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Friday, 13 July 2007

Fun with Forex

I stopped my posts about day trading Forex as I'd given up in disgust after losing $3,000 fairly rapidly. The last trade was especially annoying as I'd gone long the AUD at around 83.15c US and had been liquidated when the AUD dropped to below 82.70c on a sharp dip. It only traded a few points below the liquidation price before bouncing back up to above 83c, and since then has trended strongly upward to over 86c.

Since my original plan had been to buy the AUD vs USD when it was around 82c, but had lost my capital trying to day trade short runs up and down, it was disappointing to end up sitting on the sidelines with less than $250 in my trading account and not having enough margin to benefit from the strength of the AUD.

I finally decided to transfer another (final) $1000 into my trading account and take a small ($25,000) long position on the AUD. I figured that since I have around US$75,000 of stock in my "little book that beats the market" portfolio that is unhedged, I can't really loose by doing this. If the AUD does continue to rise against the USD the gains from my Forex trading will offset the currency losses from my US stock portfolio and vice versa. Although the effective interest rate on keeping a position open is around 7%pa the current run up in the AUD is so strong that the interest cost is negligible.

BTW - with the AUD around US$0.868 my net worth is breaking through one million in USD. ;)

Copyright Enough Wealth 2007


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