Here’s Why You Should Consider Forex
When I started my
trading career back in 1994, the goal was real simple. Figure out a
methodology to exploit short-term movements intra-day so as to generate a
consistent equity steam, in essence a paycheck once a month. As all of you are
aware, this is no small task. Whether it be stocks, futures or commodities
there is an angle and edge that can be exploited that makes trading these
markets a reasonable substitute to full-time employment.
Over the years, I have always wanted to be able
to effectively manage what has been set aside in savings and retirement
accounts. Actively trading those accounts (not HVT per se) was always a
challenge simply due to the tremendous workload entailed in research and with
markets getting narrow and choppy in recent years, it just seemed that it was
too large a task to tackle without having to give up a portion of my day
trading. Just over two years ago I developed a deep interest in the Forex (FX)
market. At first, my thought was to take my HVT skills and transfer them to
this market. Needless to say, I found that scalping FX was next to impossible.Â
The market structure and price action was simply not conducive to this
hyper-active style. A colleague of mine, an accomplished trader at a major FX
bank, pointed me in the right direction. “Forget about the scalps, that is
difficult, if not impossible to do consistently”, he said. I heeded his advice,
which also included the suggestion that I overlay my technical analysis skills
against a solid macro understanding of the variables that effect FX prices.Â
Since then, I have been become accomplished at FX trading and now rely solely on
FX as a way to manage my investment portfolio as well as other friends and
associates. My day trading account is still funded, and that provides me with
2-3 hours a day of opportunities, the remainder of the day is dedeicated to FX.
I tell you this story for one simple reason. Do
you overlook your investments due to your focus on trading? I suspect the
answer is yes. What is key however, is that FX does not require traders to
abandon their existing tried and true methods, FX is merely a complement to
your existing trading, and a damn fine one at that. My goal with my FX
account is to shoot for absolute return and minimize draw-downs. While 10-12%
per year may not sound sexy and exciting, do not forget the power of
compounding. Let your trading accounts rack up the silly total return figures,
because you can, and those markets allow for that type of leveraged trading.Â
Sure, FX is more leveraged than any other market, but the leverage can quickly
knock you out of the game.
In a time where the stock market appears to be
headed for one long trading range, alternate markets need to viewed. Ones that
not only have more range and liquidity, but also ones that have zero correlation
to the equity markets. FX is that market. Allow me to do all the legwork for
you if you are still unsure about biting off yet another project. In less than
30-minutes a week I can offer you a solid synopsis of what I am seeing and
doing, as well as specific trade recommendations.Â
The Day Ahead
Jobless claims, if they deviate far enough from
expectations could set tone for more dollar selling or buying. Absent a real
surprise there or any new oil/terror related news, FX will likely continue to
grind sideways. Greenspan comments tomorrow may have an effect too.
My favorite trade ideas continue to be short EUR/CHF
as a medium to long-term trade. At present I am scaling into this trade and
waiting for certain levels to be breached before adding to the position. My
other idea is to begin building a long NZD/USD position. The sell-off in this
pair represents a solid long entry in my opinion, however, with market
conditions thin, scaling in will be the most prudent approach.
Please join me on September 9th at 1:30 PM
PDT for a free conference call on FX trading. Simply
click here to sign up:Â
As always, feel free to send me your comments and
questions.