A Trade A Day

It’s been a quiet for few weeks on the blog. I’ve been busy with other things beside trading and the market. Typically when I take long breaks, I won’t trade until I can give myself enough time to get back into a groove. I trade small or just watch. I spend most of time researching.

This week was different. For the past few weeks, I have become increasingly enamored with the Forex market. It intrigues me for several reasons.

1. Price seems to trend well.

2. The market is open 6 days a week, all day long.

3. It is traded without a volume indicator.

4. Razor thin margins/Huge leverage.

I am going to conduct a little experiment. For the next few weeks I will no longer trade futures and stocks. My focus will be totally on forex. I am going to attempt to apply my methods to the forex market and see how I fare. Results will be posted here of course.

This experiment will start on 4/5. I have to confess I have a few misgivings about forex. I wanted to open a mini account with the minimum, but I would tend to think that will limit my trading opportunities. Small moves against me will easily knock me out of my positions. So, I am in the process of evaluating what time frame will be best served by such a small account. Right now I have two in mind.

1. A Daily time frame.

The pro for a daily time frame is the spread becomes less of an issue if I am looking at larger moves. Also, I don’t have to make as many decisions, thus increasing my chances of selecting the best trade.

The con is that when I get stopped out, I’ll really get stopped out. A couple of losses could be catastrophic to a small account. I’ll need to set large stops relative to the account size. So, two or three losing trades and I’m done.

2. A 5 minute time frame.

The pro is that my losses will be limited to a few pips.

The cons is that I will need to make multiple decisions during the day. This wouldn’t be such a big issue if I didn’t spot the broker three pips when I’m looking for a 10 pip move.

It should be interesting. I have to say that I hate the word “pip” so I may end up referring to them here as points. I know that’s not the correct verbiage, but “pip” sounds stupid. There, I said it.

“Why are you starting with the minimum?” Well, I’m not sure. Forex has become very popular and I tend to think it the easy of access and low cost of entry. I want to test the low cost of entry. Can one successfully trade forex on $300? We’ll see.

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