Foreign currency (FX) Trading

[TFG]

I am relatively new to FX trading myself and have only been trading just over a month so, if anyone wants to constructively discuss Foreign currency trading, this is the place to do it and I look forward to learning alongside anyone else interested in this field.

I did spend a month reading everything on the web I could and paid special attention to something called the Fibonacci theory.
If you are interested in checking into FX trading I recommend you read a few things on it. FX trading can make you a handsome profit and it can also trash your entire account if you are not careful.
On the upside, you can start an account with as little as 50,000 Yen and you can use leverage of up to 100 times the amount invested, but I don't recommend anyone use 100 times leverage as if the currency you are trading drops say 10 pips your account will be wiped out. And very often I will see my trades drop 10 or 15 pips before an upswing bringing in around 40-60 pips.
The good thing about FX trading is even if you leverage your 50,000 Yen to 50,000,000 and lose it all, all you lose is the original amount invested.

You can start a DEMO account with toy money for free and practice without any fear of losing money. However, I recommend you only make trades which you would with your own actual money or one can gain too much confidence which will not serve you well when you come to use your own money.
This site has a good basic free demo with about a million Yen in it which someone on the board recommended. Doesn't have Fibonacci studies built into it though.
http://www.fxonline.co.jp/en/

This one has a full range of study tools such as Fibonacci studies which you can apply easily to the charts. However this site only allows a 30 day test of the trading platform, and is rather complicated to use but it is a good one to learn on.
http://www.fxfor.com/en/

I recommend this reading on the Fibonacci theory.
http://forex-tutor.com/How_to_use_Fibonacci_retracements.phtml

Origins of Fibonacci theory and usage
http://www.trend-fx.com/articles/technical/forex-fx-fibonacci-1.html

Hope this helps.


PS: As I said above one can make a lot of money FX trading but it can also make you broke.
Today, so far, I have made about 180,000 Yen on 2 trades over a 3 hour period, but the other day I lost over 400,000 Yen in less than 30 mins and had to sit on the trades for two days to regain the original investment and settled for a 50,000 Yen profit.

This advice is of course only theoretical advice and I accept no responsibility for anyone using it.

[kamome]

The good thing about FX trading is even if you leverage your 50,000 Yen to 50,000,000 and lose it all, all you lose is the original amount invested.

Are you sure about this? If you lever up to 50,000,000 and then lose it, you've lost your principal and the amount of the leverage. That's a huge loss. Doesn't that have to be paid back?

[Mulboyne]

Are you sure about this? If you lever up to 50,000,000 and then lose it, you've lost your principal and the amount of the leverage. That's a huge loss. Doesn't that have to be paid back?

There are plenty of financial instruments offering leverage where only your principal is at risk. However, if you leverage your principal 100 times, then a 1% move against you will wipe you out rather than causing a 1% loss.

[kamome]

There are plenty of financial instruments offering leverage where only your principal is at risk. However, if you leverage your principal 100 times, then a 1% move against you will wipe you out rather than causing a 1% loss.

Mulb, are you referring to derivative instruments such as swaps? I suppose a currency swap could have embedded leverage leaving only the principal at risk but if the market moves against you, you may be subject to continuing margin payments to the counterparty. Better than losing the full leveraged amount, I suppose.

I'm no finance expert so it's entirely possible that everything I said above is wrong. But I like to learn about these things, so rip away Mulb!

I'm more familiar with how these instruments are regulated. Retail forex is a topical subject in the US and Congress recently passed a law giving the CFTC more power to regulate this area (even though retail forex trading is traditionally considered a spot transaction and not a futures transaction).

By the way, interesting topic, TFG!

[pheyton]

Thank you TFG for this thread. My wife and I have some money sitting in our accounts in Japan and have been wanting to invest it, but haven't gotten around to it.

Due to the sluggish economy here I am not working as much so I have lots of time to monitor the markets. I'd like to look into this stuff. I realize it is very risky, but much of life is.

Looking forward to the continued discussion and any advice.

[TFG]

In Forex Trading, you can only lose the original amount you placed in your account, no more.

http://forexroom.wordpress.com/2008/04/13/forex-trading-leverage-and-margin/

If the equity (the value of your account) falls below your usable margin due to trading losses, you will either have to deposit more money or your broker will close your position to limit your risk and his risk. As a result, you can never lose more than you deposit.

PS.

Anyone thinking of starting FX trading is strongly advised to study the Fibonacci theory and this is why.

This is a Fibonacci projection fan I drew on the chart at around 12:30 AM Japan time, I drew only the red line from the low at around 11:15 to the double topped high at around 12;30. as you can see the trend continued over the night and the Dollar rose well over 1 Yen in the direction of the predicted Fibonacci projection fan and hit the 38.2 mark before the market closed.
Of course the market is not open at the weekend so you need to sell before it closes or risk a huge swing when it opens again.
Fibonacci projection is not completely infallible at all and occasionally it will fail but, if it can help you make a decision as to the trend direction and time frame, and be correct 70% of the time, it is indeed worth studying.

[pheyton]

TGF, I have a question. I know you are new to FX trading, but do you set a % that you want to make and go off that? For example, when I was trading stocks I would say I am in this stock until I make X % and set it to sell when it hit that mark. Do you do that?

I read up on the Fibonacci theory and I have seen everyone under the sun use it. Simple to understand, but implementing it may be a different story.

[TFG]

TGF, I have a question. I know you are new to FX trading, but do you set a % that you want to make and go off that? For example, when I was trading stocks I would say I am in this stock until I make X % and set it to sell when it hit that mark. Do you do that?

I read up on the Fibonacci theory and I have seen everyone under the sun use it. Simple to understand, but implementing may be a different story.

Sometimes, I do set an automatic buy marker so the software will buy X amount of $ if the price drops to a certain amount, at the same time I set a profit limit so the platform will sell once the rate hits a certain level and most important of all, a LIMIT LOSS marker which will sell the currency if the rate drops below 10-20 pips after I have bought it.

I mainly do this while I am going to be out or asleep, but I make sure I research the trend over a a several hour time frame.

There again, if I am going to be around at home all day which is generally the case, I will watch and look for certain price fluctuations during times of the day at which I have constantly seen reversals in the market.

Don't confuse the automated order such as above with FT trading robots which are software that buys and sells all day while monitoring the market and whatever pairs of currency you set it for. Most it not all these FX robots are scams!

PS: The more advanced trading platform I posted a link to, has all kinds of STUDIES built into it such as Fibonacci fan, extensions and the standard Fib. They are easy to use and draw anywhere on the chart you desire to give you a hint of the trend.

Hopefully Cyka UchuuJin will be back soon as she is also trading and will be able to add her knowledge and experience to the thread.

[pheyton]

Thanks again. Yes, I did the same thing when I was playing with stocks. Set a limit/stop marker if I was going to work. I did pretty good, but got spooked when I started to hear what was coming down the pike re: mortgages. I backed out while I was ahead and have been hesitant to start trading again.

Currencies open up a new ball game though.

[Hamaki]

the trend direction and time frame

The trend is your friend, so be nice to your friends.

[TFG]

The trend is your friend, so be nice to your friends.

Yep, it certainly is and we don't want to go against our friends.
Well, not often.

[TFG]

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[pheyton]

The markets are going to have a giant fuckin hard-on for a few days. Then they will realize, oh shit, the US economy is more seriously fucked than we though. I expect to be wiping my ass with dollars come dhristmas cause that is about what they will be worth. God I miss my Japanese bidet.

Here's to hoping you make a mint TFG

[TFG]

The markets are going to have a giant fuckin hard-on for a few days. Then they will realize, oh shit, the US economy is more seriously fucked than we though. I expect to be wiping my ass with dollars come dhristmas cause that is about what they will be worth. God I miss my Japanese bidet.

Here's to hoping you make a mint TFG

Well, it may not be that bad for us here in Japan as I think the Yen is going to take a dive along with the dollar so things may keep on an even keel.
There again, we could all end up under under rubble come the 13th. Haaaaa

[TFG]

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[TFG]

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[pheyton]

Buy Yen. I am reading articles predicting a large decline in the value of the $ due to the bailouts and the need to keep over priced assets overpriced.

http://www.counterpunch.org/whitney09192008.html

[TFG]

I doubt that bailouts are going to lower the $.
Look what the latest bailout plan has done to the $ at 107.
Not sure what the long term effect will be however as the balance sheets get corrected with taxpayers money, the can really only appreciate in strength.

[TFG]

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[Cyka UchuuJin]

do you have a link for that software?

[TFG]

I will pm you the details as you have to set this up properly.
This setup should popup buy and sell text on the screen however, I have not managed to get that working in Vista yet.
Still, you don't need it to trade if you watch it.

[TFG]

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[IkemenTommy]

TFG, I started to play around with that demo software.
Why is it that you can't buy any more than 8.0 volume at once? It is also frustrating when you have the pending order set to buy at a certain level and it won't let you go through the transaction because apparently you have maxed your volume size.

[CrankyBastard]

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.

The villagers seeing that there were many monkeys around, went out to the forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it.

The man now announced that he would buy monkeys at $50. However, since he had to go to the city on some business, his assistant would now buy on his behalf.

In the absence of the man, the assistant told the villagers.
"Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."

The villagers hurried round with all their savings and bought all the
monkeys.

Then they never saw the man nor his assistant again, only bloody monkeys everywhere!

[Tsuru]

Started fooling around with the demo over my morning coffee, bought small amounts of EUR-GBP and USD-CHF for no reason other than a whim from the graph that perhaps they were going to go up today. No golden ratio rules or what have you. So I made an incredible killing of 40% profit on top of my starting deposit of 5000 demo euros.

How the hell is this possible??

[IkemenTommy]

Just look at where the yen is vs all the currencies right now.
Insane.

[TFG]

TFG, I started to play around with that demo software.
Why is it that you can't buy any more than 8.0 volume at once? It is also frustrating when you have the pending order set to buy at a certain level and it won't let you go through the transaction because apparently you have maxed your volume size.

That is probably ODL's limit, I am using their software with a different broker.
I don't like the compulsory 1/100 leverage they insist upon.

Yesterday, I bought, 10 lots of $100,000 with no problem with another broker.
It is a shame that it appears that ODL Japan is the only broker offering that software. I am not sure if you can change the server and use MT4 with another broker. I just use it on another screen to plot entry and exit loosely.

[Tsuru]

Hitting 120% profit now, in little over 24h. Sheeeeeet.

Bought EUR-USD and GBP-USD today btw.

[TFG]

There you go.
You using MT4 with that template?

I am reinstalling Vista so will probably trade later.
Although that said, the markets dod not look very good this morning with GPB mirroring the USD.

[IkemenTommy]

TFG -
How do you change the time in the charts to your local time? It seems to be in Eastern US time.