I previously worked for 3 years a trader on a currency desk at a mid-sized hedge fund. Since the web is inundated with misinformation regarding currency trading in particular I figured it sensible to provide an institutional perspective on currency trading, discussing the major differences between retail and institutional investors. Why is it that most retail traders lose money? They are almost defined by this very fact. Conversely Bloomberg features articles like "Goldman Lost Money on Two Trading Days in First Quarter... made over $100 million on 46 days in 2nd quarter."
Additionally, instead of solely discussing how a retail investor can trade on an institutional level I am going to fund an account to back my approach. I will fund it with 10,000 USD (a figure reasonable for any retail trader).
The major key differences are as follows:
- FUNDAMENTAL RESEARCH (A clear understanding of why you're trading)
- Money Management
I will discuss these in more detail later.
I primarily stick to G7 currency pairs.
I use fundamental analysis to gain an overall perspective of the markets, focusing primarily on interest rate differentials.
I use technical analysis (support & resistance/ trend lines) to identify key areas of confluence for entry/ exit.
I target medium to large swing trades 250 to 500+ pips with a minimum risk reward ratio of 2:1.
I prefer 4H and 1D chart. I may use 1h to target entry & exit.
My initial entry size is 20% of my maximum position size. I increase the size of positive trades and let my negative trades stop out.
I will update performance monthly.
I use Ransquawk, IFR Markets, UBS FX Research, Bloomberg,
Also check out: nobrainertrades.com, Market Wizards, & The New Market Wizards by Jack D. Schwager if you haven't already.
***This thread is for informational/ educational purposes only. None of the following is meant to be a buy/ sell recommendation.
More to follow soon...