Category Archives: The Forex Femme Fatale

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Lessons Learned the Hard Way

I recently learned two very valuable lessons about forex trading and I’d like to share them with you.Trading Forex on garbage day

First, let me tell you how I learned about slippage.  It seems I didn’t pay enough attention to something known in the Forex world as “slippage” which is defined as the “negative pip value between where a stop loss order becomes a market order and where that market order may be filled.”

You can see where this is going already, but let me set the stage…

Last week, I entered my regular $5,000 buy EUR/USD trade on the trading platform of choice.  I expected some data to come out that would appreciate the Euro (of course, if it came out the way I wanted it to, it would).  I watched the trade closely as it approached the time of data release, and saw that my pair was moving into green (profitable) territory.  Yeah!

Then, just a minute before the data release, someone knocked on my gate and I went out to see who it was (it was the garbage men, since I know you really want to know).  And, of course, since I was the only one home I had to let them in to take our bins out (yes, we have door-to-door garbage service here in Africa; it costs GHC 2 extra but you have to watch them like a hawk because they won’t take all of the trash unless you’re there).

Anyway, by the time I got back inside, my trade was tanking.  Big time!  Like lightening, I mouse-clicked the trade closed, and was happy to get away with a loss of only $26.50.  Whew.  Crisis averted.

At least, that’s what I thought.

Fast forward a few days and I have another trade open ($5,000 selling NZD/CHF, if you’re curious – I’m trying to branch out beyond my comfort zone).  I let this one flip back and forth for a while, certain as I was that the safe haven draw of the Swiss Franc would bring the pair around my way.  Which it eventually did, and I closed it out when I was ahead a bit (I’m not too greedy).

I was curious to see my account balance, but because I was using the Java-based platform that isn’t really clear.  On the downloadable applet, it’s always right at the bottom of the screen, so you know what you’re margin is and how much money you’ve got to play with.  I had to look around to find the account tab on the site, but find it I eventually did, much to my chagrin.

Account balance:  $51.50.

Let me tell you I was shocked, floored, totally blown away by this.  I don’t know it to the penny, but I have a pretty good idea how much money I’ve got to play with and I had expected to see that balance closer to $75, give or take a few bucks.  (Stop sniggering – no one ever said I was a big spender, and up until recently, I have made this original $100 last a long, long time.)

To say I was confused would be an understatement.  Why?  That doesn’t make sense, I thought.  I clearly recall the feeling of relief, closing that trade and knowing that I would only lose $26.50.  I remember later on going to see how EUR/USD was faring, and thanking my lucky stars that I got out when I did.

Ha!

This is how I learned my lesson and discovered what “slippage” is and what “slippage” does.  Apparently, my cancel order was actually a “request” to cancel order, and it was actually executed a few moments after the request.  How long was the delay?  Don’t know exactly, but certainly long enough.

Here I was thinking I was only down $26.50, but by the time that close order was actually executed – and given the extreme volatility that day – that trade lost another 40 or so pips.  Slippage?  Heck, $49 ain’t slippage.  That’s a head-over-heels fall.

Oh, second lesson learned?  Never trade on garbage day.

Trading Without a Net

Forex BlackoutWe’d had a rough week here in deepest darkest Africa.  Without warning, but with alarming unfortunate regularity, we’ve had what we call “lights off” incidences.  Boom!  And the power is off.  And not just me but the entire neighborhood, sometimes even the entire city, for hours and hours at a go.  It makes living here (and trying to work here) a challenge, to say the least.

When lights go off and you’ve got freelance work (a.k.a. my bread-and-butter) that has to be done, you turn on your generator (if you have one) or hightail it to an internet café (if you don’t).  I don’t have a generator, so it’s a matter of me getting out of my pajamas (we freelancers live in pajamas, you know), then having a shower and getting dressed (in wrinkled clothes, of course), hopping in a taxi and driving across town to a reliable café.

That is if the lights off occurs early in the day.  On this particular day, coincidentally the day when I penned the “Waiting is the hardest part” article, I had already finished all my writing assignments, so I decided to “play” a little.  (And why I decided to open a trade after the lights off week from heck, I’ll never know.  Oh yeah, it’s because I’m insane.)  I opened a trade and made a decision – I was going to let it run for a loss for a while because I was waiting for some data that I just knew was going to bode well for my decision.

I had originally set up a stop… that I kept revising and pushing further back, at one point I was down more than $30.  I cancelled the stop.  I was that confident (remember, I’m insane).  As it got within 10 minutes of the data release my numbers improved – I was down $10, then $7.50, then $5.  I was so excited to think I might actually have (educated) guessed right this time.  Then Boom!  Lights off!

No power.  No internet.  No stop.

No stop!

I turned laptop #2 on (since laptop #1 has a dead, never-to-be-revived-again, battery) and hooked my cell phone up to it to use it as a modem.

No good.  The connection was so bad the java-based trading applet wouldn’t load.

I looked at the clock.  It was after the data release.  I had no idea what was going on with my open trade.  I could be losing big time.

I know!  I called my dear, sweet, old, technology-challenged mom in the U.S. (she’s the only one who I know will be at home) figuring I could walk her through the login procedures and have her close my trade.

No good.  Mom’s computer had just crashed again (I am convinced it’s because she’s an AOL subscriber, but let me not go there now).  Maybe my brother could help?  Oh wait, maybe not, he’s got a construction job today.  My sister?  No, at the office – she won’t be able to log in.

I know!  My Forex sponsor!  He’ll do it!  It’s his money, after all.  I quickly send him an SOS.  Fifteen mind-wracking minutes later I get a response.

Oy!  No good.  Of all days for his wife to give birth it has to be then?  Sigh.  “No worries, my friend,” I email him back.  “Congratulations!”

Just as I hit the send message button on my cell phone, the power comes back on (I truly believe it was my “reward” for reacting so maturely and not throwing my laptop across the room).

Achingly slow, the trading application finally loads.  I AM AHEAD $25!!!!  Whoot! Whoot!  I close out the trade.

I want to say I learned a valuable lesson from that, but I didn’t.  Even as I’m writing this I’ve got a stop-less, limit-less trade open.  I should know better.  I do know better.  I must be insane.

 

Waiting is the Hardest Part

While I wait for my Forex tradeI like instant gratification.  Scratch that, I love instant gratification.  I like fast food, instant coffee, scratch-off lottery tickets, and instant messages.  I don’t want to wait for my food to be cooked or my coffee to perk or for numbers to be announced or for mail to arrive.  If that means I’m immature, so be it.  Patience is highly overrated anyway, I think.  It’s a virtue?  Who cares?  I’ve got plenty of other redeeming qualities.  What?  Let me ask around and I’ll get back to you.

So why I keep playing this forex trading game, I’ll never know.  Within seconds of my opening trade or bet or whatever you want to call it, I’m losing.  Every.Single.Time.  It’s got something to do with the spread.  Kind of like at a casino where the house always has the edge – only difference here is that no one is bringing me an iced beverage to slake my thirst or dull my senses.

Earlier today, though, I put in my trade and it was only a matter of a single minute before I headed into the green (on my forex trading platform, profits are a pretty green – the color of the dollar bill) and I watched, fascinated because it stayed green.  And the numbers kept moving higher and higher – still green.  After $12.50 in green territory I couldn’t stand it anymore and I closed the trade.

Then I second guessed myself, wondering how high it could have gone.  So I did something (stupid, I think now, I’ll have to let you know by how much later).  I put in an identical trade.  Only the outcome isn’t identical; how could it be?  That was then, this is now.  It’s losing, right now (my time, not yours), even as I type.

In truth, what I was and am waiting for is 2:00 pm GMT, when the European consumer confidence report comes out.  Now, I’m not in Europe, but I have friends who are European and they’re consumers (or at least live somewhere in Europe and I’m pretty sure they buy stuff).  And I’m sure that they’re as strung out by their economy as I am with mine.  I am positive that consumer confidence levels are going to plummet, which is why I put that trade in.  Of course, I’m selling Euros, buying Dollars.  (Yes, I know the Dollar is also pitiful but I’m an American, so consider it the act of an insane patriot.)

I should have waited, and put my trade in closer to the announcement time.  Now, I’ve got an hour to go and I’m dying and in the red (my forex platform uses red – the color of blood – when you’re losing).  I’m down by more than $20.  I’m afraid something may give between then and now; either my margin account (I’m at 40%), my nerves (frayed, but not yet raw) or my patience (stretched, but not yet ready to snap).  Can somebody please send the cocktail waitress over?  Now!

 

A Lesson in Limits and Stop Orders

This has been a slow trading week for me, seeing as how an internet connection is a huge necessity to forex trading.  Our internetForex stop orders and order limits service provider went AWOL for a few days, leaving me with lots of opportunities to profit from a depreciating U.S. dollar, but alas, no way to actually do it.  Oh well, that’s life here in Africa.

Finally, my internet service was restored.  And it was just in time for Big Ben’s [Bernanke] historic press conference the other day.  And that was really good, ‘cause I was absolutely certain that Ben was about to grease the wheels for more easing of the U.S. monetary policy.  And we all know what that means.  Yep, the dollar sinking even lower.

It’s 6:12 p.m. here in the GMT time zone, a mere three minutes before Ben is to take his seat so that the world can question his motives.  I start the application loading; surely three minutes is enough time.  You’d think that, but you’d be wrong.  Maybe in the developed world it’s a fast load and login, but here in the jungle?  Well, let’s just say I’d have been better off transmitting my EUR/USD (buy!) and AUD/USD (buy!) orders through old fashioned drums.

It’s 6:18 p.m. here before I’m logged in properly and Ben is already starting.  In my mind I can see the dollar dropping one pip at a time.  But I know exactly what I want and I get my two orders in pretty darn quickly, complete with stops and limits.  I don’t want to watch, I want to be surprised.  So I shut down the application, trusting my stops and limits to work, and wander into the kitchen to get dinner going.

What am I doing?  The kids’ food can wait!  I rush back to the laptop and open the application again.  Come ON!  Okay, I’m in.  Only one trade left open.  That means my stop or limit order executed.  Gulp.  Which one, which one?

Limit order!  Yeah!  Or maybe not yeah, it could have gone higher, right?  I’m only ahead $5.50 – who knows where it could have gone.  But, hey, I’m happy ‘cause that’s way better than the stop order being executed isn’t it?

One open order, and it’s EUR/USD.  I’m just in positive territory but I’m thinking it could move lots higher so I remove the limit.  I’m $6.50 ahead before it starts to backtrack.  Oops!  I watch it move lower, lower, lower – I’m back where I started.  Sigh.  Now, I’m losing, losing, losing.  Ugh.

I just know it’s going to swing back the other way, so I remove my stop order now.  Down $5.00.  Then it starts to rebound.  Slowly.  I’m staring at my computer screen for nearly 15 minutes before I move back into positive territory; I can’t keep waiting; I’m marginally ahead so I cancel the order.

As I walk back into the kitchen to try to get dinner going (again) it dawns on me.  Here I was worried about a few dollars profit ($8.00 total!) while there are starving children in Africa!

 

 

 

I’m a (Forex) Loser

I’d had enough.  I’d “played” for a few days, doing lots and lots of simple trades in the demo mode.  This is kids stuff, I think.  I canForex trading - Losing money is part of life solidify my Forex trading strategy as I go along; I’ll just keep using my “toe in the water” approach and it will be fine.  Gulp.

I sign out of demo mode and sign into “Real USD.”  Gulp again.  No more tokens, no more Monopoly money.  This is the stuff in my wallet, in my kids’ piggy banks – the stuff I work pretty darn hard for (okay, maybe I work a little hard for it).  It’s real honest-to-goodness George Washington dollar bills.

Okay, I’m in.  Deep breath.  I’m going with the old EUR/USD standby which I’ve been following very, very closely.  There are some issues over in Portugal (aren’t there always) that should give the Euro a little bit of trouble, so I’m thinking a slight drop is more than probable.  I’ve read the analysts’ insights and adhered to professional Forex trading strategies and most agree that the Euro will be hard pressed to find any support.

In for a penny, in for a pound – isn’t that the old saying?  (Or in this case ten thousand dollars!)  Against all earlier inclinations (and my gut instincts), when confronted with the choice, I opt to go higher than the minimum trade.  I am that confident.  I put in a $10,000 sell order for EUR/USD.

So much for analysts’ insight.  The Euro seems to be finding some support after all, at least in the few seconds after I’ve got my trade in.  Like a car accident that you can’t look away from, I’m compelled to watch.  And it ain’t pretty.

I’m down $3.00 (Diet Cokes are too expensive here, anyway, I think).

I’m out $10 (there goes the Chinese food for lunch – oh well, MSG probably isn’t good for me).

$15.00 (I can get away without a haircut for another month – the shaggy look is in here).

$25.00 (I’m pretty sure my daughter can squeeze into her sneakers for a while longer if she scrunches up her toes a bit).

And I’m thinking, why the heck am I still watching this?  Why isn’t my well thought out Forex trading strategy working?  Why am I not putting an end to this madness?  I can’t help but watch the numbers move back and forth, worsening, improving, worsening more.  Finally, it dawns on me – I am losing for goodness sake – and I just don’t have it in me to take anymore punishment!

Why didn’t I put a stop to it earlier?  I’ll tell you why; it’s pure gambler’s mentality – the next spin is going to give me the jackpot.  Or maybe it’s the one after that?  In any event, for now, I am a Forex loser.

 

 

Episode 2: I’m a Forex Trading Newbie

So, here I am, a newly registered Forex trader, and I’m anxious to make my first million (in any currency, I’m not picky).  First things first, I need the trading platform.  This particular broker has two trading platforms, one is Java based, and the other is downloadable.  Now, I’m all for Java, but only in a cup with lots of cream and sugar – so I opted for the downloadable version.  A few minutes later, it’s installed and I’m now the proud owner of a Forex trading platform!

Diving into Forex trading

Diving into Forex trading

From what I’ve heard, trading Forex is all about decision making, and my very first decision will be to decide whether I want the demo platform or the “real” one.  Now, I’m a “toe in the water” kind of girl, so the decision is easy.  But, if you’re a “Geronimo” type of person (i.e., the kind who cannonballs into the water regardless of the water’s frigidity), you might want to bypass the demo.

Not me, thank you very much; I’ll just wade around a bit while I adjust.  I double-click and get the demo application started; could be my internet connection, but it takes forever to load.  (Note to self:  Don’t ever have a preconceived notion of the “perfect trade” because in the minute or so it took the application to open, the market changed.)

Finally, the platform opens.  If you’ve ever seen Willie Wonka and the Chocolate Factory (the original movie) – when Mr. Wonka opens the doors to the factory and the ticket winners stand there with their mouths open – well, I’m like that.  I don’t know what to indulge in first.  I need some java (the liquid kind) so I can sit back for a few minutes and analyze the situation.  Nope.  Still overwhelmed.  I can see I’ll have to move in baby steps here.

My demo platform gives me a $100,000 to play with.  I’m thinking, heck, it’s play money – why be so stingy?  But I’ve never had $100,000 in my life, play money or otherwise – not even Monopoly money now that I think on it.

In keeping with my “toe in the water” strategy, I decide to go with the minimum amount for my Forex trading venture.  How low can I go?  In this case the minimum is $5,000 and that’s what I use for my first unofficial/official trade.  I decide that I’m going to buy EUR/USD.  Not for any particularly astute or logical reason, but just cause it’s first currency pair on the drop down list.  I now know that this is the most popular currency pair, but I didn’t know that then.

I get a pop-up box that tells me I’m “buying”, and directs me to choose my pair.  Okay.

Then, select my trade amount. Okay.  Then I have an option to let the trade go as is or to set my stop and/or limit.  Why not?  I try to set my own stop and limit rather than take the “house hint” and all I get for my effort is an error box.  Apparently, I’m too close to the actual trading price so I can’t use that limit or stop.  I’m directed to set a different limit and stop; and I do it and hit the enter button.

Oops!

All of the parameters reset with the error box (very tricky, that house).  So instead of the minimum trade I wanted, I discover (with horror) I’m trading the maximum $100,000!

I’m searching like a fiend to cancel the trade, and 15 seconds or so later, it’s done.  My first trade – a total bust, and I’m out $27 play money.

First lesson learned – trading Forex is definitely not as easy it looks.

Episode 1: Introducing The Forex Femme Fatale

I come from a long line of gamblers; twice a week bingo, Friday night poker games, Saturday afternoon visits to the race track; atForex Femme Fatale - The Forex Newbie work there were office pools for the Super Bowl, the World Series, the World Cup, this playoff, that subway series – there was always something to bet on.  When casinos started enticing adventurers with free bus rides and all you can eat buffets, you can bet I cracked open my piggy back and took a chance.  Yes, I had the gambling gene.  And even though I lost far more than I ever won, I enjoyed the noise, the sounds, the smell, the camaraderie, the commiseration and the excitement.  If I won, it was just icing on the cake.

But as I grew older, I started to consider those forms of “entertainment” as “below” me.  After all, I’m an intelligent person.  I’ve got a degree in finance (with honors!).  For many years, I’d worked in international banking organizations and well respected financial firms on Wall Street.  I read the business section of the newspaper – heck, I could write the business section of the newspaper.  The question is can I put my vast knowledge to work for me, for the greater good (i.e. my pitiable bank account)?

I think I can.  But I’ve got a problem.  I’m frugal.  Okay, okay, in truth – I’m cheap.  I hate spending/losing/wasting money without getting something in return for it.  So when I was given the chance to write about my experiences as a newbie Forex trader, with my amazingly wonderful sponsor offering to front me, I jumped at the chance.  You bet I did.

So off to Forex fantasy land I went.  And I survived.  I am living proof that you can come out again, whole, on the other side – oh, maybe not so much richer as wiser – but that’s another story.  And here it begins…

I got myself registered with a Forex broker; one that was well-known, had a good reputation, with an award winning platform (that really appealed to me – honors and awards?!  It must be good!).

I look forward to sharing my experiences with you over the next few weeks.  The profits, the losses, the emotions, and everything in between!

* This is the first of a (purely tongue-in-cheek) series written by The Forex Femme Fatale; opinions expressed therein are the author’s own and may or may not represent the views of Daily Forex.