Case Study: My Adventures in Forex Trading (Update: 10/09)

Posted by 18 October, 2009 (2) Comment

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My last Forex update was in April. I had recently transferred our account from a US based branch of FXCM to the UK office. The US government changed the laws and that basically took away a lot of the advantages of Forex. If you’d like a more detailed explanation, I please e-mail me and I can direct you to a more knowledgeable person.

Given the interruptions, we (my wife and I) have been actively Forex trading for a little under 5 months, but we’ve been very happy with the results.

Please take a look at past Forex updates to get an idea of the beginning of our journey.

· 1/15/09: Balance: 15,485.80 Equity: 13,530.00

· 2/16/09: Balance: 16,768.40 Equity: 13,981.30

· 3/16/09: Balance: 17,971.20 Equity: 15,116.20

· 4/16/09: Balance: 20,341.88 Equity: 18,171.08

When you look at the past articles, you will see that there is mention of a demo account. Unfortunately, the transfer of our account from the US to the UK resulted in the demo account evaporating so I will not be reporting on those results going forward.

My strategy – correction – my mentor’s strategy, is that I read the charts before I go to bed, when I wake up, and when I get home from work. I read the charts at those times and put trades in from what I see. I’m not an active trader, per se, because I simply choose entry and exit points based on the charts. Basically, I make my money when I’m asleep or when I’m at work. I put in as much as 10 minutes and as little as a few minutes into Forex trading each day. The key for me is to be consistent and not greedy. Instead of going for the home run trade, I go for lots of base hits.

In the last month, my wife and I started to become serious about Forex trading and decided to put more money into our account because of past performance success.

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If you look at the beginning balance and deposit, you can see that we made a significant addition to our account. This addition is what enabled us to do as well as we started doing in terms of profit this month: $1,375.80 ($2,974.40 in total earnings).

Forex is a great market because you trade based on margin, however that same margin can also get you into trouble very quickly. It’s really important to have a good margin percentage. I know it’s difficult to get a perspective on what I’m talking about, but basically you want a really high margin percentage. My current margin percentage is at 98.85%. You want to make sure it’s above 90%. We were able to make more money this month than in any previous month because we have more money in our account. This gave us a higher margin percentage given our trading level, giving us the ability to trade more units. Yes, I know this may seem very confusing, but stay with me. The more money I have available to keep my margin percentage, the more units that I can trade which means I can essentially make more money and take on the same amount of or less risk if I choose.

Photo by: Kevin Dooley

Categories : Entrepreneur Tags : ,

Case Study: My Adventures in Forex Trading (Update: 4/16)

Posted by 16 April, 2009 (16) Comment

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This year is cruising right along. Looks like I’ve been trading for about 3 1/2 months. Here are the previous three posts so you can keep tabs on my progress:

· 1/15/09: Balance: 15,485.80 Equity: 13,530.00

· 2/16/09: Balance: 16,768.40 Equity: 13,981.30

· 3/16/09: Balance: 17,971.20 Equity: 15,116.20

I want to remind you that this is a demo account. Unfortunately, it’s not REAL money. To recap, my demo account started with $15,000. The difference between the balance and the equity is the amount in trades that are open and negative. It is my mentor’s strategy, and therefore my strategy, that I don’t take losses while trading. To avoid a margin call, there are a few ways to avoid this situation. One of the most important points is that you must have a properly funded account. When trading Forex, you are trading on margin. The brokerage firm will only allow margin up to the point that you can cover which is why proper funding is important. Another tactic to avoid a margin call is to offset a trade. If you have a trade that goes negative, whether a buy or a sell, put the opposite trade in to keep a healthy margin. The last thing you can do is only trade in single units.

I’m pretty excited about my numbers this month. I started getting pretty aggressive this month by trading more than one unit. For instance, in the past, I would trade only a single unit. If I gained 40 pips, that would translate into $40 (minus any carry over fees). This past month, I started trading 2,3, and 4 units. So, that 40 pip trade that landed me $40 in the past, landed me $80, $120, or $160 for the same trade.

New Balance and Equity Numbers
Account Summary 3/16/09 – 4/15/09
Beginning Balance 17,931.40
Comm Trading Commission 0.00
Rollover Rollover Fee -20.92
PnL Profit/Loss of Trade 2,431.40
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 20,341.88
Floating P/L -2,170.80
Equity 18,171.08
Necessary Margin 200.00
Usable Margin 17,971.08

This month I profited $2,431.40. This is more than twice than any previous month. Also, I had a few old trades come out. If I were to close my account today and cash out, including any negative trades, I would profit over $3000. I wish I could spend more time with Forex, but unfortunately I usually only spend about 5-6 hours per week on Forex. Imagine how I would do if I spent more than a few hours per week.

Another exciting development this month is that I just opened my live account. I’m being much more conservative with that account as opposed to my demo account since it involves REAL money. I’ve also only been trading for a week so keep that in mind. Here are the numbers for my account with REAL money:

New Balance and Equity Numbers
Account Summary 4/8/09 – 4/15/09
Beginning Balance 0.00
Comm Trading Commission 0.00
Rollover Rollover Fee -0.41
PnL Profit/Loss of Trade 99.50
Depos Deposit 7,500.00
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 7,599.09
Floating P/L 0.00
Equity 7,599.09
Necessary Margin 0.00
Usable Margin 7,599.09

As you can see, I deposited $7500.00 into the account. I’ve put in 5 trades and profited a total of $99.09. It’s definitely not Earth shattering, but I’m being very careful since it is real money and I can’t have as many trades open due to my current funding level ($7,500 as opposed to the demo account of $15,000).

Be sure to subscribe to my FULL RSS Feed to stay tuned and see how good or bad I perform next month.

Photo by Orangeacid

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Categories : Entrepreneur Tags :

Case Study: My Adventures in Forex Trading (Update: 3/16)

Posted by 16 March, 2009 (17) Comment

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Wow, already a month since my last update on my forex trading adventures. Here is a link to my previous two updates to note my progress:

· 1/15/09: Balance: 15,485.80 Equity: 13,530.00

· 2/16/09: Balance: 16,768.40 Equity: 13,981.30

Before I comment on current progress, let’s recap what the above numbers mean. This is a demo account which started at a value of $15,000. I am being mentored by a person who trades Forex full time. She has been trading for 8 years and full time for 6 years. I speak with her daily through Skype. Her trading style is such that she doesn’t take losses. She waits for the trading pair, EUR/USD in her case, to become profitable before trading. You’ll notice that my balance and equity are far apart. Basically, the balance is how much I’ve made from trading above the $15,000 mark. The equity portion is lower than $15,000 because I have trades that are currently not profitable giving me an equity position less than my original amount, $15,000. I currently have four trades that are not profitable. Three of the trades I’ve had since the first week that I began trading. The other position is from a trade I executed last Thursday or Friday.

What does all of this mean?

An equity position of less than $15,000 means that if I were to “cash in my chips”, I would actually lose money on the entire deal. However, that is not how I learned to trade. I will wait until the trade is positive.

New Balance and Equity Numbers

Account Summary 2/15/09-3/15/09

Beginning Balance 16,768.40
Comm Trading Commission 0.00
Rollover Rollover Fee 15.50
PnL Profit/Loss of Trade 1,187.30
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 17,971.20
Floating P/L -2,855.00
Equity 15,116.20
Necessary Margin 300.00
Usable Margin 14,816.20

For the past month, I’ve profited $1,187.30. Again, if I were to close my account and put all of my trades in, I would be positive, but not by a whole lot. As a matter of fact, I would be positive $116.20 as of the night of 3/15/09. So, why is this significant? Well, for starters, this is the first time I’ve had a positive equity position. I am therefore more likely to have a positive position in the future and will look to even increase it by a larger amount. There are three possible scenarios for my account. If the market holds at the same relative position, give the past performance of the last three months (~$1000 per month in gain), my account would increase by $1000.00. The other scenarios are that my three negative trades would either become less negative and even positive leaving me with even more gains, or I will only be slightly positive next month (assuming I stay on the trend of making ~$1000.00 in trades every month). None of these scenarios are guarantees by any means. My mentor, nor anyone else knows what the market will do. The pundits are predicting an upward trend for this week for the EUR/USD pair, but none of the pundits predicted the market crash late last year either so we’ll see.

Be sure to subscribe to my FULL RSS Feed to stay tuned and see how good or bad I perform next month.

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Categories : Entrepreneur Tags : ,

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

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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.

To ensure you don’t miss anything, be sure to subscribe to our free full RSS Feed!

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

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