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The Forex Trader

The Diary of a Novice Forex Trader

Hi! First off, don’t read this expecting to get any useful tips on how to beat the market, mug the market or even take 10 pips a day out of the market. This diary, in the greatest of British traditions, will allow you a feeling of Schadenfreude.

For those of you out there who have just seen your 9pip gain turnaround and trigger that carefully placed, out of reach, stop you can turn to this page and realise that it wasn’t just you that got it wrong. And if you’re the smart-arse who just took 50 pips out of the market this afternoon you can feel a warm glow, whilst reading about some-one who didn’t!

My e-mail address and forum link follow:
Forextrader@proactiveinvestors.com
Novice Forex Trader Forum

Wednesday, October 29, 2008
My Final Forex Trader Diary
Hah, the Scowling Scot has called for a ‘spirit of national unity’ that, roughly translated, means, “Don’t keep having a pop at me about “No more boom and bust” or the abandonment of my previous borrowing targets.”

Meanwhile his predecessor is grinning even more since handing over the poisoned chalice of a country close to moral and financial bankruptcy. The Grinning Puppet, who spoke to us for free for 10-years, is apparently now the world’s highest paid public speaker, commanding a fee of around £157,000 for 90-minutes. This is more than Bill Clinton who at least had one story worth telling.

Welcome to the final diary in this column. This series has now been running for nearly 3 years so I really shouldn’t be a novice trader anymore. But I’ll tell you, three years is pretty brief apprenticeship.

When I started out, I told a mate who’d been trading forex for a while that I hoped to be up to speed in twelve months. He, very politely, wished me well and said that he reckoned it took him two years to master it. After two years I reminded him of this and told him that I agreed with his original thoughts. He then said that after four years he was still learning and, again, I agree with him.

The good news is that I’ve been making money, and hope to continue to do so. I can’t claim to have found that magic formula of moving averages, RSIs and a few toads’ testicles but, more importantly, I’ve learnt that the real strategies to master are risk and money management. Those are the crucial lessons to learn to keep you in the game.

The fortunes of the Chimp and I in our final week were pretty polarised. Poor old Chimpy went out on a low note, suffering a 500-pip loss. With 3 out of 4 trades making money I saw a 597-pip gain on the week. Our final balances are:

The Chimp –900
FT        +8436

Friday 24th October. Blimey, see that Dollar go! Unfortunately I didn’t. I made 145 pips on a day that saw a 600-pip move in Cable. In fairness, I was busy with an extremely profitable £10 short on FTSE; the £1 forex trade was an afterthought. I sold £1 when Cable broke below $1.58 and bought it back when I thought the move was overdone ahead of the UK’s GDP release. I was wrong, the move was nowhere near overdone, but I’d made money to add to the profits on shorting FTSE.

Monday 27th October. I left the office on Friday with a £6 short in FTSE and a rising equity market. This morning the red ink had disappeared and my short position was looking very chirpy. The only small blight was that I’d set a limit order to buy back £2 at 3770. Naturally, with Asia falling apart at the seams, this had been triggered while I was still keeping Mrs FT warm in the early hours, so I missed out on a bit extra there. I took a fairly quick 333 pips out of a short Cable trade this morning. As before, I’m grateful for the profit, but it wasn’t a very professional trade; I joined the trade late, at $1.5516, and left early, though in fairness my trailing stop at $1.5455 had left plenty of breathing room, but was triggered by a sharp reversal in the rate.

Tuesday 28th October. By 8 o’clock this morning I’d dealt in three markets, but ultimately the forex trade was the only profitable one. In one rash moment I sold Cable in a fiver, FTSE in a couple of quid and gold in £1. The forex trade quickly came right and, although I was stopped out on my balance, I was 230-pips richer. My timing in selling FTSE was poor and I was soon 50 points offside. However, 30-minutes later I was £100 in profit. Unfortunately I opted to let the trade run, and it ran the wrong way. I stopped myself out for £180 loss and looked for a cat to kick. I rarely deal in gold and today was a stark reminder why. I sold at $749 when it looked like the $750 level wouldn’t hold. But because I was less confident in this market I closed out at $752 for a loss of £30. Soon after that the price fell to the low $740s; I guess if that had been my only trade I might have persevered and made money, but at the time it was too much risk in too many places.

I’ve been asked to do a TV interview tomorrow about Spreadbetting. Unfortunately Mrs FT used this to get me to re-visit my part-time barbers. This time they were open for business and with both chairs in operation and only one person ahead of me in the queue things looked promising. What I hadn’t allowed for though was a mother asking the barber to carve out an entry for the Turner Prize on the side of her young lads’s head. I had a further 20 minutes to kill with the selection of men’s’ mags restricted to golf, running and digital photography. Only a fear of Mrs FT kept me there.

Wednesday 29th October. The TV people couldn’t find a camera crew so that’s deferred until Friday- a real Halloween horror movie. What a move in equities last night! I don’t believe it was down to rate cut expectations. Firstly, they’ve been talked about for over a week now; secondly, rate cuts had no effect the first time round so why expect much different this time. More likely explanations are the talk of asset allocations from bonds into equities by managed funds and perhaps a lull in the forced selling of assets. Either way, I was caught short in FTSE and surrendered some of my earlier gains. As luck would have it my final forex deal for this column ended in a loss. After Sterling’s resurgence overnight, I sold Cable at $1.5977 when it dropped back below $1.60. After such a big move across markets I decided to restrict my bet to £3 in case I was misjudging the mood. My caution was well placed as not long after, I was stopped out at $1.6013 for a 108-pip loss.

As the Chimp and I wander off into the sunset I’ll leave you with this stock market report:

Helium was up. Paper was stationery.
Fluorescent tubing was dimmed in light trading.
Knives were up sharply.
Cows steered into a bull market, while pencils lost a few points.
Hiking equipment... was trailing.
Elevators rose, while escalators continued their slow decline.
Weights were up in heavy trading, but light switches were off.
Mining equipment hit rock bottom, and nappies remain unchanged.
Shipping lines stayed at an even keel.
The market for raisins dried up, and Coca Cola fizzled.
Caterpillar stock inched up a bit, but Durex prices were inflated. Kleenex Tissues touched a new bottom.
And finally, batteries exploded in an attempt to recharge the market.


Other articles in The Forex Trader column

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