I recently mentioned that I have decided to delve into the exciting world of currency trading in order to hopefully someday supercharge my income and thus, consequently, my dividend snowball. My original plan was to trade with fake “paper money” for a few months before going live in order to test out my strategy. However, after 3 weeks of fake trading, I have decided to take the jump and go live immediately.
Why? Well, the reason is quite simple. As nice as demo trading is, it simply cannot capture the psychological aspect that comes into play when you are putting real money on the line. With demo trading, the risk is effectively null, which means that it is much easier to deviate from your strategy, take trades that you normally wouldn’t, and shoulder way more risk than you would on live. As such, I will now start trading with real money, albeit with a small amount at first. That way, if I fuck shit up completely, I won’t be ruining myself.
I am starting off with $500, and I won’t be adding any extra money for the time being. The goal is simply to work with that amount and see if I can slowly increase it for a month or two purely via profits I make through trading.
In order to keep myself accountable, I will be posting weekly logs of all the trades I have taken, much like I log all my stock purchases and monthly dividend earnings here on the blog. I won’t sugar-coat anything or inflate anything. All my profits will get logged, as will all my losses. I will also outline my trading strategy and discuss my approach to Forex in detail in future blog posts.
Now, I am aware that Zero to Zeros initially started purely as a dividend-investing blog, so the topic of Forex trading will undoubtedly not be of interest to many of my current readers. With that being said, I am still a dividend investor at heart, and I will continue to post all my stock purchases and dividend logs just like I have done until now. My foray into the world of currency trading will simply be an addition to the blog, which is ultimately a fully-transparent documentary of my journey to financial freedom.
Without further ado, I present to you my first ever Forex trading log, covering the week of 10/25/2015 – 10/30/2015. Enjoy!
|ENTRY TIME||8:31 PM|
|EXIT TIME||6:00 PM|
I entered this trade on a trend-line breakout signal. The price had been in a clear upward trend since 10/15/2015, and a nice trend line had been forming, connecting three consecutive higher lows. I then noticed a strong bearish candle close below the trend line on the 4-hour chart, so I placed an entry order a few pips below the close of said candle. The price fell down nicely, but unfortunately my trailing stop was hit on a small retracement to just below the break-even point, leaving me with a small profit, though a profit nonetheless.
Had I given the trade more room to breathe by not setting such a tight trailing stop, I wouldn’t have been stopped out so prematurely and definitely could have locked in more profits.
|ENTRY TIME||8:35 PM|
|EXIT TIME||5:12 AM|
On the evening of 10/26/2015, the USD reached a major resistance line around the level of 0.984, one that the market had tested and rejected about 5 times since 2011. On the 1-hour chart, a bearish candle tested that line, so I put a sell-stop order a few pips below the low of said candle, with the assumption that if the price continued down below that low, it would signify that the market had once again rejected that major resistance line. Unfortunately, the market did indeed dip a tad lower than that candle’s low, thus triggering my order, only to then shoot back up and break through the resistance line, where I had set my stop loss.
Whether or not this marks a legitimate breakout above that major line of resistance still remains to be seen. It could very well be a fake breakout of that resistance, two of which occurred since 2011. The price seems to have topped out about 100 pips or so above the resistance line, and it looks like it might go back down. I’ll have to wait a few more days to get a feel for what is going on. If it is indeed a fake breakout, then I will probably go short again once the price falls back below the resistance level. If it is a legitimate breakout, then I will likely go long once a few more bullish candles establish themselves, or once the price falls back down to the resistance level only to bounce off of it, thus turning it into a support level and confirming the breakout.
|ENTRY TIME||8:57 PM|
|EXIT TIME||3:03 PM|
Much like with the first trade described above, I entered this trade on a trend-line-breakout signal. Here too, the price had been in a clear upward trend since 10/13/2015 or so, with a very clear trend line connecting four consecutive higher lows. With such a strong upward trend line, it was a no-brainer for me to go short when a strong bearish candle closed below the trend line on the 4-hour chart; I placed an entry order a few pips below the close of said candle, which quickly got activated. The price fell down sharply over the next 12 hours, before starting to consolidate, at which point my trailing stop got hit, leaving me with a nearly 50-pip profit.
It’s too bad I only went short with 1 micro-lot of 1k, since my original plan was to go with 2 micro-lots like I did with the first trade. This was simply an entry error on my end, but it did cut my profit by half of what it would have been otherwise, unfortunately. The first-world problems are real, lulz.
|ENTRY TIME||6:59 AM|
The U.S. dollar has been getting stronger relative to the Canadian dollar since 2012, and a particularly nice uptrend has been forming on the weekly chart since June of 2014. The price has been retracing over the past month or so, but the week of 10/18/2015-10/23/2015 ended with a huge bullish engulfing candle right on a bounce from the trend line connecting higher lows.
I set a buy stop order a few pips above the high of the bullish engulfing candle, which quickly got activated as the week started off incredibly strong; it’s no secret that oil prices have been dropping, and since the Canadian dollar is positively correlated to oil prices, its value has been falling and the USD/CAD has consequently been going up. During the second half of the week, the price ended up falling back down a bit due to a surprise decrease in oil supplies announced on the 29th, which helped stabilize and even boost crude oil prices, at least temporarily.
As of the close of this trading week (October 30th), this trade is still open. My view of the USD/CAD is still bullish because my view of oil prices and the Canadian dollar are still bearish. If anything, this small retracement during the latter half of the week could be an opportunity to further add to my long position. We’ll have to see how the next week pans out!
|ENTRY TIME||12:06 PM|
|EXIT TIME||3:15 PM|
Right around noon on the 28th, the price of the EUR/JPY closed below a major support level of 133.2 or so. I placed a sell stop order a few pips below the close of that candle, which quickly got activated as the price continued to fall.
My trailing stop loss was activated the next day on an upward retracement of the price, just short of a 24-pip gain, which translated to a nice a little profit of nearly $4.
|ENTRY TIME||6:05 PM|
|EXIT TIME||2:23 PM|
At the close of the trading day on the 29th, I noticed that the price of the NZD/JPY pair, which had been falling down, had reached a major support level, right around the 80.2 mark. A bullish pin bar had formed, giving me a strong signal that the price was about to reverse and bounce off the support line. I set a buy stop order a few pips above the high of said candle, which shortly got activated as the price did indeed reverse upward.
My target profit was about 30 pips, which was the distance to the previous swing high. The price reached that level the next day, at which point I closed out my position for a profit of five bucks.
|ENTRY TIME||6:43 PM|
|EXIT TIME||2:37 PM|
The Euro had been falling relative to the New Zealand Dollar since mid September, and a beautiful downtrend composed of lower lows and lower highs had formed. On the 29th, the price reached the trend line on a retracement,so I set a sell stop order a few pips below the close of that candle on the 8-hour chart. The price did indeed bounce off the trend line to continue its downward run.
My target profit was the previous swing low, which the price hit 20 hours later. I locked in a profit of 77 pips, which came out to just shy of 21 bucks.
Overall, this has been a great first week of live trading. I closed out the day on Friday with a 5.6% return on my account balance, which I certainly can’t complain about! I still have an open position (long USD/CAD), which I feel confident in and which I will give time to develop since I entered it on the weekly chart.
As you can see, I am more of a short/mid-term swing trader than I am a day trader. I’m not hellbent on having closed out all of my trades by the end of each trading day; instead, I often like to keep a position open for a few days, sometimes even longer. Different personalities and different lifestyles may suit one trading style more than the other, and, in my case, swing trading definitely aligns itself more with my patient and calculating personality (which also explains my penchant for long-term dividend investing). Furthermore, by trading on higher time frames, this means that I do not have to stay glued to my computer screen all day, which isn’t really possible when you still have a full-time job.
That’s it for this week. If you have any interest in the Forex market, then hopefully you enjoyed this log. If you only care about dividend investing though, fear not! My October dividend recap will be published in just a few days!