Why I still prefer hedging...

Most of you might heard terms called Hedge Fund. I like the word 'hedge'. I have been testing a lot of methods and try to beat the market. The result is not very promising. I believe most of the hedge fund manager strategies and philosophy: "You will never get right all the time!, Mr. Market is always right!". Finally, I go back to my most powerful method which suit my style. In my previous article, I wrote about trading Forex is based on personal style and I strongly prove the statement is 100% right after I went through lot of experiments.
When you trade Forex Market, you must feel comfortable after you place your trade. Once you start to feel worry, your portfolio will start to screw up. You will be making mistake again and again. Few major mistakes will make you feel uneasy and your brain start to malfunction. I advise you to stop immediately and take a rest at least for a day.
Well, I feel very comfortable when I hedge my position, I don't have to worry where the market is heading. I can go out and have a cup of Cappuccino at Starbucks and chat with my business partners on other deals. I don't have to stare at the monitor for the whole day. I only check my position once or twice a day. If I go for vacation, I can hedge it for a longer term or just close all my positions. The most beatiful things is; the return is much higher if compare to I sit infront of the screen. That is my style of trading. Who say you cannot sleep well if you trade Forex?

Forex Party

Bulls is back to stock market! Is the underlying fundamental support the market frenzy? I think the financial media mogul such as CNBC and Bloomberg really doing a good job create the party frenzy and attract a lot of retail investors. To most of the investors, the only way to make money is not miss the train and hope can join the party. Most of them simply "follow" the herd instinct and hoping for fast bucks.
I don't want to touch on stock market since my blog is focus on Forex Market. In Forex market, you are not worry when the music will stop in the party. The opportunities to join the party (make money) is always open as long as you follow the right music. However, most of the FX participants stop at the middle of the party  by choosing the wrong music. Based on my experiment in Forex Lab in my last article, I follow all type of music and try it out. If you want to continue to join the party, you need to follow the tune of the music. If you dance wild while the party is playing sentimental music, you are out. If you dance slow while the music is wild, you are out too. If you are a successful FX trader and have been surviving the party for more than 3 years, you know what I mean.
Yesterday, I read part of the Market Wizard which focus on the FX trader. Surprisingly, I discover if you are really big (I mean you have hundred billions dollar to join Forex Party). You can be the deejay of the party.

Forex Leverage: A Double-Edged Sword

What attract most traders come to Forex market is a very unique word: Leverage. Most of the traders are abusing this word and resulting 95% lose money. In the other hand, 5% of traders will use this magic word to maximize the return.

Human is the creature full of emotion. Emotional such as greed drive people come in to Forex and seek for high return. Most of the traders like to use leverage when they "think" the market is favor for them. My personal experience, if you 'think' the market is always with your site, you are looking for trouble. But 'Thinking' right with Mr. Market may resulting a huge profit if it comes with other concrete variables.

How does leverage work? Simple. If you have USD10,000 and open a forex account with ABC Bank which offer 100:1, it will give you 100xUSD10,000=USD1,000,000 to trade. Let say, you 'think' EUR/USD will move from 1.4000 t0 1.3500 since everyone like USD. Woola..you are right, after 2 weeks, you achieve your target. You will earn 0.0500(1.4000-1.3500)XUSD1,000,000=USD50,000. With capital USD10,000 you earn 5X in 2 weeks. Amazing return! Those treat Forex market as Casino like this style a lot.

Now, if suddenly some big players sell billions of USD against EUR. Ohh.....let see what happen. Since you are very confidence USD will appreciate and not willing to put stop loss or hedge it to avoid market pull back. Once the market move against you only 0.0100 (1.4100-1.4000), you account is totally wipe out!!!

I strongly suggest those who 'think' they are always right don't invest in Forex. Mr. Market is always right, not you!

Experiment In "Forex" Lab.

For the last 2 weeks, I "locked" myself in the "Forex Lab" and doing all kind of experiment on 6 type of major pairs currency. As Non Farm Payroll hit last Friday, USD/JPY spikes more than 200 pips. At the time of my writing, it shoot down more then 150 pips. It shows how volatile the market is. The same volatility shows in other pairs, the only difference is the magnitude and time frames.

Now (Tuesday 330pm EST), the market is waiting for the decisions of Fed on the sign of US interest rate which will be announced tomorrow; Wednesday 215pm EST. All the events stated above consider the crucial elements that move the forex market. Anyway, expectation always collide with reality. In fact expectation shows the "real" market movement which is being controlled by the participants' psychology. The final truth might drive the market in both way or remain sideways(which is unlikely in this volatile market).

To create hypothesis in this vicious market, it is almost impossible. The only way to beat the market is stick to the strong guidelines. As mentioned in my early articles, those who wish to find the Holy Grail in Forex market will dig the grave with their own teeth.