Month 3, Day 57 - 36-month forex trading challenge - oil, news and commodity currencies.
Watching the news last night, it looks like the move into safe-haven currencies (CHF and JPY) was fuelled (to coin a phrase) by the oil crisis currently taking place in Saudi Arabia.
Anything that destabilises the financial or political landscape tends to impact related currencies and watching out for reactive moves is one of the main challenges in currency trading. There's planned news (the kind that is scheduled in Forex Factory) and the unplanned kind that often shows up on Twitter. The latter can often cause wild swings that trigger stops.
CAD is closely linked to the price of oil and the reduction in supply looks to have sent bids into CAD pairs (at least for the moment), and overnight AUD has seen offers as a result of minutes from the RBA showing that a forthcoming rate cut is still on the cards.
Currencies linked to commodity prices (AUD, NZD and CAD), I call 'Commodity Currencies' and from experience these are often susceptible to some of the wildest swings driven by news. Often the reaction is a short-term one. Having a clear picture of the major trend in play and holding on can be the best course of action.
The link to the world economy is one of the things that makes forex trading so fascinating, but also so frustrating!
Yesterday I entered a long position in AUDNZD (T12L). I got positioned using my FULL HOUSE strategy. The entry came on the daily trend line's centre line on an XY candle. I placed my stop loss 20 points below the 50 SMA.
This is the first trade to use my new three-candle stop pressure rule, which I explained in yesterday's blog post. Basically a failure to close above my entry candle within three candles from entry and a close below the turquoise line (average stop pressure plus 10 pips) would signal me to exit my position in full.
As price has already closed above the high of my entry candle this exit rule now falls away. I'm now reliant on my staggered exit rules using the EMAs and 50 SMA to get out should things go against me. In addition, should price track down to the red dashed line I'm prompted to ask myself the question – does this trade still make sense?
These exit rules are key to cutting my losses short, while at the same time giving any trade a chance to work. It's a delicate balance where if I'm not careful emotions can take over. My rules are there to take the emotion away and to clearly show me what to do.
As always, knowing and doing are two very different things. I still need to pull the trigger to take a loss should an exit signal show up. It's never easy taking a loss, but I know it's an essential part of the game.
At last Friday's networking lunch I sat next to a guy who has a regular job in the IT sector. He's dabbled in stocks and shares before, so the conversation inevitably turned to trading. Somewhere in the middle of our conversation I asked him what would happen to him and his employment status if 50% of the time he made mistakes. As expected his response was that he'd get fired.
In trading being wrong, and being wrong a lot, is just part of the game. Understanding this and being able to operate in such an environment is why trading is really a game of psychology.
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
Anything that destabilises the financial or political landscape tends to impact related currencies and watching out for reactive moves is one of the main challenges in currency trading. There's planned news (the kind that is scheduled in Forex Factory) and the unplanned kind that often shows up on Twitter. The latter can often cause wild swings that trigger stops.
CAD is closely linked to the price of oil and the reduction in supply looks to have sent bids into CAD pairs (at least for the moment), and overnight AUD has seen offers as a result of minutes from the RBA showing that a forthcoming rate cut is still on the cards.
Currencies linked to commodity prices (AUD, NZD and CAD), I call 'Commodity Currencies' and from experience these are often susceptible to some of the wildest swings driven by news. Often the reaction is a short-term one. Having a clear picture of the major trend in play and holding on can be the best course of action.
The link to the world economy is one of the things that makes forex trading so fascinating, but also so frustrating!
Yesterday I entered a long position in AUDNZD (T12L). I got positioned using my FULL HOUSE strategy. The entry came on the daily trend line's centre line on an XY candle. I placed my stop loss 20 points below the 50 SMA.
As price has already closed above the high of my entry candle this exit rule now falls away. I'm now reliant on my staggered exit rules using the EMAs and 50 SMA to get out should things go against me. In addition, should price track down to the red dashed line I'm prompted to ask myself the question – does this trade still make sense?
These exit rules are key to cutting my losses short, while at the same time giving any trade a chance to work. It's a delicate balance where if I'm not careful emotions can take over. My rules are there to take the emotion away and to clearly show me what to do.
As always, knowing and doing are two very different things. I still need to pull the trigger to take a loss should an exit signal show up. It's never easy taking a loss, but I know it's an essential part of the game.
At last Friday's networking lunch I sat next to a guy who has a regular job in the IT sector. He's dabbled in stocks and shares before, so the conversation inevitably turned to trading. Somewhere in the middle of our conversation I asked him what would happen to him and his employment status if 50% of the time he made mistakes. As expected his response was that he'd get fired.
In trading being wrong, and being wrong a lot, is just part of the game. Understanding this and being able to operate in such an environment is why trading is really a game of psychology.
*********
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
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