31/07/14 – Day Trading Forex – This Diary post covers the morning of 31 July 2014 where I had 3 Forex trades all on 13 minute time frames. I have put these three trades together on one post to highlight the true nature of day trading forex and the importance of trade discipline and placing stop losses. Day Trading Forex is not as easy as people like to make out. In July 2014 I have had 8 Forex trades and won 5 of them giving a NET profit of 7.05% on my trading account balance for these Forex trades – My strategies do include equity trading as well and finding a balance is critical to being a profitable trader.
To further explain my Stop Loss and risk strategy simply, I only ever risk 1% of my trading account balance on any one trade – For Example on the GBPUSD Short trade below the difference between entry point and the stop loss is 10 pips. If my account balance was $100,000 my risk would be $1000 (1% of the balance) for the trade, so my spreadbet per pip would be 1000/10, which is $100 per pip. So the most I would lose on this trade would be $1000.
To give you a real figures for July, show the proportions of wins to losses and how this 1% risk works within my strategy. I have had 24 trades close of which 17 were winners. So a win rate of 70% for the month of July (Results page updated 1st Aug) with an average win profit percentage on my trading account balance of 2.28%. Obviously I have made losses in the month but the average is simple as my stop loss discipline never wavers, it is 1% on my trading account balance. So in real terms and using simple maths for a typical 10 trade period (July figures) using all my strategies gives 7 trade wins and 3 trade losses:
7 x 2.28% = 15.96% and 3 x 1% = 3% giving a NET WIN of 15.96% – 3% = 12.96% on my trading account balance for every 10 trade period.
So for the Day Trading Forex trades this morning, see below charts and comments:
1. Day Trading Forex – EURUSD Short – First XTL Breakout Red bar formed on this 13 minute chart at 06:43 am, which is an indicator of bearish momentum and a possible breakout to the downside. As usual with this type of trade I calculated the entry point at 50% of the length of this first XTL red bar then down from the low of that same bar to 1.33853. The Stop Loss is calculated a similar way but on a Short trade added up from the high of the first XTL bar, in this case at 1.33939. The Stop BUY order triggered on the very next bar but then pulled back during the third bar at 07:09 am, then after better than expected unemployment data from Germany the EURO got a boost and stopped me out of the trade pretty much straight after the announcement. Now, if the data had been as predicated or worse i would have looked like a hero as the Bearish momentum would have continued, but I stayed the course and triggered the trade on the indicators and information at hand at that time. The first day trading forex , trade of the day to trigger and the first to close, giving a 1% loss on my trading account balance As Below
2. Day trading Forex – GBPUSD Short – First XTL Breakout Red bar formed on this 13 minute chart at 06:43 am, the same as the EURUSD trade above and again is an indicator of bearish momentum and a possible breakout to the downside. The entry point was calculated as above and was 1.69026, with the Stop Loss the same and was at 1.69128. I had closed a Successful Short trade on this pair yesterday on a 240 minute time frame, Full Trade Diary post HERE and as stated in this that post I would be looking for further Shorts on smaller timeframes . The Stop BUY order then triggered on the third bar at 07:09 am. the price became range bound until just before the European Markets open at 08:00 am GMT and then broke to the downside and fulfilled the breakout and momentum study. I wanted to take advantage of the large movement so took profits at 2.5% on my trading account balance as below. This was the second trade to close and was a tactical decision after the EURUSD loss that got stopped out just after this trade opened. So this in effect covered the losses of the first trade and would mean even if the USDJPY trade went against me, I would still be in profit for this Day Trading Forex morning’s activities. As Below
3. Day Trading Forex – USDJPY Long – The first XTL Blue bar formed on this 13 minute chart for USDJPY as 06:43 am, the same as the other two trades but in this case an indicator of possible Bullish momentum and a breakout to the upside. I had already been in this pair earlier in the week on a 60 minute chart and too profits on that trade (Trade diary post for that trade HERE ). The trade triggered on the third bar at approximately 07:09 am and did initially make good ground then at 08:40 am took a nosedive and took out my Stop Loss, giving a 1% loss on my trading account balance. This is an example of a forex pair on the opposite side of the US Dollar reacting to another, in this case the EURUSD trade above. Chart for USDJPY trade as below: