Next Steps

[Tinnaz369]

So I posted here a week or two ago, with a very unclear image in my head. After some positive responses I have taken some steps forward and feel it is starting to come together.

Firstly I have decided I would like to focus on the hugely popular Forex market, this was a long and difficult decision. With no commissions, low transaction costs, 24 hour markets and the opportunity to trade with a small lot size are appealing to me.

I have decided to focus on Day Trading for now, although I am flexible in this and still think Swing Trading could be a viable option for me and my personality.

I'm not sure how many pairs I should focus on?
I am thinking the best pairs for me to trade are EUR/USD and GBP/USD, they are the most traded pairs so are probably a good start for any trader. I am however seriously considering GBP/PLN, it is a little more volatile than the other markets, but my partner is Polish, I spend a lot of time in Poland and think I can get a good idea of where that pair should be trending. Opinions please.

I have opened a practice account with Oanda, it was simple to set up, they won a number of awards last year, so seem a safe bet.

To further my education, I have began reading Market Wizards and have some of the other books in my queue. I am currently working my way through The School Of Pipsology on Babypips.com (a great resource). I will move over to the Forex section in the next few posts and begin to post some analysis which I hope will be dissected by other users.

My focus is to practice trade for the coming year, I will have neither the experience or capital to open a real account just now. I hope to record as much of this information as possible in order to build some sort of portfolio I can take with me to show potential employers next year.

Any advice is always appreciated, thanks for reading.

 

[Tinnaz369]

Well the response has been limited, so I have continued to do my own research and can already see I have made some mistakes.

Firstly EUR/USD and GBP/USD are positively correlated, they tend to trade similarly, so trading both is almost pointless and can result in doubling your risk if you back each currency the same way. They tend to trend the same. So one of them may as well go from my list. Is this a correct assumption?

GBP/PLN is exotic, I already knew that and it should be used by more experience traders, so for now I will just keep an eye on this one, and maybe start paper trading it in a couple of months. I will be living in Poland for a few months soon so maybe I can get a good idea of the Fundamentals then.

Nobody commented on how many currencies I should be looking at, of course I know it varies for each trader. Basically I am asking is better to really focus on 1-4 pairs and try to get a strong understanding of the market or should I look at more and try to look for charts which look to have potential. I guess in time it is something I have to decide for myself. But I would love to learn from those who are successful, how did you do it?

 

[tomorton]

Firstly EUR/USD and GBP/USD are positively correlated, they tend to trade similarly, so trading both is almost pointless and can result in doubling your risk if you back each currency the same way. They tend to trend the same. So one of them may as well go from my list. Is this a correct assumption?

Yes, they're pretty close in TA terms, and as the EU is the UK's largest trading partner and vice versa I think, it makes fundamental sense that we move in lock-step. A long on each would in a sense be a double trade as both would be a bearish view on the USD.

I usually have only a handful of trades open at any time (currently 1 only) but am getting a sense of market sentiment through very basic TA on a much larger range. I am looking for trends and have a set of essential characterisitics I must see before I would open a trade on a pair. Summing where these are currently showing this allows me to tally how many buys, sells and 'waits' I have each weekend for each major currency. Currently, this (idiosynchratic) approach gives me 5 buys, 3 waits and 2 sells on the EUR, but 6 buys, 3 waits and no sells on the GBP: in addition, GBP/EUR is looking bullish, so this favours the bias towards the pound, though its stuck in a range so a buy here would be speculative. I hope this matches reality pretty well.

Over shorter and shorter periods of course, you will often find that correlated pairs move out of synch so if you're into that it could still be worth watching both.

 

[Tinnaz369]

For now I think I will extend my list to this:

- GBP/USD - 2nd most traded, liquidity

- AUD/USD - Commodity currency, export driven economies, should diversify my portfolio
- NZD/USD - '' ''
- Gold - slightly more volatile profit potential, however more risk.
- Silver - '' ''

- GBP/AUD - Cross, opportunities outside USD, diversification
- GBP/NZD - '' ''
- GBP/JPY - '' ''

- GBP/PLN - Exotic, profit potential, should have good fundamental understanding, but risky, take care.


Of course these are not set in stone, they will be on my watch list, I will try to learn more about them and hopefully begin to understand their movements. Hopefully one day they will become clearer to me and I will be able to trade them. Comments appreciated.

 

[Tinnaz369]

Over shorter and shorter periods of course, you will often find that correlated pairs move out of synch so if you're into that it could still be worth watching both.

Hey tom, thanks for the response.

So it would be worth watching both, then choosing which I prefer to trade at the time. Just because I am watching both doesn't mean I have to trade both. Since both follow a similar trend it would mean that before entering a trade one has the choice of charts and can go in on which is most suited to their style, this could change with each trade.
Additionally, when they are moving out of synch on the short term it could provide further opportunities to grab some pips.

 

[Splitlink]

I watch 4 pairs regularly plus a couple of indices but once I have decided on the one to follow for the day, I don't look at the others, anymore. The reason for this is that I am too old, now, to have the concentration needed for multiple pair trading.

There are two posters that I use to help me with this, one is Captain Currency on the 3 Ducks thread. The other is Dentist, who is a point and figure expert, who you will find, easily, every day. They won't tell how to trade their suggestions--that is your business.

 

[Tinnaz369]

I watch 4 pairs regularly plus a couple of indices but once I have decided on the one to follow for the day, I don't look at the others, anymore. The reason for this is that I am too old, now, to have the concentration needed for multiple pair trading.

There are two posters that I use to help me with this, one is Captain Currency on the 3 Ducks thread. The other is Dentist, who is a point and figure expert, who you will find, easily, every day. They won't tell how to trade their suggestions--that is your business.

Hey, well for now age is not a concern of mine and I do think I have the concentration and ability to trade multiple pairs per day. But I guess that is something I should work towards, maybe focussing one per day is a good idea to start out.

The 3 Ducks Thread is one I have previously followed (I wanted to get into trading a few years ago, but quickly realised I was too immature and not quite ready yet). Now I am having another crack at it and this is a thread I have already decided I will take a close look at, thanks for the reminder!

 

[tomorton]

I could have added my weekly round-up gives me the following biases on the major currencies - this is just FYI and might mean very little but personally I don't want to be long JPY or NZD right now -
AUD - Bearish
CAD - Unclear
CHF - Bullish
EUR - Unclear
GBP - Bullish
JPY - Bearish
NZD - Very bearish
USD - Cautious

 

[NVP]

hey there

just bouncing off of my recent comments at Captain currencies 3 duck thread that you have followed before .....................heres my ideas for longer term bias at moment

N

GBP .......buy
USD ............Sell
NZD........Sell

other G8 currencies are tooo neutral to call at moment but EUR, CAD and AUD are marginally bearish with yen and CAD on the bull side .........



N

 

[Tinnaz369]

NVP, Tom

Thanks guys, those are great to get me started. I read your posts on Captain Currency earlier this morning NVP, your charts look so....informative !

I will use this information to help me have a better look at the charts this week.
Thanks again!