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Forex Follies & Lessons Learned

Forex Follies & Lessons Learned. John Mason, MBA FXStreet MeetUp , Toronto June 4, 2014. My Trading Journey – John Mason. Every trader and trading story is unique R esults are individual - not repeatable, nor guaranteed. Based on factors such as:

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Forex Follies & Lessons Learned

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  1. Forex Follies &LessonsLearned John Mason, MBA FXStreetMeetUp, Toronto June 4, 2014

  2. My Trading Journey – John Mason • Every trader and trading story is unique • Results are individual - not repeatable, nor guaranteed. • Based on factors such as:  Trading Techniques  Portfolio Size  Risk Tolerance  How You Execute  Your Money Mindset

  3. My Trading Journey– John Mason Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, ad seek advice from an independent financial advisor if you have any doubts. The information, including commentary and trade ideas, provided in this presentation should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. The speaker and author is merely providing this material for your general information. The information and opinions expressed do no take into account any particular individual’s investment objectives, financial situation or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. John P. Mason, OANDA, FX Street will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in the above sources. John P. Mason, OANDA and FX street do no render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought

  4. My Trading Journey– cont’d • Strategy for 25+ years: “buy & hope” • Major losses in 2008 • Took control of my investments • A-Ha Moments: FOREX trading offered potential of Big Gains…. and Big Losses • Scary … but interesting

  5. How I Trade Markets: Mini-contracts on 12 major FOREX pairs Portfolio: Started FOREX trading with $18,500 cash (plus other investments worth $26,500) Total Investment Portfolio = $45,000 Technique: Swing/Trend trader. Seek entry & exit signals a) Break-outs: based on 3-day highs/lows b) Inside Days: When daily trading range is within trading range of previous day

  6. Techniques Break-outs: Trends based on 3-bar highs/lows

  7. Technique Inside Days: When daily trading range is within the trading range of previous day

  8. Trading Summary – One Folly I Avoided Keep written records of ALL your trades Summaries (as below) and each individual trade

  9. Portfolio Change – Nov. 2011 to May 2014

  10. Results – 497 FOREX Trades (Mini-Contracts) Overall: 60% Winners 385 winning trades (Longs: 65% winners; Shorts 55% winners) Avg P/L: About $20 per trade Best Trades: +$885 Lg AUD/JPY Oct 11-25, 2012 +$611 ShGBP/JPY May 24 - Jun 1, 2012 Worst Trades: -$742 Sh USD/CHF Jan 12-16, 2012 -$406 ShAUD/USD Dec 7 – 14, 2011

  11. FOREX Folly # 1: Not Managing Your Risk What’s Your Risk? • “Fixed Fractional” Technique: • Risk per trade is a fixed percent of your portfolio • Keeps you in the game. • I set 1% max risk on any FOREX trade based on my total portfolio’s value • Portfolio = $45,000; Max risk = $450

  12. FOREX Folly # 1: Not Managing Your Risk My Worst Trade: -$742 Sh USD/CHF Jan 12-16, 2012 I failed to follow my 1% rule. Actual risk was 1.6% Why? That’s coming up in Folly #2 So what was my lesson?.....

  13. FOREX Folly # 1: Not Managing Your Risk Lesson Learned: Calculate risk/trade BEFORE entering EVERY trade Based on prices for entry and protective stop Long entries: I buy on stop (above current market) & I attach a sell on stop Short entries: I sell on stop (below current market) & I attach a buy on stop

  14. FOREX Folly #2: Trading on Emotion • Why didn’t I manage my risk? • Emotion & Greed • Previous month P/L = +$2,000 , almost 11% • Failed to follow the rules • Took a trade with three contracts – “Sure thing” • Trade went against my position. Lost 3 X $247

  15. FOREX Folly #2: Trading on Emotion Lessons Learned: • Have a plan and strategy. Put it in writing. • Follow your rules. Learn your trading platform • Take the emotion OUT of your trading • Make trading a SYSTEM, execute it consistently • Review BEFORE trading & check your monthly results

  16. FOREX Folly #2: Trading on Emotion How I “Systemized” my FOREX Trading – Just the numbers

  17. FOREX Folly #3: Not Listening to the Market • The Market is always right. • “You can be right, or you can be rich” • There are always signals • Know what to look for • Be ready to act • Be ready to change your mind

  18. FOREX Folly #3: Not Listening to the Market Lesson Learned: How To Listen Example: Trading Non-Farm Payroll May 1-2, 2014 • Used Inside Day on USD/JPY as set-up • Ready to enter either long or short • Identified entries, stops and profit targets • Placed orders in advance • Prepared for the market to move in either direction

  19. FOREX Folly #3: Lesson Learned: Listening to the Market Inside Day Set-Up May 1 1 day before Non-Farm Payroll: What’s the market saying?

  20. FOREX Folly #3: Lesson Learned: Listening to the Market USD/JPY Daily Candlesticks (detail from previous slide) Step 1. Inside Day Set-Up May 1 1 day before Non-Farm Payroll: Ready to go Long Or Short with 2 contracts each. If long, enter at May 1 high 102.4 with 102.1 stop If short, enter at May 1 low 102.1 with 102.4 stop

  21. FOREX Folly #3: Lesson Learned: Listening to the Market USD/JPY Daily Candlesticks (detail from previous slide) Step 2. Inside Day Set-Up May 1 1 day before Non-Farm Payroll: Set 2 profit targets each for Long Or Short Longprofit targets: at 25% = 103.00 at 15% = 102.76 Short profit targets: at 15% = 101.74 at 25% = 101.50

  22. FOREX Folly #3: Lesson Learned: Listening to the Market 102.4 Long entry 102.1 Long protective stop

  23. Takeaways – To Fix the Follies • FOREX Folly # 1: Not Managing Your Risk • Calculate risk/trade BEFORE entering EVERY trade • Use entry prices and protective stops • FOREX Folly #2: Trading on Emotion • Have a written plan and strategy • Follow your rules • Take emotion OUT of your trading • Make trading a SYSTEM • Check BEFORE trading, review results monthly

  24. Takeaways – To Fix the Follies • FOREX Folly #3: Not Listening to the Market • Learn how to read the market • Get familiar with trading techniques that fit conditions • Be ready for fast action • It’s okay to get in and get out quick, or not… • If in doubt, get out! • Thank You! Questions & Comments

  25. Forex Follies &LessonsLearned John Mason, MBA FXStreetMeetUp, Toronto June 4, 2014

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