Tuesday, December 20, 2011

2011 - A Nasty Trading Year for Forex Traders - Infiniteyield Forex Challenge Account:$34,183

I've had a very tumultuous year in trading, and so has the Challenge account.  Not bad, but tumultuous.

1. full of tumult or riotousness; marked by disturbance and uproar: a tumultuous celebration.
2. raising a great clatter and commotion; disorderly or noisy: a tumultuous crowd of students.
3. highly agitated, as the mind or emotions; distraught; turbulent.

Yes, it fits.

When I started out the year, silver was at the $29 - $30 level, same as it is now.  The Eur/Usd was at  the 1.3250 level and it got up to 1.4700 and now is back down  at the 1.3000 level --below the start of the year.

Of course silver had its big move up early in the year to the $49/oz. area.

How did the Challenge account do?  It depends on an individual's point of view who's interested, but from mine--  it did quite well.

We started out the year with $26,522.00 in the Challenge account.  We were holding 1000 ounces of on the Oanda platform, which made it possible to hold it with less than $1000 margin.  When silver got over $49/oz. at the end of April, the Challenge account had a total value of over $51,000.  I backed way off my trading size on FirstStrike and OneNightStand positions because the volatility of silver and the volatility of the currencies was parallel and there was no need to increase my risk.

I sold 500 ounces at 48.90.  WOW!  I just couldn't help it.  The volatility was insane, the market was ticking up and down 20 to 50 cents every few minutes.  I decided if silver decided to go above $50 I would put the 500 ounces back on.  It didn't happen.

To not describe in detail the ensuing 10 weeks of painful volatility is a bonus for you and me (I'm not interested in reliving it or reminding you of the nightmare you dealt with too), as I was trading much larger silver positions on Comex and the cash markets.  Equity swings of $100k a day, sometimes an hour - are not fun even if you have done it many times before.  My personal year has worked out fine, while most money managers are posting red ink.  This year reminds me of the famous Kenny Rogers song with the lyrics:

You've got to know when to hold 'em.
Know when to fold 'em.
Know when to walk away,

know when to run....

I ran from all my silver by the time silver dropped through $45/ounce.

Back to the Challenge account.  A couple weeks after the 500 ounce sale, I sold the other 500 remaining ounces at Oanda in the mid 30's, took a disbursement and bought 1000 ounces of silver in bar form. Why?

Thanks to the idiots who are behind the  Dodd–Frank Wall Street Reform and Consumer Protection Act.

This is the notice that Oanda account holders received:
Effective the end of Friday, July 15, 2011, Retail Foreign Exchange Dealers (RFEDs) registered with the Commodity Futures Trading Commission (CFTC) will be prohibited from offering leveraged retail trading in commodities, including precious metals such as gold and silver. This change in the U.S. law is being enforced by the CFTC as an outcome of The Dodd–Frank Wall Street Reform and Consumer Protection Act.

Yes, OANDA offers 1:1 non-leveraged Gold and Silver trading.  That defeats the whole purpose of a speculator like you or me using Oanda or other similar  firms for profiting via gold and/or silver -- we want the leverage.

Anyway, so now the Challenge account has 1000 REAL ounces of silver, valued momentarily at $29,600, and $4,583 left over to position in the forex markets if something great happens.   Maybe after the first of the year.  So, a  total current value of  $34,183.

Not bad performance in 4 years from a meager $500.  Only have to double the account a little over two more times within the next 6 years.  

I'll have to get the chart up above updated.  The spike over $50K and back down is the kind of thing that makes people (and wives) think you are crazy for trading.

 The question I always get after a drawdown, if I am stupid enough to even mention it to my non-trading friends, is: "Why didn't you sell when it topped...?"  As if you always miraculously know that the top they see after fact is obvious when it is happening. 

But the public thought process is why we have so much opportunity when we trade.  Others cannot or will not do what has to be done at the times the right trade has to be executed.

Looking forward to more updates.

Joel Rensink