Case Study: My Adventures in Forex Trading (Update: 2/16)

Posted by 16 February, 2009 (23) Comment

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Here is a link to the first post regarding my adventures in Forex Trading. I’m pretty happy with the progress I’ve made over the last month. I probably spend an average of 5-10 hour per week talking with my mentor Mindy while simultaneously trading and watching the market.

I think the biggest surprise for me has been how fast the market can move. The first few weeks of my training occurred during the Christmas and New Years holidays. This time of the year is a quieter as far as Forex trading is concerned and the market wasn’t as active due to many of the large currency traders being on vacation since we are trading the Euro/USD pair.

ACCOUNT SUMMARY
Beginning Balance 15,479.00
Comm Trading Commission 0.00
Rollover Rollover Fee 26.70
PnL Profit/Loss of Trade 1,262.70
Depos Deposit 0.00
Withd Withdrawal 0.00
Option Options Payout 0.00
Comm Options Commission 0.00
AdminFee Administrative fee 0.00
MngFee Management Fee 0.00
PerfFee Performance Fee 0.00
Void Deposit Rollback 0.00
ASPComm ASP Commission 0.00
MargInterest Interest on Usable Margin 0.00
Ending Balance 16,768.40
Floating P/L -2,787.10
Equity 13,981.30
Necessary Margin 300.00
Usable Margin 13,681.30

Above is my account summary for the month. This is a demo account so no actual money is involved. This represents my trading from January 14th to February 15th. The first thing to take note of is my beginning and ending balance. I’ve gained over $1200 or 1200 pips for the month. The rollover fee that you’ll notice in the third line is for any trades that I have executed, but the trade was open after 4 p.m. CST. The bank charges interest for the ability to leverage money and this is represented in the rollover fee. Mindy’s strategy for me is to not hold trades for very long, but I’d much rather hang onto a trade for a little while as opposed to losing money. I do want to point out that while I have gained money in the balance column, if I were to close out my account today and sell my trades, I would still be negative over $1000. I want to make sure I’m not sugar coating my experience. It’s very interesting and I’m making progress, but I would be negative if I were to close out today. Fortunately, there are tactics that Mindy could help me employ if needed – for example if my usable margin (currently at 97.80% as I type this on 2/15) were 80% or lower.

My goal for the next month is to have an equity position that is over $15,000 (my original position).

Have you ever traded Forex? What are your experiences?

Photo by Wili

Other Posts:

The TED Spread and What It Means to You
Book Review: The One Minute Entrepreneur
Interview: FairRepair.com
Carnival of Personal Development – February 2, 2009
Book Review: The How of Happiness

Categories : Alternative Income,Entrepreneur Tags : ,

Case Study: My Adventures in Forex Trading

Posted by 15 January, 2009 (22) Comment

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Welcome to our Forex Case Study on Happiness Is Better.

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I am being coached by Forex expert, Mindy Yost. She has been Forex trading for over 8 years and full time for 6 years. I will be detailing my progress through a monthly report. I opened a demo account and am currently trading under her guidance through Skype (wow, Skype is really handy!). Skype is essentially an internet-based phone/text communication service (VOIP).

To start off our training, Mindy had me read through a handy website, Baby Pips. If you’ve never heard of Forex before, it stands for the foreign exchange (currency) market. Forex trading is the buying or selling of a currency “pair” and the one that I am learning about is the Euro paired with the US Dollar and is called the EUR/USD.  In the Forex world, there is a thing known as a pip. I had heard the term pip before, but I really didn’t understand what it meant. A pip is the increment by which a currency pair is measured for trading purposes. In the case of the EUR/USD, a pip is 1/100th of a cent and would be displayed as $0.0001. Baby Pips explains a pip as “if the EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation. The Pip is how you measure your profit or loss.” The Pip VALUE however is a little different and is determined by the size of the trade you make. In Forex trading you cannot trade one EUR/USD at a time. Forex is traded in 100,000 units at a time in a standard account, and 10,000 at a time in a mini account.  I am using a mini account so the pip value when I trade one mini lot is $1.00 ($0.0001 X 10,000). So, when I am in a trade, I will earn or lose $1.00 for each pip the market moves. If I were to trade multiple mini lots at a time, the pip value would be determined by multiplying $1.00 times the number of mini lots I made the trade for. Basically, the more pips the market moves in the direction of my trade the better! If the market moves against my trade, that can be a bad thing. But, as Mindy says, the market can only do two things – go up or go down, so if you are willing to wait it out, your trade will probably be profitable sooner or later (if you have enough money in your account to cover the loss before the market goes your way).

So what makes Forex trading so attractive? One major advantage Forex trading has over traditional stocks is leverage. Leverage means that when you make a Forex trade, you essentially only put down a small deposit for the trade.  In most cases the Leverage Ratio is 200:1. So, when I do a one mini lot trade, instead of fronting $10,000 to make that trade, I only put up a $50 deposit to control the 10,000 units in the mini lot. Another new term to me is that of a “Margin Call”. In Forex trading, the Brokerage House will not let you lose more money that is in your account, so if your trade go so far negative, that you no longer have any more money to cover any additional loss on you trade, they will close your trade at the accrued loss.  This means that you will have lost a lot of money and is a bad thing, but, unlike some other venues, at least they will not call you up and ask for even MORE money! Leverage is always a double edged sword, and can work for you or against you. One thing that Mindy has stressed to me is the importance of properly funding your account. The best way to protect yourself in Forex is to “over fund” your account and put way more money in it that what you expect to trade with and then make small trades. Also, remember these things: 1) do not open an account with money you can’t afford to lose, 1) do not open an account with “a little” money as a test-the-waters type of trial, and 3) don’t trade Forex unless you have nerves of steel. You can properly fund your account yet trade in small quantities to minimize risk while you are getting your feet wet. However, if you do not properly fund your account, you run into the possibility of having the broker perform a margin call and lose your money. Another attractive feature of Forex is that it’s a large market that can’t be altered or controlled by a few people. To give you an idea of the enormity of Forex, about $4 trillion is exchanged daily compared to $25 billion exchanged on the New York Stock Exchange. There are also no commissions charged by the brokers and you can trade basically 24 hours a day, 7 days a week.

If you are interested in Forex trading, it is advisable that you read through School of Pipsology on Baby Pips and if you want to contact Mindy for mentoring, let me know (happinessisbetter@gmail.com) and I will give you her email address.

It’ll be at least a month or two before I start trading with real money, but in the mean time I’ll be showing you the results of my demo account.

Here is our first report on how we are doing with our demo account.

ACCOUNT SUMMARY
Beginning Balance 15,000.00
Comm Trading Commission 0
Rollover Rollover Fee 19.6
PnL Profit/Loss of Trade 466.2
Depos Deposit 0
Withd Withdrawal 0
Option Options Payout 0
Comm Options Commission 0
AdminFee Administrative fee 0
MngFee Management Fee 0
PerfFee Performance Fee 0
Void Deposit Rollback 0
ASPComm ASP Commission 0
MargInterest Interest on Usable Margin 0
Ending Balance 15,485.80
Floating P/L -1,955.80
Equity 13,530.00
Necessary Margin 300
Usable Margin 13,230.00

We’ve profited $466.20 because we are trading in a mini account and we are only trading one unit (we are cautious and HIGHLY suggested by Mindy) at a time. If you look at the Floating P/L, you will notice we are -$1955.80 in the hole. As previously stated, we have not lost that money because we have not re-exchanged the currency pair. Mindy has told us that the market always goes up and goes down, and as long as you are willing and able to hold onto the trade, we will more than likely not lose money.

Stay Tuned!

Do you trade in Forex? How do you like it?

Photo by: Zack Attack

Other Posts:

Interview: 2 Million Dollars Made in Network Marketing – It’s All About Leadership!
6 Reasons Why I Joined Toastmasters
Goals for 2009
Goals from 2008 – How Did I Do?
Interview: Do You Have What It Takes to Own a Franchise?

Categories : Alternative Income,Entrepreneur,Personal Finance Tags : , ,

Woohoo! I just got PAID!

Posted by 16 May, 2008 (0) Comment

Ok, so I did just get PAID, but it was a pretty small amount. I’ve written a few articles on associated content. It’s basically a site where the members are the writers and people can either get paid up front in addition to performance payments, or you can option for performance payments. I received an up front payment today. I am interested in using associated content not to necessarily make gobs of money (although it could be a good source of alternative income), but to hone my writing skills, or lack there of. You can sign up here. You can view the article that received an up front payment of $5.68 here. I originally found out about Associated Content from Zachary at See Me Get Rich.

Categories : Alternative Income Tags : ,