FX Club

[FxJalarupa]

So I'm hoping to get this thread up and running into something that becomes a worthwhile discussion to new entrants into the Forex market as well as hopefully leverage some of the experience out there that may happen to come across this thread.

What I share with you will be my realizations thus far in the investment world, more specifically relating to Forex and Inter-market forces, the technical's and fundamentals to watch and hopefully be able to fast track you to profitability in a game that I liken to the wild west...

So sit back relax and read on as I attempt to provide you with a free resource that will hopefully save you from going to the cost and trouble of doing a forex course with one of the many so-called professional forex training outfits in South Africa...

 

[FxJalarupa]

When looking at a currency to trade one needs to understand that the currency is quoted as a Base and Counter currency...

So USDZAR is the US Dollar versus the South African Rand

The Base Currency is always representative to 1 and with this notation we determine how many units of the counter currency we require to purchase one unit of the Base currency...

So this determines the MOST FUNDAMENTAL TRUTH about investing and is something that we lose focus on due to a plethora of indicators and systems...

That Truth Is PRICE

Price is the ONLY indicator worth any value... it is more worthwhile than RSI, MACD, STOC, VOL, Etc...

So meditate on that statement and let's see what realizations you come to?

 

[Thor]

When looking at a currency to trade one needs to understand that the currency is quoted as a Base and Counter currency...

So USDZAR is the US Dollar versus the South African Rand

The Base Currency is always representative to 1 and with this notation we determine how many units of the counter currency we require to purchase one unit of the Base currency...

So this determines the MOST FUNDAMENTAL TRUTH about investing and is something that we lose focus on due to a plethora of indicators and systems...

That Truth Is PRICE

Price is the ONLY indicator worth any value... it is more worthwhile than RSI, MACD, STOC, VOL, Etc...

So meditate on that statement and let's see what realizations you come to?

What broker do you use?

USD/ZAR is not readibly available.

At least none of the brokers I tried had it. Should check if IG markets have it

 

[Papsak]

Price action is the be all and end all indicator?

Fair enough, but most people would say to to use indicators in conjunction with mov avg, volume, price action. You did throw volume in with stoc, rsi - is that fair?

BTW looking fwd to the thread - subscribe. As Thor has hinted at, maybe keep any examples onto the dollar/ Euro pair?

 

[FxJalarupa]

What broker do you use?

USD/ZAR is not readibly available.

At least none of the brokers I tried had it. Should check if IG markets have it

Try this broker... I use it for a number of my managed accounts...

Tickmill

 

[Thor]

Try this broker... I use it for a number of my managed accounts...

Tickmill

Prefer local as I am a South African.

So I use either GT247 or IG markets

 

[FxJalarupa]

Prefer local as I am a South African.

So I use either GT247 or IG markets

neither of those brokers are ECN

Add to that the software that they use, is their propriety quoting and charting systems... And they are subpar... (unless IG now support mt4?) But for the most part one uses international brokers for forex due to the competitive nature of the costing structures...

GT and IG (to be fair IG is way better than GT) will screw you any chance they get... And there are many ways in which they do it, from spreads, to the price / market they offer, speed of execution, slippage, requotes... Mainly bucket shop shenanigans...

Having your money offshore also offers you the opportunity of a Rand hedge and more/most importantly an inflation hedge!

 

[FxJalarupa]

Price action is the be all and end all indicator?

Fair enough, but most people would say to to use indicators in conjunction with mov avg, volume, price action. You did throw volume in with stoc, rsi - is that fair?

BTW looking fwd to the thread - subscribe. As Thor has hinted at, maybe keep any examples onto the dollar/ Euro pair?

In my experience indicators are a crutch and show nothing that is not already visible in the price... REMEMBER in trading; much as in crossing the road... You need to look left before you look right...

Volume as a indicator in Fx and it's derivatives such as OBV, VSA are of no use (unless you trading Fx futures on the CME)

In terms of which pair we look at, that is also greatly irrelevant, because price behaves the same whether it be one of the majors or the exotics, the fundamental laws of SUPPLY and DEMAND hold true!

I'm am also excited to go on this journey with you, but it needs to become one of realization... I hope to challenge you and see where it takes us... Hopefully to the point where you can extract profit from the market at will... But this will take time and practice and hard work...

I do not teach a system... My system is common sense, my indicator reality, my methods utterly discretionary

 

[Papsak]

would you say your trading style is to pick reversals or are do you more stick with the trend. As a beginner, I think I have fallen into that trap of trying to pick reversals - whereas my gut says sticking with a trend (or part of trends) would probably work out better for me.

Do you use SMA's at all?

How long do you usually hold your trades?

What chart time frame do you find most usefull?

How about some internet resources that you find usefull? I will be doing the babypips course this week. Anyone on youtube that you think is really worth following?

 

[FxJalarupa]

Lesson ONE

Price is all that matters!

But What is PRICE relative to the Past?

How Far back should I go?

As far a Possible... at first... and start to understand if PRICE is cheap or expensive on a relative basis... Relative to the past... Why? because they can only move between supply and demand... because price is a function of Supply and Demand

It helps to have a keen eye on the BIG PICTURE... but we should try and bring it back to whats relevant today...

Spot the imbalance between Supply and Demand... Remember Look Left and ask your questions... The answers are all there in the price itself...

Find Supply and Demand... closer to current price... always considering where we are in the bigger picture... High Price or Low price...?

When opportunity presents itself take action... in the direction that price is most likely going to move towards... supply to demand or demand to supply...?

 

[FxJalarupa]

would you say your trading style is to pick reversals or are do you more stick with the trend. As a beginner, I think I have fallen into that trap of trying to pick reversals - whereas my gut says sticking with a trend (or part of trends) would probably work out better for me.

Do you use SMA's at all?

How long do you usually hold your trades?

What chart time frame do you find most usefull?

How about some internet resources that you find usefull? I will be doing the babypips course this week. Anyone on youtube that you think is really worth following?

Being a trader means that you can act when price acts, you move with price, like a river you need to flow... Follow the path of least resistance, stack the odds on your favor by employing confluence (more than one reason to enter the trade, and no I don't mean what an indicator tells you...)

The concept of "the trend" is highly subjective are you trending on the H1 or the DAILY? The concept of the reversal trade is all about finesse... Can you pick the right price at which the market turns on a dime?

Basically price is constantly moving from Supply to Demand and Vice Versa...the Little turns and breakouts along the way is what gets it there eventually...

SMA's look colorful and will distract you from what's important... Everyone loves the 200, 50, "golden cross"... But in actual fact it's all there to the left... You just don't have the eyes to see it yet!

I have held trades for hours and some for years... All depends on the price I got and the carry (swop) that I get...

The larger the timeframe the better... You work your way down from top to entry...

I follow John Kicklighter from DAILY FX for fundamentals

 

[Papsak]

cheers dailyfx site looks interesting - will be having a good look around it. The amount of information around trading FX is just huge compared to trading CFD's on the JSE.

On the question "does history repeat itself?" - Yes, eventually is does. Key word, being eventually I guess. Actually changing that answer to NO. Just because it hit a level once, it doesn't mean it will hit it again does it? I do not see the rand hitting parity with the dollar in my life time - even though it has in the past. Do I see Capitec share going down to R2 because it once was there? No, of course not. So my conclusion would be buying or selling a share/ forex because it has at one point reached a level, could be foolish.


Will have lot's more questions later in the week....please only answer when you have time!

What percentage of time do you spend research vs actual trading? I was thinking last night one of my big problems is my lack of patience and not doing nearly enough research.

Where do you feel you make more money - on your entries or on your exits?
Do you use support/resistance levels?

do you use stops and if so, do you have a method for placing them? Ever use trailing stops? As a beginner, I think trailing stops might be the way to go as it at least lets winners run to a point and stops the need to bank to early.

Lastly, have you had any "light bulb" moments that changed the way you trade? You know, something that just clicked and suddenly things became clear?

 

[FxJalarupa]

On the question "does history repeat itself?" - Yes, eventually is does. Key word, being eventually I guess. Actually changing that answer to NO. Just because it hit a level once, it doesn't mean it will hit it again does it? I do not see the rand hitting parity with the dollar in my life time - even though it has in the past. Do I see Capitec share going down to R2 because it once was there? No, of course not. So my conclusion would be buying or selling a share/ forex because it has at one point reached a level, could be foolish.

Maybe I need to clarify what I mean't a little better...

Price moves from Supply to Demand and Vice Versa... So what is supply... Economics 101 tells us when prices are high then there are no willing buyers for your assets at those prices, and this leads to an oversupply of the asset... Price then has to drop down to a level where the price of your asset is now attractive enough to a willing buyer... That means the price has corrected to a level where there is a reemergence of demand for the asset...

If Sasol went to R2 everyone and his dog would want to own it... it wouldn't stay there that long (and yes its likely that the demand higher up is so high that it wouldn't even get there... But hey Lonmin's do happen)... heck it if went to R350 it wouldn't stay there for long due to the Supply Demand Imbalance... There is adequate demand at R350 but there is more at R200 and even more at R100 for Sasol... What happens when price hits a demand level is that we see trades start to bid prices higher... until they sell at a price where its unlikely they would get someone dumb enough to buy it from them in a supply level, So the experienced trader selling to the inexperienced... (but believe me in this game there's always another trader to take the other side of your trade in FX... the liquidity is awesome!)

So Let Me Illustrate...

What percentage of time do you spend research vs actual trading?

I spend about 60% of my "trading time" looking at charts are doing TA and 30% reading the news and keeping up with the economic landscape (this is vital for you to understand the MACRO aspects of supply and demand) and 5% setting alerts at prices that are interesting and 5% setting limit orders... Once I'm in the trade I'm 100% hands on deck to ensure my Risk to Reward doesn't blow up (more about this later) and then when I'm comfortably in the money or out of the trade I sit back and let my software take over the management of the position...

Where do you feel you make more money - on your entries or on your exits?

I make more money by gearing up a good trade and getting out of a bad trade without a full loss (more about this later)

Do you use support/resistance levels?

Yes, but not in the same way everyone else uses them... I will say that they form a core part of the way I see the market, but I hardly ever draw them onto a chart... I have learnt through practice to see areas where price may do something interesting... I focus my energies on those areas and ignore most of what happens in the middle... unless I'm looking to add to a position... or take a quick profit...

do you use stops and if so, do you have a method for placing them?

I do not trade with stops... but I also do not let price take me out at a full loss... (more about this later) Most of my risk management is managed automatically by my software

Ever use trailing stops?

Yes I do, but it depends on the trade and the target that I'm aiming for... I rarely will trail a stop less than 130 pips from current price... (but again more about this later)

any "light bulb" moments that changed the way you trade?

Too MANY!

Don't add to losing positions rather take the loss and move on...
Much more can be accomplished through size than it can through distance...
Size + Distance = Your dreams and aspirations realized
Price makes but one Highest High and one Lowest Low
Breakout trades are where the real money is made, but few can trade them successfully
Price moves from Supply to Demand
The market is manipulated and if you can think like a manipulator or a stop hunter you can profit from the mistakes of others
Don't chase price... let it come to you - a large part of my trading involves limit orders (market orders are for chumps - get your own price!)

Somethings others have said that resonate with me... and I'm paraphrasing

The market is the only game in town where the pitcher throws pitches all day and you can never strike out for not taking a swing (Buffet - Meaning that you can get YOUR PRICE and smack a home run and leave the rest)

Real investing is boring if its exciting then you probably not making any money anyway - (Soros)

There is nothing new on Wall Street or in stock speculation - (Livermore)

TRY FIND THE SUPPLY AND THE DEMAND ON THIS CHART

Your posted attempts will be appreciated

 

[FxJalarupa]

https://www.bis.org/publ/qtrpdf/r_qt1603.pdf

Worthwhile read for anyone who is serious about trading Fx and understanding global macro

 

[Papsak]

Cheers man - will be doing that in the morning. Lounging on the couch - tore my calf muscle playing tennis and my leg needs to be horizontal - and this feels like more a sitting at my desk activity! I think a bit of research is need. But in your sasol example, would there not be an area of supply demand between 2009 - 2011 with a mid point @ around 28000?

Anyway - will post results in the morning.

 

[FxJalarupa]

would there not be an area of supply demand between 2009 - 2011 with a mid point @ around 28000?

Precisely! With confirmation Mid 2011... Price pulled back into demand and bid away.. thats a massive level... if price ever ends up at around R300 again you can buy with heavy hands!

Remember also that its kind of like Support and Resistance but more like a zone than that... I've learnt that the pursuit of accuracy in any market could be costly... best to have a level and see what happens in and out of your level and trade that price action accordingly than trying to catch a falling knife, unless you think you that good

 

[Papsak]

Precisely! With confirmation Mid 2011... Price pulled back into demand and bid away.. thats a massive level... if price ever ends up at around R300 again you can buy with heavy hands!

Remember also that its kind of like Support and Resistance but more like a zone than that... I've learnt that the pursuit of accuracy in any market could be costly... best to have a level and see what happens in and out of your level and trade that price action accordingly than trying to catch a falling knife, unless you think you that good

Great stuff! Sort of on the right track then.

Will upload the other in the morning.

 

[Papsak]

BTW reading that report. I have always found economics "heavy" and hard to read, where as I always enjoyed reading about companies. Basically, I read the FM cover to cover besides arts, health and and economic based articles. Will see. Maybe as there is a point, I might have better luck with them

 

[FxJalarupa]

If you don't understand anything or want to chat about anything in the BIS report, just ask...

 

[Papsak]

Cheers. A while ago I was thinking about doing a basic economic course on Alison - didn't get round to it but it might be useful.

Another question if you do not mind.

How many trading pairs do you keep an eye on?

Do you only look at forex or do you also look at any indices or commodities as well?

I am thinking that initially, I should only study and concentrate on a few - say 4 - 6 instruments. Basically, study less instruments, but study them better. Makes sense?