Forex Trading

[jimmylu]

HI Dennis

I am very new to this forum. All the seniors are talking about investing in Property and Stocks. How about forex trading? Shall we also consider this as part of our investment since it is most liquid and can trade 24/5 every week?

thanks
jimmylu

[lootster]

Dennis does not encourage trading, do a search and you will know the answer

[Dennis Ng]

HI Dennis

I am very new to this forum. All the seniors are talking about investing in Property and Stocks. How about forex trading? Shall we also consider this as part of our investment since it is most liquid and can trade 24/5 every week?

thanks
jimmylu

Read these postings;
short term Trading vs Investing, what're the differences?

http://www.masteryourfinance.com/forum/ ... f=5&t=2453


His students said this Forex Trading Trainer is a gambler
http://www.masteryourfinance.com/forum/ ... =10&t=1823

[archonmage]

HI Dennis

I am very new to this forum. All the seniors are talking about investing in Property and Stocks. How about forex trading? Shall we also consider this as part of our investment since it is most liquid and can trade 24/5 every week?

thanks
jimmylu

Hi, Jimmy Lu.

I do not encourage active forex trading too. However, forex can be use as a form of passive income. I am doing carry trade for the past 2 years.

Carry Trade is a term often used in forex.

In simpler terms, it is a method to earn the interest.
ie. Borrow money with low interest rate and reinvest it for a higher interest rate.

An analogy,
You go to Bank A and take a loan of $1000 with 1% interest p.a.
Next, you use the money of $1000 and buy bonds which pays 5% interest p.a.
Hence, you would make a good 4% or $40.

In forex, logically speaking, we always go for a currency which charges a low interest (i.e. YEN) and use it for a higher interest rate (i.e. AUD). Since forex typically gives us a typical leverage of 50 times, we are using small amount of money to earn the interest. Hence, the returns will be magnified. Coming back to the analogy, in practical, it is possible for us to earn up to 200% depending on market conditions.

When the time comes, I will make a notice on the entry details.

Regards,
archonmage

[wemakebread]

As a very rough guide, once AUD/USD drops below 1.0000, I will take notice and look for opportunities to BUY this currency pair.

Putting on Fundamentals thinking hat, USA having financial trouble and keep printing money, generating a lot of debt.
AUD has natural resources and agriculture.
So my bias is AUD must be stronger than USD, in a big picture perspective.
Whenever market forces push the price of AUD/USD below 1.0000, I think it becomes "under-valued".
Hence, I am looking for opportunities to BUY.

If we take the same arguement, if USD/SGD goes to 1.3000, I am interested to SHORT or SELL.
By the way, USD/SGD is currently around 1.24 now (spot forex price).
If you go the banks or money changer, they will roughly take USD and give SGD at 1.23 or lower, and take SGD and give USD at 1.25 or higher. (ie. if I want to buy some USD notes, the rate will be 1.25 or higher)

Above is just to share some idea about forex as a financial instrument, and offer some perspective for comparison with stocks or other asset classes.

[Ms Tan]

Hi archonmage,

Fully agreed that forex can be a form of passive income. To me, it is an additional stream of income for grocery shopping

Looking forward to hear about your big plan, if possible, do share your thoughts early, don't need to wait until "when the time comes".

Hi, Jimmy Lu.

I do not encourage active forex trading too. However, forex can be use as a form of passive income. I am doing carry trade for the past 2 years.

Carry Trade is a term often used in forex.

In simpler terms, it is a method to earn the interest.
ie. Borrow money with low interest rate and reinvest it for a higher interest rate.

An analogy,
You go to Bank A and take a loan of $1000 with 1% interest p.a.
Next, you use the money of $1000 and buy bonds which pays 5% interest p.a.
Hence, you would make a good 4% or $40.

In forex, logically speaking, we always go for a currency which charges a low interest (i.e. YEN) and use it for a higher interest rate (i.e. AUD). Since forex typically gives us a typical leverage of 50 times, we are using small amount of money to earn the interest. Hence, the returns will be magnified. Coming back to the analogy, in practical, it is possible for us to earn up to 200% depending on market conditions.

When the time comes, I will make a notice on the entry details.

Regards,
archonmage

Hi wemarkebread,

By looking at the rate at the money changer, we can set the range for USD/SGD isn't it? ie. short at 1.25 or higher and close postion at 1.23 or lower. These are my orders/positions in past weeks.

By the way, USD/SGD is currently around 1.24 now (spot forex price).
If you go the banks or money changer, they will roughly take USD and give SGD at 1.23 or lower, and take SGD and give USD at 1.25 or higher. (ie. if I want to buy some USD notes, the rate will be 1.25 or higher)

Above is just to share some idea about forex as a financial instrument, and offer some perspective for comparison with stocks or other asset classes.

[lynnboh]

The only pair of forex I am interested is USD/CAD which is also known as the commodity currency because of its inverse relationship to Oil. If Oil prices goes up, this currency pair will come down and vice versa. However, I am currently no buying it because I am still observing it and only intend to use it as a hedge against a recession/deflationary situation. That is in a deflationary recession situation Oil prices is most likely to drop and so this USD/CAD is going to spike. It serves only as a form of insurance when market peaked. So if market crash from the top, I don't lose everything. Any comment?

[Ms Tan]

Hi Lynnboh,

Thanks for sharing an interesting pair on commodity currency. You may be right.

To me, I’m not sure if commodity is still an “insurance”. With so much of paper money, everything seems to go up/down together, be it stocks, oil, gold, silver, diversification doesn’t help. Personally I don’t know about hedging with commodity but I do hedge with real estate, ie. Properties.

In view of US$ may continue to weaken, I pair it with stronger currency such as USD/SGD & USD/AUD. I will monitor USD/CAD too. Those who know about USD/CAD do share your thoughts.

The only pair of forex I am interested is USD/CAD which is also known as the commodity currency because of its inverse relationship to Oil. If Oil prices goes up, this currency pair will come down and vice versa. However, I am currently no buying it because I am still observing it and only intend to use it as a hedge against a recession/deflationary situation. That is in a deflationary recession situation Oil prices is most likely to drop and so this USD/CAD is going to spike. It serves only as a form of insurance when market peaked. So if market crash from the top, I don't lose everything. Any comment?

[archonmage]

Hi archonmage,

Fully agreed that forex can be a form of passive income. To me, it is an additional stream of income for grocery shopping

Looking forward to hear about your big plan, if possible, do share your thoughts early, don't need to wait until "when the time comes".

Hi, Ms Eileen.

Thanks for the comments.

The time will come when the market experience a similar crash which happened during the last 07/8 financial crisis. It is a matter of waiting only.

I have highlighted the general strategy in my previous post.

Just a short note, I am focusing on the AUD/JPY pair. Why?
For the past 20 years, the lowest it went was around 55/56 which it happened 3 times only. If it can reach around that level again, I will go in big time.

After some findings and studies, I have come up an enhanced carry trade strategy and template. I will release to all when the time comes.

Regards,
archonmage

[candy_chia]

Hi Ms Tan,

Looking at the chart, USD/SGD has been trading within the range of 1.2360 (May 2012) to 1.2931 (Jun 2012) for the past 6 months.

Bought at 1.24407 yesterday, set position to take profit at 1.26, is it realistic with the incoming US election & QE3 carrot?

Appreciate you kind guidance.

By looking at the rate at the money changer, we can set the range for USD/SGD isn't it? ie. short at 1.25 or higher and close postion at 1.23 or lower. These are my orders/positions in past weeks.

[Ms Tan]

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.

[tpc]

Hi Ms Tan,

Looking at the chart, USD/SGD has been trading within the range of 1.2360 (May 2012) to 1.2931 (Jun 2012) for the past 6 months.

Bought at 1.24407 yesterday, set position to take profit at 1.26, is it realistic with the incoming US election & QE3 carrot?

Appreciate you kind guidance.

By looking at the rate at the money changer, we can set the range for USD/SGD isn't it? ie. short at 1.25 or higher and close postion at 1.23 or lower. These are my orders/positions in past weeks.

Hi Candy,

For USDSGD, if you long at 1.24407 and intend to take profit at 1.26, you are expecting SGD to depreciate . What is your trading time-frame? Do you intend to hold this long position for days or months?

The Singapore stock market has an inverse relationship with the Sing Dollar (STI up, USDSGD down). My view is that the stock market will remain bullish, so I expect the SGD to continue to appreciate (USDSGD down).

MAS also publicly informed us they expect SGD to appreciate to ~1.20 (or 1.22 I have forgotten, it was published in newspapers earlier this year)

If you look at the chart below, you can see that right now USDSGD is clearly in a downtrend. You are trading against the trend (nothing wrong on that).

I use a 8/21 EMA. The moving average is ONLY used to help me determine the trend. I am not using MA-crossovers to enter a position (i.e. cross above I buy, cross down I sell... no, I don't do that)

Some traders like to use 10/20MA, some like 13/26MA etc. It doesn't matter as it is just a personal preference. We use it to judge the trend only.

You can see from the chart that price is respecting the moving average. Every time the price retraced higher, the moving average is acting a dynamic resistance.

Personally, I am a swing trader when I am trading currencies, holding my position for a few days to at most 2 weeks. Although I do know the FA (election, QE3, economy or whatever...), I simply do not care. I only look at price action to determine whether I short or long.

So at this point in time, I would prefer to look for opportunities to short USDSGD instead (I don't really trade SGD though, more on the pairs below)

Eileen, the other currencies pairs I often monitor are:
EUR/USD
GBP/USD
AUD/USD
NZD/USD
USD/JPY
USD/CAD
USD/CHF
EUR/JPY
AUD/JPY
AUD/CAD

[candy_chia]

Hi zipink,

Thank you for your thorough explanation.

My trading time frame is 3 months, but will cut loss if trend changes.

Is it inappropriate to use 20/50 EMA compared to 10/20MA, or 13/26MA (or 8/21 EMA that you use) to determine the price trend?

Hi Ms Tan,

Looking at the chart, USD/SGD has been trading within the range of 1.2360 (May 2012) to 1.2931 (Jun 2012) for the past 6 months.

Bought at 1.24407 yesterday, set position to take profit at 1.26, is it realistic with the incoming US election & QE3 carrot?

Appreciate you kind guidance.

By looking at the rate at the money changer, we can set the range for USD/SGD isn't it? ie. short at 1.25 or higher and close postion at 1.23 or lower. These are my orders/positions in past weeks.

Hi Candy,

For USDSGD, if you long at 1.24407 and intend to take profit at 1.26, you are expecting SGD to depreciate . What is your trading time-frame? Do you intend to hold this long position for days or months?

The Singapore stock market has an inverse relationship with the Sing Dollar (STI up, USDSGD down). My view is that the stock market will remain bullish, so I expect the SGD to continue to appreciate (USDSGD down).

MAS also publicly informed us they expect SGD to appreciate to ~1.20 (or 1.22 I have forgotten, it was published in newspapers earlier this year)

If you look at the chart below, you can see that right now USDSGD is clearly in a downtrend. You are trading against the trend (nothing wrong on that).

I use a 8/21 EMA. The moving average is ONLY used to help me determine the trend. I am not using MA-crossovers to enter a position (i.e. cross above I buy, cross down I sell... no, I don't do that)

Some traders like to use 10/20MA, some like 13/26MA etc. It doesn't matter as it is just a personal preference. We use it to judge the trend only.

You can see from the chart that price is respecting the moving average. Every time the price retraced higher, the moving average is acting a dynamic resistance.

Personally, I am a swing trader when I am trading currencies, holding my position for a few days to at most 2 weeks. Although I do know the FA (election, QE3, economy or whatever...), I simply do not care. I only look at price action to determine whether I short or long.

So at this point in time, I would prefer to look for opportunities to short USDSGD instead (I don't really trade SGD though, more on the pairs below)

Eileen, the other currencies pairs I often monitor are:
EUR/USD
GBP/USD
AUD/USD
NZD/USD
USD/JPY
USD/CAD
USD/CHF
EUR/JPY
AUD/JPY
AUD/CAD

[tpc]

Hi zipink,

Thank you for your thorough explanation.

My trading time frame is 3 months, but will cut loss if trend changes.

Is it inappropriate to use 20/50 EMA compared to 10/20MA, or 13/26MA (or 8/21 EMA that you use) to determine the price trend?

Hi Candy,

I am a short-term trader (days)... so 20/50MA is too slow. If you are a position trader (months), then 20/50 is fine.

My humble suggestion is that don't be too obsessed with the "right" moving average. Sometimes I don't even look at the MAs. The #1 thing I look at is still price action and classical support/resistance. Nowadays I don't really use indicators (MACD, stochastic etc). Keeping the chart as "clean" as possible.

[candy_chia]

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?

Hi zipink,

Thank you for your thorough explanation.

My trading time frame is 3 months, but will cut loss if trend changes.

Is it inappropriate to use 20/50 EMA compared to 10/20MA, or 13/26MA (or 8/21 EMA that you use) to determine the price trend?

Hi Candy,

I am a short-term trader (days)... so 20/50MA is too slow. If you are a position trader (months), then 20/50 is fine.

My humble suggestion is that don't be too obsessed with the "right" moving average. Sometimes I don't even look at the MAs. The #1 thing I look at is still price action and classical support/resistance. Nowadays I don't really use indicators (MACD, stochastic etc). Keeping the chart as "clean" as possible.