GBPUSD Trading Range
By Laetitia Vaval | October 16, 2007
The GPBUSD pair has been trading in a range (2.0250-2.0450) since the end of September. I’ve decided to try to profit from this trading pattern. I bought one lot at 2.0300. My upside is 150 pips (limit set at 2.0440). I set my limit price at 2.0230, 70 pips below since that is under the trading range and if the GBP reached that level it would probably mean that the range has been broken and that my earlier ”analysis” is no longer valid.
Tags: gbp, pips, trading, USD
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Fractional Pips
By Tim Shea | September 21, 2007
If you trade either demo or live with FXCM, you’ve probably noticed an extra digit in your prices, recently. That’s because we’ve just started quoting prices out to a further digit. So, now, instead of seeing a EUR/USD price of, say, 1.3587, you’ll see a price of 1.35874. I’m so used to seeing prices only quoted in pips, and not tenths of a pip, that it’s been a little tough to adjust. But, believe me, this is great.
Why? Lower prices! Since FXCM has started fractional pips, I’ve seen tighter spreads most of the time. Like right now, it’s early afternoon in
Tags: forex, forex trdaing, fractional pips, fxcm, pips
Topics: What's New at FXCM | 2 Comments »
Canadian Retail Sales - part 2
By Laetitia Vaval | September 21, 2007
So the Canadian Retail Sales numbers came out, and I was completely wrong since they came out worse than expected (-0.8% vs. 0.0% expected). Of course, the USD shot up about 30pips and now I’m down about 25pips. That’ll teach me NOT to make my own assumptions about economic data!
Tags: dow, economic release, forex market, pips, retail sales, wall street warriors
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AUD/CAD: The Turn One Year in the Making
By DailyFX Updates | September 19, 2007
Jamie Saettele, our technical analyst was telling me this morning about the trade of the year. He has been waiting almost forever for this Wave Formation to unfold and finally, we have it. We are talking about a BIG trade. Not one that lasts for 200 or 300 pips, but one that lasts for 2000 pips. Don’t expect this to be an overnight sensation, but AUD/CAD is ready to explode . ‘
According to Jamie risk is well defined as is the target.
Tags: cad, dailyfx, pips
Topics: DailyFX.com Updates | 1 Comment »
Trading the Fed Rate Cut Announcement
By Laetitia Vaval | September 19, 2007
Yesterday was pretty exciting since the Fed was set to announce whether they were cutting interests rates and if yes, by how much (25bps or 50bps). Opinions were mainly divided between a 25bp or a 50 bp rate cut. Before, the announcement at 2:15, I prepped myself by planning out the trades I would place for each scenario.
A 25bps cut would have been bullish for the dollar whereas a 50bps would have been bearish. I decided to trade the currencies I was most familiar with — that is the EURUSD and the GBPUSD.
At 2:15pm EST, the Fed announced that they were in fact cutting rates by half a point. The reaction in the US Dollar was immediate as you can see on the 5-minute charts above (EURUSD and GBPUSD). In the case of a 50 bp cut, my plan was to get long the Euro and the Pound as soon as possible right after the announcement.
The morning of the announcement I got long the EURUSD at 1.38818. The pair did not move much until the announcement in the afternoon. Within 5 mins the EUR jumped to 1.3965 - more than an 80pips. However, soon after the pair reversed and traded down. I got out of my position at the top of the wick of the next 5-minute (red) candle at 1.3936. I made $542 on that trade. OF course, the reversal was only temporary and a few minutes later the Euro continued trading up and at 14:40 hit 1.3980, and a few hours later hit a high of 1.3987. Had i held onto my trade longer my profits could have been doubled.
My second trade involved the GBPUSD. I also got long the pound in light of the half point rate cut. I actually ended up buying 2 lots of the GBP. I bought lot #1 at 2.00419 and sold it for 2.00670 ( a 25.1 pip gain). I bought lot #2 at 2.00528 and sold it at 2.00650. Looking at the 5 minute chart from yesterday, it is easy to see that I only captured a fraction of the profits that could have been made on this explosive upmove. As you can tell from the 2nd chart above, the GBP kept trading up to hit a high of 2.0150 about 35 minutes later. Same problem here as in the EURUSD, and many of my previous trades as you can see in my past postings — I exit my trades way to early and then they keep trading my favor.
About 15 minutes after the announcement I placed a few smaller trades on the USDCAD (got long at 1.0178) and re-entered a long position in the EURUSD at 1.3960. I exited those trades a few pips higher and made some minor profits — about $100.
I really enjoy trading the news. It’s very fast paced and there is a potential to make a lot of money. However, unfortunately market moving news like the fed rate cut do not happen everyday and in the meantime, I have to make some trades in the “slower” in between phases. Today, I’m going to focus on trying to find a few range-trading currencies.
Will update on that this afternoon.
Tags: dollar, dow, eurusd, forex, forextrading, pips, rate cut, trades, wall street warrior
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Leverage can be your best friend and your worst enemy!
By Tom Long | September 13, 2007
I recently received an email from a new trader who found himself in a losing trade and didn’t know what to do. He had a mini account with a balance of $1500 and sold 15 mini lots of a currency pair where the value of each pip was $1. The market had moved against him by about 40 pips and he wanted to know if I thought the market was going to come back. Before I had a chance to answer the email, the trader received a margin call and was automatically closed out of the position. He was a little upset about losing $750 on just one trade and thought that maybe he wasn’t cut out for trading. He asked if he sent me the details of the trade, would I offer comments on what went wrong. But I didn’t need any more details because I already identified his biggest mistake. He was using too much leverage, which may be the biggest mistake new traders make. There is only one guarantee in the business of trading and that is if you trade, you will have losing trades. How you manage those losing trades will have more to do with your success or failure as a trader than perhaps any other factor. We recommend risking no more than 5% of your account balance at any one time. So if trading with a 50 pip stop, this new trader should have only opened one mini lot instead of 15. Then his loss would have been $50 instead of $750 and he would still in a frame of mind to find another trade instead of wondering if trying to trade was a mistake. His mistake was in thinking about how much he could make when he should have been thinking about how much he could lose. This is the main difference between a new trader and a professional trader.
Tags: forex trading, leverage, online trading, pips
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Trading when economic data is released
By Laetitia Vaval | September 13, 2007
Today, I’m going to write a little bit about having a position open when major economic data is released. As I wrote on my previous thread, I opened a long position in the GBPUSD yesterday and decided to keep my position overnight. By doing so I made a major mistake: I didn’t check the economic calendar on DailyFx and therefore was not aware that the UK was releasing its RICS House Price Balance for the month of August at 23:01GMT. This indicator measures the costs of homes in the U.K. and was estimated to come out at 10.0%. A rise in house prices usually reflects an overall strong housing market and strong economy. However, this number came out at -1.8% much below expectations and even showed a decrease in the cost of homes — an indicator of an overall weak economy.
Of course the GBPUSD reacted to this disapointing news and dipped about 30pips below the level it was trading at before the release. Having placed my stop at 2.027, I was stopped out at 19:34 EST. The fact that I was not aware of this important overnight news release didn’t allow me to adjust my stop price since I should have foreshadowed that the GBPUSD would be fluctuating greatly following the release. So as I wrote earlier, I was stopped out at 2.027 — a 46pip loss. Of course, the pound traded back up slowly and peaked at 2.03440 mid-day today.
This mistake is in some way very valuable because it taught me to check which indicators will be released overnight, the consequences they may have on the positions I am holding and how to make the necessary adjustements to avoid big losses.
Today, I am trading the EURUSD and the USDJPY, and have to take into consideration that major economic releases will be coming out tonight regarding both the US and Japan. At 8:30 EST tomorrow morning, Advance Retail Sales - a major market moving indicator — will be released and could trigger a rather large move for the EURUSD if not in line with the 0.5% expectations for August. Japan will also be releasing some relatively important data overnight regarding Industrial Production — which could have a market moving impact on the USDJPY.
I’m going to hold my EURUSD position overnight, as I am looking to keep it for a longer period of time. I’m going to make sure I place a large enough stop, so that I do not get stopped out of my position if the US economic numbers come out better than expected. I’m going to place my stop at 1.3777 which was a good support level on 09/10/07.
Tags: dailyfx, dow, economic release, eurusd, gbp, housing market, pips, retail sales, wall street warriors
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The Second Day
By Laetitia Vaval | September 12, 2007
Today, I placed two trades on my demo account.
The first trade involved the GBP/USD pair. As you can see from the chart above, the pair has been trading in a range for a few days now. The wider range this pair was trading at can be set to 2.0358 - 2.0228. If you look at a shorter time frame, the range can be narrowed down to 2.0358 - 2.0281. I decided to trade that range, meaning to get long at the bottom of the range and short at the top. I got long the Sterling at 2.0316. I placed my stop 10pips below the 2.0281 support level at 2.0270.
Ialso had a long bias because the recent weakness of the USD and the relatively good unemployement news that came out in the UK overnight.
My second trade was buying the AUDUSD. On the 1yr chart (2nd chart), you can see that 0.8397 had been a resistance level in mid-April.
As far as fundamental analysis goes, the September Australian Westpac numbers came out above expectations during the night and indicated a 4.2% increase in consumer confidence since August. According to the Daily FX the Westpac number has a moderate impact on the market, however it might be partly responsible for today’s uptrend in the AUD.
At 10:18am, I got long the AUD at .8388. At 12:52pm, I’m up 32pips.
I placed my stop at 0.8277 and my limit at .0581. I placed my stop at the 50% fib level which closely matches the S1(daily) pivot level of 0.8273. My limit was placed close the nearest resistance level of 0.8600.
Tags: dailyfx, dow, forextrading, fxcm, gbp, pips, trades, wall street warriors
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You can’t lose taking profits…or can you?
By Tom Long | September 11, 2007
One of the biggest problems new traders make is to take quick profits on a trade because they fear that the market will move against them and they will end up with a losing trade. A common statement I hear is, “Ringing the cash register is not a bad thing”. This means getting out of a trade when it is showing a profit is a winning strategy. If that is the case, then how come we see many new traders winning most of their trades and still losing money? It is more common than you might think. The problem of course is money management. This is what makes professional traders consistently profitable. They call it working a trade and it means having the patience and discipline not to take quick profits on a trade as soon as the market starts moving against your position. We would all love to enter into a trade, have about 60 seconds of anxiety and then just pure joy as the market keeps moving in our direction into big profits without a worry. Unfortunately, that is not real trading. Real trading involves planning your trade before you enter and then trading your plan. We need to think about using at least a 1:2 risk:reward ratio every time we are in a trade. If we risk 50 pips, we need to look for at least 100 pips in profit. That way if we win half of our trades, we are profitable. Sound easy? It is probably the most difficult key to successful trading and takes practice and confidence. But this is what trading is all about.
Tags: forex, forex trading, pips
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First Trades
By Laetitia Vaval | September 11, 2007
Tuesday, September 11, 2007
I’ve just set up my new demo trading account and here I am with $50,000 (fake) dollars at my disposal to buy or sell a currency pair that I believe will move in the direction my combination of technical and fundamental analysis will have predicted.
The first currency pair i looked at, of course, was the EURUSD. The Euro was reaching a record high at around 10:30AM 1.38494 as you can see on the chart above.
I had seen an important resistance level @ 1.3837 and got in as soon as that resistance level was crossed. I got long at 1.3841 (where the top line is drawn). The Euro peaked at 1.3849 and traded back down to its previous levels. I sold my position at 1.3832. A 9 pip loss ($90).
Having traded previously, I can easily identify some of the mistakes I made on this trade. First, I did not clearly identify my Risk vs. Reward (and with that my Stop and my Limit). My upside was difficult to estimate since I was expecting a breakthrough all-time highs. My downside however was about 19 pips since the next closest support level can be found at 1.3822 (the bottom line on the chart). I’ve learned that a trader — especially a beginner should never enter a trade without having first identified his risk vs. reward. Had I followed this rule, I should have expecting to see at least a 40 pip upmove - since my downside was 19.
Although i’m not an expert, I believe that a 40pip upmove would have been quite important and difficult to achieve without some sort of news breaking event. I’ve traded equities before and although false breakouts exit, they seem more rare than in the Foreign Exchange market. I’m used to seeing stocks skyrocket after breaking all time highs. This didnt happen with the EURUSD — i was just the victim of a false breakout.
Another mistake I made in one of my other trades was that I got shaken out too quickly. I entered a position, the currency pair did not immediately move the way I had expected it to, and i quickly closed the position by fear of loosing too much. Of course, immediately after I got out of the position, the pair made a reversal and started moving the way my analysis had predicted. That’s most likely an old habit left from day (short-term) trading. I’m not used to waiting hours (and sometimes days) to see the results.
In my EURUSD trade, you can see that I exited my position before my stop was hit. Although it was for the best since the currency kept trading down from there, it probably shows a lack of discipline by not respecting the levels i had previously set.
For this trade i did not factor in any sort of fundamental analysis as I was looking to enter a short term position and trade a breakout.
Tags: demo trading, dollar, dow, eurusd, forex, forextrading, pips, trades, wall street warrior
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