ForexSpirit

So I’ve been back trading for just over a week now. It feels pretty good actually. I think part of that is because I can be pro-active working towards recouping my losses from last year. I know that it’s going to be a long, hard struggle to regain the lofty heights I had reached last October, but at least I’m back on the road again.

My first trade of the year encapsulates quite well some of the changes I have made to my trading style.

I bought EUR-USD last Monday (7 January) at 1.4694 using gearing of 2:1. My rationale for buying was that the euro would appreciate in the run up to the ECB meeting on the Thursday of that week.

The euro inched up slightly on the Monday and Tuesday of that week, peaking at around 1.4740 before breaking down and hitting a low of 1.4640 on Wednesday. I had placed a trailing 100 pip stop loss with my order. The stop loss was hit on the Wednesday resulting in a 51 pip loss.

On that Wednesday the market was driven by concerns that the BOE would cut rates again. This dragged down GBP-USD which in turned pull EUR-USD down with it. I didn’t pay close enough attention to the UK side of the currency equation.

For my position sizing I’m going to stick with 1:1, 2:1 or 3:1 gearing as my options per entry. Previously I used a fixed gearing size depending on what quadrant of the grid price was in at the time of entry.

Going forward I’m going to have a slightly more flexible approach, where I will determine what gearing ratio to use dependent on my aggressiveness at the time. If everything seems to be lined up for a substantial move then I’ll use a 3:1 entry, even if in the top quadrant of my grid. If I’m unsure but want a toe-in then I’ll plump for a 1:1 entry.

I’m also going to be slightly more open about what currency pairs I trade. I want to try and focus on pairs that are showing decent momentum or have clear catalysts in play, whether they be fundamental or technical in nature. For this reason I have added GBP-USD to my trading mix. I’ll continue to focus primarily on EUR-USD, with side plays in USD-JPY and GBP-USD. I’ve been peeking at AUD-USD and I’ll consider trading this pair again once I feel I have a better handle on its dynamics, especially after getting so badly burned trading it last year.

I will restrict myself to a maximum of 9:1 gearing in any one pair at any given time. I will also restrict myself to a maximum of 15:1 gearing in a single currency at any one time. Since the only currency that crosses multiple pairs for me is the US dollar, this means that I can only have a maximum of 15:1 gearing in place across the currency pairs I trade at any given moment. If I decide to move into trading the EUR-JPY or GBP-JPY at a later date then the same 15:1 rule will apply to the euro, sterling or Japanese yen.