Okay, first things first. About me, I'm an 18 year old student in Singapore. I came across forex through a 4x Made Easy seminar held here 2 years back. I got interested and began digging up on everything I could find related to trading, from stocks to futures to options. Forex of course was my number 1 choice. With stocks, you have to have capital to trade. With futures, well, you get sweet leverage like you can with forex and options? I don't know where to trade them in Singapore.
Well I read up everything I could, even now when I walk to the local Borders (a bookstore), there isn't any book on trading that I have not read before. I demo traded from then and I got really successful in paper trading. From a starting capital of $50,000, I made it grow to a nice sum of about $200,000 in 5-6 months. I could say I was pretty confident.
I saved up as much as I could to get started, and I worked part-time to get extra income. I'm working as a swimming coach now, earning around SGD400 a month for about 4 hours a week.
After saving a nice sum, I opened a mini account with IBFX on the 12th December 2006.
Starting capital, USD750
Within 2 days, I was up by $150, with makes my equity a nice and wholesome figure of $900. I was trading right, grabbing for small bites on the 15 minute chart, observing my stop losses and protecting my profits. I was trading in a ranging market, squeezing out everything I could in the low volatility environment. I was never picking tops or bottoms, just following price action and support/resistance levels.
However after my initial 2 days success, I noticed that GBP/JPY was on a sharp trend upwards and forgetting my principles, I did something that wiped me out with just 1 trade. I tried to pick a top. I was looking for a correction downwards and when that trade went against me, I sought to average it out by adding more lots. I was in 9 lots, with an equity of 900 US dollars.
That's leverage with a capital L. As my trades went against me, they were closed out due to the dreaded margin call. I was down by around 800 bucks. Soon after, the pair really corrected. My timing sucked, and I was gambling, this ain't no trading, this is pure forecasting.
Trading is seeing prices go one way, and you look and enter at the point of highest probability. Gambling is where prices can go all over the place, and you try to pick a direction recklessly.
Of course for my GBP/JPY trade, I did analyze, and I did it right, just that my timing was way off. I need to learn patience. I'm rather impatient and I always screw up my trades by timing it wrongly.
My mind got screwed by that trade that wiped out my capital. I began losing more and more as my analysis became blunt.
I went looking for indicators and systems to help me out, but that's no way to go about trying to save my account. So now, I just wrote out my trading plan and I plan on following it word by word. Of course, the plan will change according to rules that I'll add.
This blog will ensure that I follow every gist of it.
Trading Plan
Goals: Earn at least $10,000 by the end of 2007.
I must stay focused on 3 main pairs, GBP/USD, EUR/USD and USD/JPY.
My main time frame would be the 5 minute chart and the 15 minute chart. Always stick to it.
I will only enter trades from 3pm – 3am.
Look at any incoming news reports before entering a trade.
Analyzing the market top down:
1.Look for support and resistance levels, channels and trend lines from the daily chart downwards.
2.Identify chart patterns and oversold/overbought markets using CCI, stochastic and RSI.
3.Determine market type, ranging or trending
For ranging market
1.Use CCI, Stochastic and RSI for oversold or overbought level
2.Judge how long the range can last.
3.Check for news.
For trending market
1.Use 5/21 Ema and 50 Sma method to enter on retracements
2.Look for Zero-Line Rejects from Woodies to confirm entry
3.Look at the average daily range
4.Look out for currency characteristic
Money Management
I will only risk 20 pips per trade. My risk reward ratio must be at least 2:1. If I stand to lose more than gain, there's no point entering a trade. Like in poker, it's not worth it. Always enter a position with a stop loss in place. Get my timing right, if trade is going nowhere within 2 hours, exit position. The entry is the most important.
Rules
1.Always enter a position with a stop loss in place.
2.Take profit at measured targets
3.Do not be greedy, stick to money management targets.
4.Go for small bites,do not go for the home run
5.Stick to entry rules, do not go by gut feeling
6.I am a short term trader, do not mix up my time horizon
7.Trade like how I play poker, go by probabilities and not feelings
8.Be patient always, wait for the right entry moment!
