Monday, 22 October 2007

Death of a Day Trader

Some initial setbacks when I started trading Forex (AUD vs USD) using Contracts for Difference (CFDs) saw my CMC account balance drop from $4,000 down to $1,200. A period of more careful trading during August and September saw me slowly claw back to around $2,400 and I had some hope of getting back to break-even by the end of the year. Then a sudden spike in the USD while I had a short USD$100,000 position open overnight saw my account balance plunge back down to $1,400. I didn't trade for a couple of weeks until the volatility seemed to have reduced and a general uptrend in the AUD seemed to have re-establised itself. For a while going long the AUD provided some gains, and I'd got back to an account balance of $2,400 briefly on Thursday. Then, on friday night the AUD plunged again and this morning a further decline in the Aussie dollar saw my position closed out by CMC Markets. My account balance is now down to only $190, too small to even make any further trades (unless I tipped more funds into my account), so I've decided to call it quits with trading forex. While I enjoyed trading it was too expensive a hobby, and 'paper' trading is more boring than watching grass grow. I may use the CMC account to trade S&P index CFDs or even to short Australian stocks that I have long positions in if I what to protect gains without having to sell the stock and realise capital gains tax liabilities. Losing nearly $4,000 dabbling at currency trading was an expensive lesson, but at least I was a faster learner than Debt Kid!



Copyright Enough Wealth 2007


8 comments:

Anonymous said...

CMC Markets is a Bucket shop. They manipulate their fx/cfds quotes to wipe out traders.

Rocky said...

Although I'm not convinced they're a bucket shop, I have had the same 'experience' as enough wealth. I started with $4k and I'm down to $2k. I think I'm getting better at controlling my risk, but who knows. Time (and money) will tell

Beanieville said...

Forex is for Fools. Join me.

enoughwealth@yahoo.com said...

Of course 24 hours later the AUD has bounced back to where I started - if I hadn't run out of margin I'd now be back up to $2000 balance, instead of a residual $200.

Then again, if I'd stayed up just an extra hour on Friday night I would have closed my position when the AUD hit .897 (which was my target at that time), and would have had $2,500 to buy in when it bottomed out yesterday around .873, in which case I'd now have made back all my trading losses and have a balance around $4000.

To me this suggests that forex trading is 99% luck and only 1% skill for most players.

Rocky said...

yeah, I was lucky enough to buy back in around 8750 and sold out for a 70 point profit on monday night. I'm long again around 8830 with my take profit at 9004. (I figure it'll run through the big figure level). I've been rolling my stop up about 70 points behind the market, so it's aroun 8910 at the moment.

enoughwealth@yahoo.com said...

That's probably the biggest mistake I made trading - I didn't have automated stop losses in place. Instead I planned on manually closing trades if I exceeded my mental stop loss position. Unfortunately I then left positions open overnight, which was not consistent with this strategy. Grrr...

Anonymous said...

Hey, my frd: U in sydney rite? Can u leave ur email address to my email pls?mine is: oliverzeno@gmail.com. Really hv sth to talk with u if u do not mind, tx! Oliver

living off dividends said...

trading futures on currencies is pretty risky if you don't know what you're doing.

i've done currency trading, but I actually traded currency, not futures. Not a lot of profit, but then I didn't lose any sleep at night either.

I'm currently long FXA (AUD currency shares ETF for US investors) - 100% exposure to AUD and you get 5%+ yield that pays out monthly.