Trip to Europe
By Laetitia Vaval | October 10, 2007
I’ve just come back from a two-week trip to Europe. Needless to say that I sure felt the weakness of the dollar. I usually love to shop when I am in Paris but this time around everything was so expensive that it took away much of the fun.
I also visited London for the first time, and despite having heard many times that London was one of the most expensive cities in the world, I still couldn’t believe how high the cost of living was. It seemed as if everything cost exactly TWICE as much over there than it does in New York. For example, a 1-week subway pass is about 22 pounds over there (which is about US $45 !! — twice as much as what it costs here). A simple subway ride is 4 pounds — US $ 8 !!! Food, clothing, transportation seemed to keep the same numerical value as in the U.S. ( 32 for a basic T-Shirt, 12 for a pizza, etc) except that instead of being expressing in dollars prices were in Pounds (i.e. more than doubled).
Even duty-free over there wasn’t all that worth it given the exchange rate…
It was really interesting going there at this time, right after my stay at FXCM. I never had really paid much attention to exchange rates in the past, but my trip was a first-hand demonstration of the current situation with the US Dollar.
Tags: currency market, dollar, fxcm, laetitia vaval, wall street warrior, wall street warriors
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Afternoon Trade
By Laetitia Vaval | September 21, 2007
I entered a short-term position (probably until tomorrow) position in CHF/JPY earlier today. I had noticed that it was trading in a range between 98.56 and 98.20. I got short “relatively” close to the top of the range at 98.483 (middle black line), placed my protective stop at 99.350 ( a previous support level — on the 1 yr chart. Since i’ll be holding this trade overnight i’m going to set a limit price at 98.00 (lower green horizontal line on the chart above). From the different colored lines you can easily see that my risk vs. reward ratio is not optimal in this trade. It seems to be about 2:1 (when it should be 1:2)…
Tags: currency market, forex, forextrading, jpy, wall street warrior, wall street warriors
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Food For Thought
By Laetitia Vaval | September 21, 2007
I found an article by Tom Long on www.forextradingblog.com. He talks about using protective stops and his article identifies one of the major DON’Ts that I’ve been doing on the demo account and that I briefly touched upon in some of my previous posts. I copy-pasted what I believe to be the essence of the problem: “Too many new traders use what they call a “mental stop”. They have a price level in mind where they would consider getting out if the market moves against them, but do not enter it into the trading platform. Typically, when the market does move down to that price, instead of exiting, they “wait and see how the market will react”. If the loss becomes larger, they then decide that they will exit when the market moves back to their original mental stop level. As the market continues to move against them, intentions about getting out turn to hope about the market coming back before they get a margin call. Many times, it is that margin call that determines their exit, not their own analysis”.
As I will be trading live very soon, I can not make that mistake again. I have to 1) use protective stops and 2) respect them. Hopefully, the fact that I’ll be trading with “real money” will be a good enough reason to not take such a useless risk !
Tags: currency trading, dow, forex, forextrading, trading strategies, wall street warrior
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Canadian Retail Sales - Part 1
By Laetitia Vaval | September 21, 2007
Canadian retail sales will be released in a few moments. Right now my USDCAD short is at 1.0021. I’m hoping for this number to dip below 1.0000 once the data is released. Canadian wholesale sales were released yesterday morning and came out better than expected. Could this be an indicator of better than expected retail sales ? will update in a few mins
Tags: cad, forex, retail sales, wall street warrior
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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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US Retail Sales
By Laetitia Vaval | September 14, 2007
As I wrote yesterday, I had a short position in the USDJPY when I left the office. At 12:30 GMT, the August US Advance Retail Sales came out at 0.3% ( vs. 0.5% expected). Although this number came out slightly below expectations, the real disappointment came from US Retail Sales LESS Autos (-0.4% vs. 0.2% expected). This number indicates that US consumers are spending less money and is reflected on the USDJPY chart (above) within minutes of its release. I was short from 115.320 kept my position overnight. The USD weakened this morning in light of the disappointing Retail Sales release and the USDJPY dropped to a low of 114.35. I decided to buy back at 114.51 as I was starting to see a reversal and the beginning of a new uptrend. I made a 81pip profit.
I am still holding onto the EURUSD position that I bought yesterday at 1.3894. As I write, it is trading at 1.385.
Tags: currency trading, eurusd, forex, forextrading, jpy, retail sales, wall street warrior
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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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