After some reading, i saw the following news,

“Germany was expected to report a moderate growth rate of 0.6%, double the previous quarter, but the actual result is better than expected at 0.7% q/q for the first quarter. This is likely to positively impact the all euro-zone read expected later on.”
(MAY 13, 2016 06:01 GMT German GDP at 0.7% but EUR/USD remains pressured)

"Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will act “decisively” to achieve its 2 percent inflation target, stressing that it still has “ample” policy options available if it were to expand stimulus again.
(Fri May 13, 2016 1:12am EDT BOJ will act decisively using its ‘ample’ tools: Kuroda | Reuters)

The only implication i can think of is an obvious bullish sentiments for the Euros and bearish sentiments for the Yen. Henceforth, i decide to focus on EURJPY for the coming week.

Usually, i just use a simple Ichimoku indicator to tell me whether the trend is a Bull or a Bear. If price is close above the cloud, momentum is bull, and vice versa. Looking at the 1hr chart with Ichimoku indicator, price is close below the cloud. Immediate momentum is bearish and this is a contradiction to the fundamentals. So how i ask myself? Do i buy or sell?

What are the secenarios? Maybe price will make a low of the week before making a high. But what if the price just shoot up on monday, and i would have missed an opportunity? I need a plan. I needed some price level to target.

At this point in time, i think more or less, i have decided EURJPY to be of bullish bias next week. The immediate bearish momentum might just be a bearish correction.

The next thing i did was using the fibo retracement tool to mark out the High and Low to obtain the fibo levels. I have added a stochastic indicator as well, and it indicate market is oversold. Price is currently in between 38.2% and 50% levels.

I ponder for a while, with my eyes staring at the fibo level. If price were to go up, a surefire target would be the 61.8% level. A reasonable stoploss would be 23.6% level. The logic is this, price should bounce of the 38.2% if price breach 23.6%, i am probably wrong.

The next thing i did was create a trade log to document my trades. Hopefully, i can get a nice result this time round.

It pretty late now. 4 more hours i will have to go to work. I better get some sleep and enter my trade tomorrow morning when market open.

[alphahavoc]

Today, while travelling to my workplace. Around GMT 0000 HR, using my smartphone, I bought 0.01 lot of EURJPY at 122.987. My target was 123.900. My sell stop order was 122.200.

122.987 - 122.200 = 0.787

If my sell stop gets triggered, i will have a floating loss of 78.7 pip.

123.900 - 122.987 = 0.913

If i hit my desired target, I would have made 91.3 pip.

My predetermined Risk : Reward (RR) was 1 : 1.16 . Not too bad.
However, in REALITY, my R:R was way more ugly than what i would have hope to achieve.

Around GMT 1945HR, i closed my 1st trade at 123.209. Reason being i saw a shooting star pin bar forming, and thought i would rather lock in some profit than to have the market turn on me and no profit made.

Thus, 123.209 - 122.987 = 22.2 pip

So in reality, my R:R is 91.3 : 22.2 or 4.11 : 1 .

During my lunch time i saw a retracement move at around GMT 0400 HR, I bought another two 0.01 lot sequentially and manage to hit my target promptly.

My 1st buy entry was 123.113, target 123.160, profit 4.7 pip
My 2nd buy entry was 123.011, target 123.113, profit 10.2 pip.
Sell stop was also created to hedge my position in case market decide to crash.
Sell stop was set at 122.870.

Mmmm,
123.113 - 122.870 = 0.243
123.011 - 122.870 = 0.141
Therefore, my risk for these 2 trade would be 24.3 pip & 14.1 pip respectively.

This would give me a RR of
24.3 : 4.7 (5.17 : 1)
14.1 : 10.2 (1.38 : 1)

Nonetheless, I still made 3 profitable trades today, and i’m happy.

LOL, i really wonder if the Risk Reward thingy is even applicable at all in this Forex business?

So long i manage to profit, isn’t it all that matters? Well, time will tell, let’s see…

On hindsight, although i have created a $1000 USD account. I have mentally segregated the $1000 into 5 portion.
What i meant was i am prepare to lose only $200 per week. Thus, my losses must be what a $200 account are able to sustain. Now, i’m going to calculate the losses i would have sustain if all my 3 trade were losing trade today.

Trade 1 : 78.7 pip
Trade 2 : 24.3 pip
Trade 3 : 14.1 pip

78.7 + 24.3 + 14.1 = 117.1 pip

Assuming, 0.01 per pip is $0.10.

117.1 x $0.10 = $11.71

(11.71/200) x 100% = 5.85%

Thus, if i lost all 3 trades for today. My $200 account would have lost $11.71 or 5.85%.
In my opinion, its a fairly reasonable amount.

Then why do i even need a $1000 account, some people might ask.
Just create a $200 account would be sufficient. Is it?
From a psychological perspective, having another 4 more portion of backup funds
promotes mind stability. Less probability of destructive behaviour manifesting for the trader.

Today, EURJPY have breached my forecasted level of 61.8%.
On closer scrutiny, i just realized a divergence had already formed earlier during the asian session.

News wise, i really couldn’t find any bullish sentiments for the Yen currency.

“TOKYO: The yen slipped Monday on speculation Tokyo will postpone a sales tax rise to avoid denting Japan’s already fragile economy, while a lacklustre string of Chinese data took a bite out of emerging currencies.”
(Monday, 16 May 2016 11:28 Yen slips on sales tax delay report)

Therefore, i conclude EURJPY is still bullish tomorrow.
50% fibo level should be supported, otherwise caution ahead.

[alphahavoc]

Yep, I was right about Tuesday. However, after that hell break loose.
Having to juggle between family, day job & a stupid SIDEWAYS YUPPY is no fun at all.

Its pure mental torture for me. I was constantly on the look out for news,
looking at the chart, scaling out, zooming in. No indicator works at all when the market trend sideways.

After Wednesday, i found a piece of news and began to see some light.

The growth data will give heart to the Bank of Japan — suggesting the economy is growing faster than its long-run trend of about 0.5 per cent — although it is unlikely to have much direct effect on monetary policy. The BoJ is still under pressure to ease because of the rising yen and the weakness of inflation.
(postedMay 19, 2016 03:36 (GMT) EUR/JPY Fundamental Forecast – May 20, 2016)

This statement gives me the impression that Yen is strong, but the BoJ will no doubt ease if necessary with reference to BoJ statement by Governor Haruhiko Kuroda last Friday.

Combining with Technical analysis, below was the only chart i could come up with that makes some sense to me.

EURJPY is currently trading between 122.500 and 124.500.
A break above 124.500 would be Bullish for the Eurjpy & vice versa.

(Here’s a updated result)

I have manage to close all of my trade this week on a positive note. :33:
Hopefully, it can continue this way.