Paper Trade A System

April 6, 2007 | By | Reply More

This contributor to this website is dedicated to investing in precious metals and other commodities, but confesses to a weakness, I like to have a little gamble. Years of experience have taught me that if I must speculate there are three golden rules:

  1. Get the gamble over and done with quickly. See a result within 4 hours maximum for peace of mind.
  2. Paper trade a system until satisfied it will show a profit more often than a loss over a reasonable time span and then stick with it.
  3. Never be tempted to increase or double up bets if on that inevitable losing streak and keep potential loss on each bet to 10 % of your gambling bank.

 

As it is a holiday weekend I thought my readers might be interested in a Forex play I have been using with success for quite a time.

It is very easy and usually over and done with in a few minutes although occasionally will go on much longer in which case I will, more often than not, bail out whether my profit target has been hit or even if I am showing a loss.

On the first Friday of every month the US government issues the non-farm payroll figures at 0830 EST sharp, and yes, in case you ask, this data was duly made public today, Good Friday, and a public holiday in the Christian world.

This did not stop the forex markets trading world wide with a seemingly undiminished frenzy of activity.

Here’s the play: –

I go short for the same amount on each of two currency pairs, one of which is always the USD/CHF (Swiss franc) and the other either the GBP/USD (British pound) or the EUR/USD, depending on the mood I’m in.

Timing is important so carry out the trades between 5 and 10 minutes before the announcement, leave it later and the spreads will widen and you may not get on both with stops in place in time and that can make you very vulnerable.

I like to put stop losses of 25 pips on each and unless I feel like watching the screen for a while I will put a limit of 45-50 pips on each.

More often than not the scenario will play out with one pair hitting its stop while the other pair moves up and will hit or approach the buy limit.

Today the trade worked out perfectly with the stop loss being hit on the USD/CHF at 6 seconds past 0830 and the limit executed on the EUR/USD at 0832.35.

Two and a half minutes hardly gave me time to bite my nails and I had hit my profit target with 20 pips in the bank.

Sometimes I will make the same play when there are other government announcements but the non-farm payroll announcement is the most likely of all to result in sharp opposing spikes for these pairs.

As usual please do not take my word for it, check it out and, if you like it, paper trade for a while before gently plunging in, after all it should only a bit of fun.

Have a great holiday, we will be back next week with some serious takes on gold, where the silver market is heading and why the uranium/nuclear play looks set to put money in our pockets for years to come.

 

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