Oh no.. the maximum amount of time that I spend on a trade is 1-5 minutes. Let me give you an example:
Canadian CPI (Consumer price index) is expected to be 0.6% and the exact numbers will come out at 8.30 am EST. Now if the CPI is >0.6%.. the CAD (canadian dollar) will go up against the USD. If the CPI numbers are low.. then the CAD goes down against the USd.. remember, all this happens really fast. If the CPI comes out to exactly as estimated, then I don't do anything.
Since I'm in California, I'm up at like 5.15 am
. and I set up my macbook, and parallels running win xp before the 5.30 am news announcement. By 5.27 am I'm absolutely concentrated in front of the computer, with a trade open (5000 units of USD/CAD).. and my finger ready on the trackpad.. I will hit either 'buy' or 'sell' depending on the CPI number.
At 5.30 am the Canadian CPI on my win xp news screen comes out to 2%. Thats way more than the expected 0.6% .. so I hit 'sell' rightaway(I'm selling the USD/CAD which means sell USD and buy CAD). In the next few seconds, the Canadian dollar goes up by 50 pips (or conversely, the USD goes down by 50 pips against the CAD). I don't want to be too greedy.. so I hit 'close' and I make my profit of 50 pips. Depending on how much money you put, 1 pip = 1 cent or 10 cents or 1$ or 100$ or 10000000000$
Sure, the CAD went up still more by about 20-30 pips after I closed my trade.. but I'm happy with the profit I made. I usually try to make about 5 pips profit (everyday) so a profit of 50 pips is great.
The funny thing is, even before I hit 'sell' I can see on the charts that the CAD went up by 30 pips (at exactly 5.30 am)! Why is this? Did someone get the news before I did? Yup, the investment officers who subscribe to Bloomberg news services ($1500 or something per month) get the news instantly.. and they get to make way more pips than I.. or the average trader does.
Read my earlier post about the US interest rate decision.. I mentioned if they raised it to 50 points.. the USD would rise like crazy.. but they raised it only by 25 points.. which was highly expected. That wasn't good news for the US$ (good news for the stock markets though.. stocks and currencies are quite different in trading terms) The USD dropped by 100-150 pips against other currencies.
This is how I trade.. I'm in a trade for no longer than a few minutes. Other traders use charting, technical analysis.. etc. But honestly, I don't have the time and the patience to read a chart and start plotting. I can never understand the logic behind predicting where a currency is going to go based on charts.
I mean, you can't predict what will happen to oil prices by looking at a chart, right? Atleast I can't. On the other hand, if the US invades Iran, then oil will shoot up to $100 per barrel and all your charting logic will fly outta the window.
When you open a Forex account, you have to be careful about the margin they give you. When I first started, I had a 200:1 margin, and $300 to start with. So I could buy $600,000 with that $300.. and obviously, when the market moves against you.. you lose your money that fast.. and I wiped out my $300 in 5 minutes! Thats because I had no clue what my margin was, what a margin call was.. etc. etc. Now I do, and my account is set at 50:1 margin.
If you have $1000 sitting in your forex account, don't use all of it on one trade.. keep $500 as a backup.. to accomodate a margin call. But you *shouldnt* get a margin call in the first place, thats why you should always employ stop-loss. My stop loss is set to 10 pips.
The best advice I can give you is : 1. Don't trade emotionally.. always use your brains, and know financial terms, or rather economic terms like CPI, PPI, Interest rates, Unemployment numbers, Jobless claims, New Home Sales.. etc.. all these affect currencies.
2. Use a Forex demo or game account.. they give you $50,000 'virtual money' Treat is as though its real.. people have a tendency to bet all $50,000 on a trade.. and then if they make a profit they get excited and open a real account.. and lose their money.
3. Trade with the game account for atleast 2-3 months, and see what mistakes you've made. See how a news release affects the currency. You can have great US job results at 8.30 am EST, but if the news conflicts with some news regarding terrorism (e.g. some bomb blast in new york at the same time) then don't trade!
4. always use a stop loss.. your goal is to make profit.. and not to *wait* for it to happen. If you know what you're doing and you're confident.. then you *will* make a profit. If you made a mistake, then atleast the stop loss will limit your losses.
5. If you make enough profit, you can always buy me a beer