I can hardly wait. In another five hours, approximately, the Forex currency trading markets will start another week of operation.
Will my open trades bust my account? Sure, it's only a SuperMini, but I'd rather not simply throw my money away. On the other hand, perhaps the EURUSD will go up and I'll end up looking like a hero? The suspense is awesome...
I've been doing my best to learn more about Forex trading, reading up at Babypips.com, as mentioned in a previous post. Quite honestly, I'd love to find out that I have the discipline and the ability to be a full time trader. Nothing would please me more than to give up the day job.
Okay, I'm rambling, but if I do blow up my account, I'll fund it again with another $100 deposit. I've only been trading for about half a week now, and I've learned first hand about the importances of stop orders, trailing limits as well as paying attention to when exactly the markets are open.
Hey, I'm sure I can find other ways to screw up, but that is how you learn! Or, on the other hand, if you are reading along, maybe you can learn from a few of my mistakes and save yourself from some costly early mistakes. Tick, tick, tick. Can I trade yet?
I should also mention that I am interested in having multiple simultaneous accounts. You see, while I am day trading right now, I am also interested in trading over longer periods of time. Both types of trading involve different risks and potentially a different level of capitalization to remain in the market. Also, the trading platform I am using will close out a position if the opposite trade is made, which could close out what was supposed to be a long term position.Look, only 4 hours and 45 minutes remaining until trading time...
Thursday, April 24, 2008
Exchange Rates Differ From Stocks
There is an important difference between Forex instruments and stocks or bonds. The nature of this difference requires that you adjust your thinking.
When you buy a stock, the presumption is that with inflation or growth that the stock will eventually always climb. That, at least, is the goal.
Trading on exchange rates is a different ballgame. The rate of exchange is a ratio representing the relative value of the two currencies. It simply is not possible to expect one currency to appreciate relative to another indefinitely. For example, if the exchange rate between two currencies widened a lot then trade opportunities would be created to adjust this imbalance.
Obviously, with a plethora of fundamental variables and widespread speculation it will be difficult to determine the range, but you can theoretically consider Forex instruments to be variable between some unknown high and low exchange rate. Personally, I would prefer to rotate my charts 90 degrees, label each side with the currency in question, and then have the line move from left to right as the relative exchange rate adjusts.
At the same time, I'd like it if instruments were mirror imaged. By this, I mean that we should not be limited to buying and selling EURUSD, for example, but instead that we should be able to buy and sell both EURUSD and USDEUR. Yes, I know all of this is semantics, and it would require work for the market makers to either support this or have the trading systems perform on the fly translations, but it would make things less susceptible to common misconceptions.
Or so I think today. With a bit of time I'm sure I'll buy into the current way things are done if for no other reason that it is the way it has always been done. Also, at that point, why should newcomers have it easier than I did?
When you buy a stock, the presumption is that with inflation or growth that the stock will eventually always climb. That, at least, is the goal.
Trading on exchange rates is a different ballgame. The rate of exchange is a ratio representing the relative value of the two currencies. It simply is not possible to expect one currency to appreciate relative to another indefinitely. For example, if the exchange rate between two currencies widened a lot then trade opportunities would be created to adjust this imbalance.
Obviously, with a plethora of fundamental variables and widespread speculation it will be difficult to determine the range, but you can theoretically consider Forex instruments to be variable between some unknown high and low exchange rate. Personally, I would prefer to rotate my charts 90 degrees, label each side with the currency in question, and then have the line move from left to right as the relative exchange rate adjusts.
At the same time, I'd like it if instruments were mirror imaged. By this, I mean that we should not be limited to buying and selling EURUSD, for example, but instead that we should be able to buy and sell both EURUSD and USDEUR. Yes, I know all of this is semantics, and it would require work for the market makers to either support this or have the trading systems perform on the fly translations, but it would make things less susceptible to common misconceptions.
Or so I think today. With a bit of time I'm sure I'll buy into the current way things are done if for no other reason that it is the way it has always been done. Also, at that point, why should newcomers have it easier than I did?
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