sKaLpZ Currency Trading For Beginners
- Thread starter sKaLpZ
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This is a very good question and analysis, Adrian.
(I think) when stop losses are hit... wait, here's an example:
Say a trader is long (opening and holding BUY positions) in EUR/USD.
It doesn't matter at what price, as long as the market (the EUR/USD rate) is moving lower they are getting themselves more and more into a drawdown, OK?
A trader either has a system he tries NOT to override, or s/he trades free-hand.
Either way, when one is in a drawdown all Hell can break loose psychologically, emotionally, mentally, etc. A trader can change his/her mind in such extreme contrary conditions, even if it results in HUGE losses.
Winds tend to blow HARD in the forex. So hard they can blind the eyes of traders with the dust storms that kick up.
Sometimes the sun doesn't break through for days in a global "currency storm." Even weeks.
So, whether SLs automatically contribute to a price erosion or an extended move one way or another, or whether traders simply change their mind and their trading direction, one thing is certain: More sellers of EUR/USD equals the exchange rate price going LOWER.
More buyers of EUR/USD equals the rate going HIGHER.
As you know, market sentiment can have a significant impact on the direction of a rate also.
Is the euro in favor? Is the USD in favor? These type mania/panic sentiments can last for months in extreme cases and cause HUGE swings in currency rates.
A question for us at this point may be, Is the sentiment towards the US and USD favorable as far as return on investment goes, also taking into consideration the effects of speculation traders?
See, a speculator won't commit money until s/he is pretty sure of a rate swing forming, but when speculators see the same thing and commit money the rate can move a full cent, two or more.
And when the formation is over they're out! (with their profit or loss).
It doesn't mean there was any "reason" for the price to go that way other than on just pure speculation.
So speculation trading cannot be ruled out when making your trading decisions. And, speculation can also engender speculation.
Regarding Warren's and Bill's ability to withstand down to .7500.
"Ability" is FAR different than the effects of watching yourself get destroyed.
So, their ability to not get wiped out until the rate hits .7500 has little to do with their simply sitting back and amassing a HUMONGOUS Unrealized P/L loss(es) potentially into the billions of dollars... before they finally commit suicide.
Sam
Sam,
Do you even have the slighest comprehension about warren buffett or his strategy with forex? your post would suggest you don't. For starters, you seem to somehow miss the point that his position is unlevered. If you're unfamiliar with this concept, it means when he says he has a "position" of 21 billion, it means he really does. If his 7 currencies go to zero, he only loses 21 billion, not one trillion..... Unlike you, he isn't using leverage. I hope none of the people who are following your thread are fooled into the notion that you have any idea what you're talking about, b/c this post of your surely illustrates that you don't.
Do you even have the slighest comprehension about warren buffett or his strategy with forex? your post would suggest you don't. For starters, you seem to somehow miss the point that his position is unlevered. If you're unfamiliar with this concept, it means when he says he has a "position" of 21 billion, it means he really does. If his 7 currencies go to zero, he only loses 21 billion, not one trillion..... Unlike you, he isn't using leverage. I hope none of the people who are following your thread are fooled into the notion that you have any idea what you're talking about, b/c this post of your surely illustrates that you don't.
Quote from sKaLpZ:
From Bloomberg:
Buffett, the world's second richest-man... has been betting against the dollar since 2002 on concern that widening U.S. trade and budget deficits will erode its value.
Berkshire made $1.63 billion on his forward contracts in the fourth quarter when the dollar slumped. The contracts are agreements to purchase foreign currencies on a future date at the current price.
Berkshire kept slightly more than $21 billion in foreign currency forward contracts through the first quarter as the dollar rose 4 percent against a basket of six currencies. Buffett said he would buy more contracts if it weren't for the skepticism of Vice Chairman Charles Munger.
Buffett, admired around the world for his investing prowess, also said Berkshire maintained a bet against the U.S. dollar of more than $21 billion even after it cost the company about $310 million in the first quarter.
Correct me if I'm wrong. Basically if you looked over Buffett's shoulder onto his forex trading platform you'd see $21 billion in his Balance indicator, with -$310,000,000 in his Unrealized Profit/Loss indicator.
Warren's in a drawdown.
That's "market reality," guys.
Well, well, well, the great Warren Buffett's been sucked in chasing the glittering Coinz. Keep comin', Mr. B, I'm waiting for you.
Whether or not the phrasology used "Berkshire made $1.63 billion on his forward contracts in the fourth quarter" means he closed his trades and actually booked the profits, or if he was just in the black $1.6 billion for a time before he was sucked under is an unknown, at least from that article.
If Adrian12 gets his(her?) 1.2600 number hit, Buffett's going to be in deep blank. Maybe to the tune of over $1,000,000,000 in the red.
Warren, if you're reading, this is what your Unrealized P/L indicator will look like:
-$1,000,000,000
You'll be heartily welcomed into the ranks of Baffoons who trade "reality" instead of trading market reality. Into the ranks of those who should have stayed out of the forex.
The market, and guys like me, through trading will eat you and your measly $21 billion: In the forex your de-financed carcass may just get tossed into the trash like a candy wrapper where it belongs.
These are dangerous waters, Warren. This is not the stock market, this is the world.
It doesn't always go the way you think it should.
The forex is a nasty bitch who has a bitter habit of chomping guys down who don't know how to get her to purr. She has long claws and even deeper teeth. And they're all sharp. Designed to neatly part a fool from his money.
You should cut your losses, boy, and get on back to the stock market. Better than being served up as Forex Stew.
At the 1.2600 level, if the market decides the euro is worth beans, the other economies falter more, the USD interest rate looks better and better, concerns and worries over USD instruments of investments in general greatly subside, and if the market decides a "trend" has set-in positive dollar-wise, USD gains may extend.
IF THAT HAPPENS... and we return to the 1.2100s even dropping into the 1.1700s... perhaps the market may just go a little nuts like it did the last quarter of 2004, only in the opposite direction pushing EUR/USD briefly into the 1.1300s.
If Warren and Bill are still short the USD with their mighty fortunes when speculation of the Chinese yuan floating kicks in hard, and a bad currency storm hits, if they have not pared their losses, both of them may be filing for bankruptcy as the EUR/USD zooms 10 cents down past 1.0000 in a turn-around shocking the globe.
Hint: Sweet currency nightmares are made of such shocks. The forex is not a safe place.
The article indicates that Buffett (and we can presume Mr. Bill, the software mogul) is short the USD against "a basket of currencies."
Well, I don't know about his "basket of currencies" but I am short the USD against the Australian dollar, the euro, Swiss franc, the British pound, the Canadian dollar, the New Zealand dollar and the Japanese yen.
Seven currencies.
A continued rally in the USD won't hurt me though because my system is structured to earn money in drawdowns. I have other trade directions in over 15 major cross rates that I am constantly opening and closing trades in and booking profits.
Using a series of money management techniques I'm able to keep myself out of trouble should the USD continue strengthening and actually make money due to my USD long positions I have in a number of pairs.
This is because I know what I'm doing in the forex. Can Warren and Bill say the same thing?
If they can't, they may be sharing their money with guys like Adrian and me.
You know what they, you shouldn't put all your eggs in one basket.
LMAO,
Sam
sKaLpZ,
I like it....
Market sentiment comes and goes. Therefore while you can successfully trade on it sometimes, you cannot all the time. It is a rug constantly being pulled out from under you.
As you know, market sentiment can have a significant impact on the direction of a rate also.
I like it....
Market sentiment comes and goes. Therefore while you can successfully trade on it sometimes, you cannot all the time. It is a rug constantly being pulled out from under you.
As you know, market sentiment can have a significant impact on the direction of a rate also.
I want to get one thing perfectly clear.
Go to Forbes 400 and you will see the top 10 richest people and what they do listed thusly:
Gates, Computer Software.
Buffett, Trader/Investor.
Allen, Microsoft.
Waltons, Retail (numbers 4 thru 8).
Dell, Computers
Ellison, Storage Software.
Just because Tiger Woods is a great golfer and earns millions, or a great baseball player earns $10s of millions, an executive of a big company earns $10s of millions...
What does that have to do with forex?
The forex market is a free market. It doesn't just give you money because your name is Bill or Warren or Larry or Tiger or Freddy.
Are we clear on this?
Entering, we are ALL equal in the global forex market. You could lose your money to me. I could lose my money to YOU.
Those are the real risks.
I trade in the forex and I post here.
Is Warren's money or Bill's money better than mine?
Why don't they post here? Are they too good to post here? Or maybe they don't want to look like a dufus because they are getting wiped out in the open forex market.
By trading in the currency market, if I am on the other side of his trade I'll rip Bill Gates' heart out (money-wise) and feed it to him on a rusty platter, I don't care WHO he is outside the market.
I know certain inner market realities that he does not know.
He can lose to me slowly or lose to me quickly, but if he enters this arena he will lose. With or without use of margin. That goes for Buffett too.
In the market money is neutral. It knows no owner until the trade is closed in a profit or in loss.
In that regard their money is no different than mine.
The number of units they have may be greater (temporarily) than what I expose to the forex but it all stops there.
Just because a person is a doctor or a lawyer or a successful entrepreneur, or is a software mogul or an investor extraordinaire doesn't matter in a market where TRILLIONS of dollars swirl around daily, ALL being up for grabs while in transition.
Yes, those trillions may make the number of my units insignificant but they also make Warren's and Bill's insignificant too.
Embedded within bigger money is bigger stupidity. In forex you can extract the money by being less stupid.
Therefore, while they may live in a bigger house than me and drive a better car, in the forex... none of that matters.
Just because they are good at an unrelated endeavor doesn't automatically mean they are good forex traders.
In fact, being good in an unrelated business doesn't make them or anyone "forex traders" at all.
Who designed Bill Gates' forex trading system? Did he?
I know who designed Windows but a forex trading system(s) that wins more than it loses is not based on computer programming languages.
Trading in the forex is very risky!
That much I know.
Consequently, unless their trading, trading style, trading methods, trading tactics, trading temperament or trading system are superior to mine they will lose to me.
And if I win it is because my system is superior to theirs. The number of units they commit to their positions doesn't matter to me.
If Gates is in EUR/USD I can scalp him for a thousand points in a single 8 to 12 hour trading session when that pair typically moves 75 points. And end flat when I am done.
That's just the way it is. That's market reality.
The Coin
Adrian,
As a beginner, if you are losing real money, my advice to you and all other beginners is to go back on a demo.
And stay on a demo until you have several winning trade set-ups and structures. Not just one. And not just ones that you test.
A main reason guys get wiped out at the start is by going live too soon in forex.
Even after trading live for quite awhile I still have demos running in the background that are testing new structures and set-ups.
only when I am fairly certain those systems will not get ground up and spit out in a real environment will I commit real money to them.
I've been trying out a new system on a demo... that should work... but so far has been losing tons of money.
If I brought that live now I'd be a wreck.
Kindest regards,
Sam
Well... you did very good if you could pull any money out of this market.Quote from Adrian12:
Well not a great day but not too bad There's always tommorrow.too many distractions today..I keep forgetting to take $$ off the table. usually in greed.. rookie mistakes i guess
Trading's been like trudging through quicksand.
But, EUR/USD is showing signs of weakness.
We hit a new week low just a while ago of 1.2838 after the market earlier showed subborn resistance to lower rates at 1.2840, retracing up to the week high of 1.2875 before giving up the full range plus more.
I opened a long at 1.2872, exchanging it for a position close taking a mere 10 points profit off the table on a previous long. Go figure.
I was able to pull out a 200-point TP short on GBP/JPY followed by another 80-point clip on a previous GBP/JPY short. See attached chart.
Arrow 1 = short opened.
Arrow 2 = 200-pip TP hit.
Arrow 3 = 80-pip profit taken.
These recent moves may indicate the market is exhausted trying to prop the flighty euro up and resolve is waivering every time the heavy burden slips a little more.
This may mean that, as you say, the market is perched ready for a huge drop, maybe even as much as or more than the over 220 points it tumbled last week.
These numbers are definitely signs of traders either trying to convince the other side (shorts vs longs), or that traders are trying to convince themselves which direction is better to commit money to. I think euro-bulls are losing that battle.
Nobody likes losing.
There's a good chance we may just go a little lower then play bounce-a-ball in a 100 to 150-point band the rest of the week.
I'm in!
sKaLpZ
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