So time management is difficult....

Hello Guys and Girls,

It's been a while. I hope you've been able to sleep at night in my absence :)

All jokes aside, I do apologize for my sudden hiatus. My last post was the day after Mr Obama won his second election, and a lot has happened since then. The fiscal cliff has become a pressing issue, quantitative easing remains the most popular monetary policy amongst major central banks...and the world didn't end.

Please...let's move on now

Today however, I want to discuss a simple concept - time management!

In the last month or so I have had: Approximately 50 hours of lectures, 18 training sessions, 7 Basketball games. I go to the gym, I DJ, I study for my masters. I've had essays, reports and a LOT group coursework (who invented group coursework?? I'd like to have a word). Not to mention job applications and job assessments.  I also have a social life that I try and keep up with somewhat. I graduated (praise God). Somewhere along the line I put this blog to the back, which is one of the things I really didn't want to do when I started. Any ways, I'm back, hopefully for the last time.

Time management. It's important people! Honestly, I used to think it was an overused term but it really does help. As does prior planning. Studies have shown that your mind works more efficiently when you have less decisions to make day to day (You're going to have to take my word for that as I can't find where I obtained this information from). So with that being said, I'm making a decision from now that I will stick to with regards to this blog:

I will post a round-up of the markets and my own views once a week, every Saturday or Sunday.

In between this I will also post during the week. Not every week, but whenever possible.

To round things off, I'll bring it back to time-management again. Currency trading is really attractive for those who have busy schedules. Although I don't do it personally myself, you have the ability to open a trade and leave your computer as you wait for it to hit your target exit point/stop-loss. Some people even have systems set up where trades can be opened and then closed on their behalf when the price reaches a certain point!

I'll discuss exactly how those work in my next post.

Thank you to everyone who gives me good feedback and enquires about my blog!

Merry Christmas

Keep reading,

Jr

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So the President is who the President was...

Hi Guys and Girls,

Obama was re-elected as POTUS last night. Whilst remaining internationally popular, Obama's first term was not as successful as the U.S  public originally anticipated. The shine has worn off, Obama has lost some of his youthful vigour, and the economy has definitely seen better days. Still...

Be thankful this man doesn't run America. Seriously.

I'm not going to go into my own political views too much, but I'm happy Obama won. If Ronald Reagan reincarnated Mitt Romney would have won, we would be led back down the road to further deregulation of markets, a large reason the global economy got into the mess it was in.

What effect has this had on the market? Let's have a quick look.

The news of Obama being re-elected resulted in the dollar falling against a basket of currencies. This essentially means the dollar has become cheaper relative to other currencies. What are the reasons for this?

Speculators are now more confident that quantitative easing will continue, which was not certain under Romney. In simple economic terms, this generally means increasing the supply of money (in this case, the Federal Reserve is increasing the amount of dollars). The goal of this is to stimulate the economy. QE3 (Quantitative Easing Round 3) is expected to continue until mid 2015 at least, meaning the dollar is likely to weaken further down the line, so a lot of speculators have sold dollars in the hope of buying it in the future at a lower price.

This is basic trading strategy using fundamental information, and when a lot of people speculate on fundamental information (such as an election, or an important release from a central bank) then you often get knee-jerk reactions such as this.

So there you have it. Let's finish off with a video of Obama's basketball highlights :)

What were your views on the election?

Thanks for reading,

Jr
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So you can trade a variety of products...

Hi Guys and Girls,

Not going to be a long post today, I just thought I'd mention something that I've left out thus far.

When you are trading currency like I have described, you are undertaking what is known as 'Futures Trading'. This is basically the speculation of a price moving up and down in the future.

Did you know however, that Forex is not the only thing you can trade? Let me introduce you to COMMODITIES.

Commodities are goods you see in everyday life, things that make the world economy go round. Rather than anticipating price movements of a currency in relation to one another, with commodities you are speculating on the price movement of just that item.

Examples of commodities? Oil, gold, sugar, cocoa, soya beans and live cattle!

Is it not amazing that you can trade such items without actually ever possessing them physically? 

You use information that you have gathered to make predictions on price movements, similar to the methods you use in the currency market. Let's talk about cattle.

10 points if you remember this guy

The price of live cattle has a lot to do with demand and supply, as well as personal income. If corn or soya beans (used to feed the cattle) change in price then this will have an effect on the price of cattle. The weather can also have an impact. If its cold, cows may waste energy by trying to keep themselves warm, and thus will weigh less - which then impacts the price they are traded at. Also, if personal income increases, the demand for quality beef also increases.

It's interesting how so many forms of information are included in the price of commodities. The individual who is able to disseminate this information and use it to anticipate price movements can make a lot of money.

Look at a full list of traded commodities here (frozen concentrated orange juice?!)
Which commodities would you like to see traded?

Thanks for reading,

Jr

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So there is a thing called leverage...

Hi Guys and Girls.

If you open a trading account with £1000 of your own money, I guarantee you could get £200,000 to actually trade with.

Your face probably looks like this right now

You probably currently think I am either stupid, or one of those guys that send you an email from Nigeria claiming to be Dr. Scam-a-tunde with $400,000,000,000,000 I urgently need to transfer into your account, for which you will get to keep 15% for your troubles.

The truth is I'm not stupid, or a Nigerian scam artist (I'm actually Ghanaian). The statement I made at the start of this post is entirely true. It is called 'leverage' (not the TV show). Leverage is dangerous. It is also a good traders best friend. I'll explain how...

If you were to open an account with £1000 in it, a broker could offer you 100 times the amount in your account as leverage. This enables you to amplify your gains, but it also amplifies your losses (if you don't protect yourself).

If your broker offered you leverage of 100:1, this means that with $1000, you could open a 1 lot (1 lot = 100,000 units of currency) position USD:CHF (US Dollar:Swiss Franc). This would mean that rather than making just 10 cents per pip, you would be making 10 dollars per pip. (Recall what a pip is here).

This also however means that you can lose money a lot quicker. If the market moves 100 pips against you, your account would be wiped out. Considering the daily movement of USD:CHF is about 120-135 pips, this could happen very easily.  Rather than a 1 lot position, if the position was just 0.01 lots, 100 pips would only resulted in $10 being lost, just 1% of your account.

I've been taught that there two ways a trade can go. You can lose (small or big) or gain (small or big). By managing the size of the trade you open and setting a stop-loss, you only risk a small propotion of your account size when trading, effectively making the liklihood of a big loss very small, and allowing for small losses that don't hurt you emotionally and gains (small and big).

It's okay to lose as a trader, as long as you lose small. Understanding this is a fundamental characteristic of the successful trader.

Thanks for reading,

Jr

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So my masters started (part 2)

Hello everyone.

Continuing from my last post, there are often people who claim to be traders, but all they are doing is gambling - risking too much of their equity (money), and being led through an emotional roller-coaster as the market moves.

What made me attracted to Forex is the fact that you can protect yourself from losing more money than you are comfortable with.

Let's imagine another situation. Imagine I sold 1 lot EUR:CHF (Euros:Swiss Francs) at the exchange rate 1:0.8000. This means I have effectively exchanged 100,000 Euros for 80,000 Swiss Francs (For more clarification on how a trade works, look at the table in this post for a clear explanation of trade dynamics).

I sold 1 lot because I anticipate CHF to strengthen, which means that 1 Euro be able to obtain less Swiss Francs. If the CHF strengthened to 1:07932, and I then closed my trade, I would have made a profit of 680 Swiss Francs.

There is something important to note here - I have just risked 100,000 Euros to just make 680 Swiss Francs. This is clearly not a smart strategy, and is similar to the scenario that I described in my previous post.

The beautiful thing about Forex is that it allows you to set exactly how much equity you want to risk. I can indirectly tell my trading program to close my trade if I've lost a certain amount of money. This is called a 'stop-loss' - as it is the position at which you stop losing money in a trade. Most people say you should risk anything between 0.1% to 5% in each trade, but in my opinion it depends on your ability as a trader.

What this means is that you will never risk more money than you are comfortable with, and also it eliminates the ability for you to make huge losses. You can still lose out on trades, but your losses will not be great.

I have a confession to make. The situation I asked you to imagine was actually something that happened. Although I'm not going to discuss the strategy behind my prediction (it is quite sophisticated), I did execute the exact trade described, and I predicted that the exchange rate would fall to 0.7932. It actually fell to about 0.7934, upon which I closed the trade early.

The yellow line is my stop loss. the first red line is where I opened the trade (0.8000) on the 21st of September, the second is where I predicted the price to end up (0.7932). I was almost exactly correct, and I closed my trade around 0.7934 on the 25th of September.

So you've seen a real life profitable trade, which earned over 600 Swiss Francs.

Thanks for reading,

Jr

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So can someone get me these please?

Ahhh!

Vans Era 59 HL Wild Dove Grey - Get in my life!!

What do you think of them?

Jr

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So my masters started (part 1)

Hi Guys and Girls,

It's been two and a half weeks since I last posted **hangs head in shame**.

I'm doing my masters in Sport Management. So now I DJ, play basketball, do a masters, and study Forex trading. This has left me a bit all over the shop recently, but I've managed to work out a schedule (like a good student) and I will be posting at least twice a week now.

So where were we? I've spoken about how I've managed to turn a scam into an interest in my last two posts:

here, and here

Although I'm not trying to sell a product to anyone, I understand that people need evidence to 'buy' into the idea that trading can be profitable. So, I'm going to first discuss the importance of risk management. In part two, I'll show good risk management, and also give you an example of a profitable trade that I made. So keep reading please!

Let's make up a scenario...

When you are trading, if a trade is going against you (or in your favour) you can close it at any time to stop your loss/secure profits. Now imagine you have £1000 to your name, but you have been given some information that leads you to open up a trade. You are CERTAIN that this trade is going to be hugely profitable for you, so sure in fact that that you decide to use all of your £1000 in this trade. You hope to make an additional £1000 in this trade, which is going to pay for that holiday to Miami you and you're mandem  have been looking forward to. You've already pictured your arrival at South Beach:

If you don't know this song, what's wrong with you?! 

Now it get's interesting...

When you open your trade, the market instantly moves against you, and you are at a loss - lets say £100. Not what you expected, but you believe the market to rally in your direction, so you leave your trade open. Anyway, you've only lost £100 - so it's all good right? WRONG!

Another sudden, and significant drop, and you are instantly down £400 - you are definitely sweating now. This wasn't supposed to happen. Why is this happening? You begin to pray. Hard. Surely the market can't continue to go in the opposite direction to the one you anticipated? Having made this stupid hopeful decision, you leave the trade open longer, and yes, the market moves completely against you. You are now down £1000, and you're trade is closed. You have lost everything!

Instead of Miami with the mandem you are going to spend summer in Mitcham with Mummy.

See your life?

Sound drastic? This is actually what wipes out 90% of Forex traders before they get properly started, and it tends to scare them off for life. What they fail to realise is that they weren't trading, they were GAMBLING.

Lesson? Traders protect themselves from large losses, and make small consistent profits. Gamblers risk everything hoping for one massive pay day. All their emotion goes into the market. They are 100% invested financially and emotionally in the market.

I'll show you what a trader does in the next post.

Thanks for reading, please share my work!

Jr

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