Ok, I decided to dip my toe back into the Forex markets after a pretty successful EURUSD short. Mind you, my account at Oanda.com is about $146 dollars and I do this ‘trading’ as mostly a brain tease. Still, I wanted to get this off my chest.
When I ran my original $100 Forex experiment at my old blog I fell victim to a strong trending market and thought that my ‘machine learning’ models were awesome when in fact they utter junk. I was experiencing the Dunning-Kruger effect and over estimated experience and knowledge in the Forex markets and AI.
I used to trade breakouts overnight, I thought it was a ‘piece of cake’ money making scheme but it only worked because several pairs were in strong trending markets. I took my initial $100 and turned it into $150 over the year. A gross 50% rate of return! I even analyzed my expectancy and everything was positive. I was lucky and made money.
Then 2007-2008 happened and all volatility dried up. My breakout models broke down and my $100 Forex experiment imploded. I took a terrible USDXAU trade that took my $150 down to $34 and then I made more bad trades and final ignored the account until last year.
I added $100 the account in 2018 and promptly lost money trying to trade my old methods. I stopped doing that and took a few weeks to think about things. I realized that the support and resistance areas are key. Using candlesticks, small trade sizes and no stops, I was able to take on enough risk to ride out daily market fluctuations and make some profit.
Sure my Risk to Reward ratio is all messed up, and I need to work on this going forward, but it feels like I’m going in the right direction.
I also learned that if I can find a stop to get long or short depending on what the prevailing carry trade is, I can also pick up some $ for holding a currency pair. Take for example $USDCHF below. The daily shows a nice spot to get long as the USDCHF pair has a nice 1.8% carry rate for longs.
The weekly chart looks good for being long, but only within a certain range on the chart. I’m thinking the USDCHF pair will rise to the 1.0060 level and then do something else. Maybe.
Ultimately, who really knows but these s/r lines are what other traders look at as well and if I can ride up to it and close out a trade for a profit, then so be it.
Yes I know I should let my winners run and my cut my losers but Forex is so crazy. You have to take on way more risk than you’d like because of the all the stop hunting and so to compensate you have to make small trades.
Right now I’m long USDCHF at 0.9941 and short the EURUSD at 1.1270.