Forex Trading

[candy_chia]

Hi Eileen,

Thank you for the reminder that QE3 wil cause USD to depreciate. Like you, I take small position in Forex, start dipping feet in water.

Hi Candy,

I'm afraid I'm not an expert in Forex and only put very little CFD amount on this, which is why I said is just pocket money for grocery shopping. So far, I have shorted USD and long AUD before based on economy and major trend, and would like to find out what other pairs are worth monitoring.

Thank you for sharing your position and the thought process behind it. Nobody will know if it will go up to 1.26, just follow the trend. One thing to note is: if there's QE3, USD will weaken, not strengthen.

[zipink]

Hi zipink,

Appreciate your kind guidance.

What are the factors one should take into consideration for AUD/JPY trading? Depend on Bank of Japan's stimulus? What is carry trade strategies?

How do one determine a good entry point? 82.40?

A carry trade involves borrowing or selling a financial instrument with a low interest rate (eg JPY), then using it to purchase a financial instrument with a higher interest rate (eg AUD).

While you are paying the low interest rate on the financial instrument you borrowed/sold, you are collecting higher interest on the financial instrument you purchased. Thus your profit is the money you collect from the interest rate differential. (http://www.babypips.com/school/what-is- ... z23jJ7UvJj)

Although BOJ is well known for intervention in the fx market, they don't do it everyday. Normally they will drop hints to the public before they take any action.

There are just too many fundamentals factors that will affect the currencies values - interest rates, employment, inflation, GDP, consumer confidence, trade flows, investment flows, money supply, central bank intervention etc.

My view is by the time I finish "analyzing", I don't have to trade already. Analyse till I paralyzed. So I prefer to be a technical trader just by looking at the price action i.e. what is the price trying to tell me now? Since my holding period is short (few days to a few weeks only)

So I don't care what is happening in Australia or Japan (AUD/JPY) most of the time. However, there are times when release of economic data will cause wild fluctuation of price, I will try not to enter during that period.

Just an example... happened to trade NZDJPY (latest chart at point of writing):
I look at price action only and nothing else.
It is on an uptrend so I would only look for "long" opportunity.
I let the price come down. When it breaks previous day high, I entered.
As long price doesn't hit my stop loss level, I don't care.
At point of writing, I have taken my profits. So I held my position for 3 days.
Of course, this happens to be a profitable trade. There are instances when the trade goes against me, so I just cut. Just a number games.
I follow my trading rules. Can't be 100% winning trades always.

[AndrewNg]

Hi Candy and ZipInk,
Happen to come across this discussion on Carry trade. Is the interest differential paid on a monthly or yearly basis ?
regards
Andrew

Hi zipink,

Appreciate your kind guidance.

What are the factors one should take into consideration for AUD/JPY trading? Depend on Bank of Japan's stimulus? What is carry trade strategies?

How do one determine a good entry point? 82.40?

A carry trade involves borrowing or selling a financial instrument with a low interest rate (eg JPY), then using it to purchase a financial instrument with a higher interest rate (eg AUD).

While you are paying the low interest rate on the financial instrument you borrowed/sold, you are collecting higher interest on the financial instrument you purchased. Thus your profit is the money you collect from the interest rate differential. (http://www.babypips.com/school/what-is- ... z23jJ7UvJj)

Although BOJ is well known for intervention in the fx market, they don't do it everyday. Normally they will drop hints to the public before they take any action.

There are just too many fundamentals factors that will affect the currencies values - interest rates, employment, inflation, GDP, consumer confidence, trade flows, investment flows, money supply, central bank intervention etc.

My view is by the time I finish "analyzing", I don't have to trade already. Analyse till I paralyzed. So I prefer to be a technical trader just by looking at the price action i.e. what is the price trying to tell me now? Since my holding period is short (few days to a few weeks only)

So I don't care what is happening in Australia or Japan (AUD/JPY) most of the time. However, there are times when release of economic data will cause wild fluctuation of price, I will try not to enter during that period.

Just an example... happened to trade NZDJPY (latest chart at point of writing):
I look at price action only and nothing else.
It is on an uptrend so I would only look for "long" opportunity.
I let the price come down. When it breaks previous day high, I entered.
As long price doesn't hit my stop loss level, I don't care.
At point of writing, I have taken my profits. So I held my position for 3 days.
Of course, this happens to be a profitable trade. There are instances when the trade goes against me, so I just cut. Just a number games.
I follow my trading rules. Can't be 100% winning trades always.

[Albert]

using CFD is computed daily.

[candy_chia]

Hi Alex,

Thank you for your in-dept explanation with graphic illustration.

Hi zipink,

Appreciate your kind guidance.

What are the factors one should take into consideration for AUD/JPY trading? Depend on Bank of Japan's stimulus? What is carry trade strategies?

How do one determine a good entry point? 82.40?

A carry trade involves borrowing or selling a financial instrument with a low interest rate (eg JPY), then using it to purchase a financial instrument with a higher interest rate (eg AUD).

While you are paying the low interest rate on the financial instrument you borrowed/sold, you are collecting higher interest on the financial instrument you purchased. Thus your profit is the money you collect from the interest rate differential. (http://www.babypips.com/school/what-is- ... z23jJ7UvJj)

Although BOJ is well known for intervention in the fx market, they don't do it everyday. Normally they will drop hints to the public before they take any action.

There are just too many fundamentals factors that will affect the currencies values - interest rates, employment, inflation, GDP, consumer confidence, trade flows, investment flows, money supply, central bank intervention etc.

My view is by the time I finish "analyzing", I don't have to trade already. Analyse till I paralyzed. So I prefer to be a technical trader just by looking at the price action i.e. what is the price trying to tell me now? Since my holding period is short (few days to a few weeks only)

So I don't care what is happening in Australia or Japan (AUD/JPY) most of the time. However, there are times when release of economic data will cause wild fluctuation of price, I will try not to enter during that period.

Just an example... happened to trade NZDJPY (latest chart at point of writing):
I look at price action only and nothing else.
It is on an uptrend so I would only look for "long" opportunity.
I let the price come down. When it breaks previous day high, I entered.
As long price doesn't hit my stop loss level, I don't care.
At point of writing, I have taken my profits. So I held my position for 3 days.
Of course, this happens to be a profitable trade. There are instances when the trade goes against me, so I just cut. Just a number games.
I follow my trading rules. Can't be 100% winning trades always.

[zipink]

At point of writing (about 1 hour left before NY 5pm close) USDSGD is showing a pin bar. It is now at resistance which was a support previously.

A pin bar indicates that price is rejecting higher price. Price went up initially during the day but came back down near the close.

If price breaks the nose of the pin bar (day low) the following day, there might be a chance that it will heading down again to the yellow region support zone, pending price action.

If the price comes down, a good chance that the STI will continue its upward move

If price continues to surge up the next few days, then the pin bar set-up will be void.

Above is just my view. Not an advise for any trade. Thanks.

[zipink]

A re-visit to USDSGD to see how the trade worked out.

The pin bar set-up was valid. Once the day low of the pin bar was broken, price moved significantly lower for the next 3 day.

I did initiate a short position personally. Almost hit my take-profit target before price retraced back up and formed a bullish pin bar.

Since the price action is now bullish, I decided to cover my position, take my profit and go away. I won't be doing counter-trend trading (long) as the risk/reward is simply not worth it. By the way, a bullish pin bar doesn't mean price will surely go up. It can still go down. Just that since I have decent profits and I do not want to hold my position over the weekend, I decided to liquidate it.

Basically, this is how I trade currencies. I am only using TA price action to guide my entry. As mentioned in previous posts, I am a swing trader, holding positions from a few days to a few weeks only, so I do not care about FA at all.

I like to keep my chart as clean as possible, so I try NOT to use any indicator at all. At most I will use is the 8/21EMA to help me determine the trend and dynamic support/resistance. That's all. Price action is still #1 for me. After using all sorts of indicators - MACD, stochastics, RSI, Bollinger, ADX etc, you name it, I have tried them before. I find they are not useful to me at all and my chart cluttered only.

Don't be mistaken, I am not saying indicators are not useful. Just that I don't prefer to use them nowadays through experience. I am sure some graduates here trade currencies, have different strategies and like to use indicators. If they are working fine for you, then just stick to it.

At point of writing (about 1 hour left before NY 5pm close) USDSGD is showing a pin bar. It is now at resistance which was a support previously.

A pin bar indicates that price is rejecting higher price. Price went up initially during the day but came back down near the close.

If price breaks the nose of the pin bar (day low) the following day, there might be a chance that it will heading down again to the yellow region support zone, pending price action.

If the price comes down, a good chance that the STI will continue its upward move

If price continues to surge up the next few days, then the pin bar set-up will be void.

Above is just my view. Not an advise for any trade. Thanks.

[candy_chia]

Hi ziplink,

Thank you for demonstrating your trading strategy in USD/SGD.

Anyone trade in AUD/JPY, can share your trading experience or strategies?

A re-visit to USDSGD to see how the trade worked out.

The pin bar set-up was valid. Once the day low of the pin bar was broken, price moved significantly lower for the next 3 day.

I did initiate a short position personally. Almost hit my take-profit target before price retraced back up and formed a bullish pin bar.

Since the price action is now bullish, I decided to cover my position, take my profit and go away. I won't be doing counter-trend trading (long) as the risk/reward is simply not worth it. By the way, a bullish pin bar doesn't mean price will surely go up. It can still go down. Just that since I have decent profits and I do not want to hold my position over the weekend, I decided to liquidate it.

Basically, this is how I trade currencies. I am only using TA price action to guide my entry. As mentioned in previous posts, I am a swing trader, holding positions from a few days to a few weeks only, so I do not care about FA at all.

I like to keep my chart as clean as possible, so I try NOT to use any indicator at all. At most I will use is the 8/21EMA to help me determine the trend and dynamic support/resistance. That's all. Price action is still #1 for me. After using all sorts of indicators - MACD, stochastics, RSI, Bollinger, ADX etc, you name it, I have tried them before. I find they are not useful to me at all and my chart cluttered only.

[candy_chia]

Buy 1,000 AUD/JPY at 81.984 using 24% margin, executed via limit order yesterday.

Was imposed with carrying cost of $0.11 (3.33% annual rate) yesterday, could I check whether carrying cost is imposed for all forex trades?

[archonmage]

Buy 1,000 AUD/JPY at 81.984 using 24% margin, executed via limit order yesterday.

Was imposed with carrying cost of $0.11 (3.33% annual rate) yesterday, could I check whether carrying cost is imposed for all forex trades?

Hi,

As long as you hold on to this position, you would get rough 11 cents daily for a long position on AUD/JPY.
3.33% is the net differential interest which you will be paid with.

If you would have use 2% margin which is around $25, your ROI will be (0.11*365)/25 = 160% p.a.
However, do note that your account must have enough money to cater for any temporary setbacks if you intend to hold the position for a longer duration.

Regards,
archonmage

[candy_chia]

Hi archonmage,

Thank you for the clarification.

Buy 1,000 AUD/JPY at 81.984 using 24% margin, executed via limit order yesterday.

Was imposed with carrying cost of $0.11 (3.33% annual rate) yesterday, could I check whether carrying cost is imposed for all forex trades?

Hi,

As long as you hold on to this position, you would get rough 11 cents daily for a long position on AUD/JPY.
3.33% is the net differential interest which you will be paid with.

If you would have use 2% margin which is around $25, your ROI will be (0.11*365)/25 = 160% p.a.
However, do note that your account must have enough money to cater for any temporary setbacks if you intend to hold the position for a longer duration.

Regards,
archonmage

[candy_chia]

News from cmc market, 24 Aug 2012,

The Australian dollar fell against the dollar on the Chinese data (HSBC's preliminary China purchasing managers measure for August showed a fall, compared with a final reading of 49.3 in July), as a slowdown in China (world's second-largest economy would adversely affect Australia, one of China's closet trading partners.

Buy 1,000 AUD/JPY at 81.984 using 24% margin, executed via limit order yesterday.

[candy_chia]

Thank you for showing visually how to check carrying cost of a particular commodities.

Now I know that the carrying cost changes daily.

Was deposited with $0.05 carrying cost (3.23% annual rate) for new trade for Buying of 1,000 AUD/JPY at 81.75 using 16% margin, executed via limit order yesterday.

Where and how to check the carry cost of a particular commodities - under "Overview" section:

Another friendly advise: It's best to know your broker regardless is CMC Markets, IG markets, Cityindex, SAXO etc inside out - the cost, their spread, their charts, their terms and conditions, their charts etc. So that you will know what you are are doing.

[archonmage]

Thank you for showing visually how to check carrying cost of a particular commodities.

Now I know that the carrying cost changes daily.

Was deposited with $0.05 carrying cost (3.23% annual rate) for new trade for Buying of 1,000 AUD/JPY at 81.75 using 16% margin, executed via limit order yesterday.

Hi, Candy.

I am curious why you have used 16% margin instead of a 2% margin. A 2% margin would means coming out lesser cash to support a position as compared to a 16% margin.

Unfortunately, in local contact, the margin is cap at 2% margin based on MAS rulings.

Regards,
archonmage

[candy_chia]

Hi archonmage,

Actually just trying different margin.

Is it advisable to use 2% margin instead?

What do you mean by "in local contact, the margin is cap at 2% margin based on MAS rulings"? Are you referring to shares investment or forex trading?

Sorry if my question sounds ridiculous. Just started exploring forex trading.

Thank you for showing visually how to check carrying cost of a particular commodities.

Now I know that the carrying cost changes daily.

Was deposited with $0.05 carrying cost (3.23% annual rate) for new trade for Buying of 1,000 AUD/JPY at 81.75 using 16% margin, executed via limit order yesterday.

Hi, Candy.

I am curious why you have used 16% margin instead of a 2% margin. A 2% margin would means coming out lesser cash to support a position as compared to a 16% margin.

Unfortunately, in local contact, the margin is cap at 2% margin based on MAS rulings.

Regards,
archonmage