Thursday, April 13, 2006

My first entry into the market...

I have decided to focus my attention on the AUD/USD. While I research Technical Analysis I will trade using mainly fundamentals. At this stage I am developing my trading plan so I am just testing the waters and seeing how I go.

Trade Buy AUD/USD

Time: 13/04/06 1:47 GMT

Price: 0.7293

Stop Loss: 0.7270

Take Profit: 0.7315

Number of Lots: 4

Profit loss per pip: USD $40

Max potential loss: USD $920

Max Potential Gain: USD $880

I think that I have to take a serious look at my risk reward ratio. The reason that my stop loss is greater then my potential profit is that I don’t won’t my position to get stopped out by market volatility.

I invested four lots as I am very confident that AUD will appreciate given high commodity prices and the widespread thought among analysts of a 25 basis point interest rate hike next time the reserve bank meets. I think the dollar is under priced. Investing four lots was probably excessive given I only have USD $5000 in my demo account.

Below shows the 15 minute chart at the time I opened my position:

I closed out my position as I don’t think it would reach my take profit before US market opened. Profit USD $320 8 pips. Parting thoughts: A fairly good entry, poor exit and poor money management. Risk level of trade high. It is all a learning experience though. Below image of closed position:

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