Tuesday, December 11, 2012

Currency Trading

I got into currency trading earlier this year after getting fed up with my employer's policies regarding equity trading. In order to make a stock trade, I must navigate through an hour's worth of requests and approvals through three or four layers of corporate goodness. After getting approval, I cannot re-trade the security for 30 days. I'm all for long-term investing, but being trapped in a loser for 30 days is bogus.

Anyhow, I needed an outlet for my desire to trade and found currency trading required no approvals and is actually beneficial to making country-specific calls in my stock-picking. I opened an account at Forex.com and couldn't be happier.

The basics:
1) For every $200 in your account, you can borrow $9,800. So you are investing with 50x leverage.
2) The cost to trade is fairly small. Forex.com takes the bid/ask spread as their commission, so I basically pay nothing to trade.
3) Making a trade is simple. I can trade online, on my phone, or on my iPad.

My results so far:
Mixed. I made some good trades early on but got bit by the desire to trade more and lost quite a bit. I've since refined my strategy to be less about making a lot of intraday trades and more about making weekly/monthly trades. At 50x leverage, it's sort of scary to see the swings in equity value on a trade, but you learn to stomach the losses. Gains and losses are magnified, so controlling risk and sticking to a strategy are very important.

My stock portfolio has benefited from less trading and more focus on long-term opportunities. I've made much more in my stock portfolio than I've lost in my currency portfolio and have gained a lot of valuable knowledge and experience that will help me through the years. They say you have to lose money to truly learn a lesson in the investing/trading business, so I'm taking my losses/lessons to heart.

1 comment:

  1. I must say, you’ve ran toward a very interesting community this time. The foreign exchange market can be just as complicated though. But you’re doing well. Keep identifying your goals and it would make a huge difference for your survival. After the goals, of course, you have to pick the trading style fit for those. Good fortune, Headed Home!