The Forex Chronicles

eToro Trading Update – Time To Get Serious

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New Funds

If you read my previous update, you will know that I have been trading CFDs with eToro so far (under the account SteadyProfits) due to my modest account size, which has led me to take a shorter term view that I would normally.

Well all that is about to change because I added some new funds to my trading account earlier today, and so I am now ready to take things a lot more seriously.

By having a larger account, I will now be able to meet the minimum trade size requirements when purchasing stocks, whether for short-term trades or longer term investments, and won’t need to use leveraged CFDs any more, which not only push up my risk score, but also incur small fees every day when they are held overnight.

I have still made some small profits from CFD trading so far, as I will discuss below, but to be honest, I don’t really feel comfortable using leveraged instruments to trade stocks and ETFs because of the fees, which may appear small, but soon add up if you are holding on to positions for weeks or even months at a time.

Recent Results

After a weak start at the end of last month, my trading account is up 6.19% in December, and is now up 1.18% overall at the time of writing, as you can see below:

SteadyProfits Profile Page - 13 December 2018

I’m fairly happy with this after the big market swings that have taken place since I started trading on eToro about one month ago.

At the moment I have no open positions having closed my remaining long positions yesterday, but I did manage to bank some decent profits since my last update by taking long positions on BP (BP.L), Barclays (BARC.L), Imperial Brands (IMT.L) and Lloyds (LLOY.L).

I would have made a lot more, but I got my timing wrong on GVC and ended up cutting my losses on this position, but I will be looking to get back in with an actual share purchase at some point because this stock is grossly undervalued.

Risk Score

As a result of trading CFDs, my risk score of 6 is far too high right now, and I think this will prevent me from being copied in the future, but hopefully this will come down when I stop using leverage.

Future Trades

It looks like the major stock markets are positioning themselves for a Santa rally because they have already risen nicely in the last few days.

Therefore there is a chance that I might not get the opportunity to buy into some of the stocks that are currently on my watchlist, such as British American Tobacco (BATS.L), Imperial Brands (IMT.L), Barclays (BARC.L), Lloyds (LLOY.L), GVC (GVC.L), BP (BP.L), Legal and General (LGEN.L) and Apple (AAPL), but some of them are close to my preferred entry point if there is another sell-off in the markets.

Follow Me on eToro

If you would like to follow my journey on eToro, simply go to the eToro website and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment advice nor portfolio management. 81% of retail investor accounts lose money when trading CFDs with this provider.

Why Christmas Is More Profitable For Share Traders Than Forex Traders

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Christmas Trading

We are coming up to one of the most exciting times of the year. A time when we can all take a break from work and spend some quality time with our loved ones.

None of us really want to be thinking about the markets over Christmas, but in this article I want to explain why this can be a very profitable time for stock market traders and investors in particular, and not such a good time for currency traders.

Woman Trading On Computer Over Christmas

Santa Rally

If you have been trading or investing in stocks for a number of years, you will be probably be aware of what is now commonly referred to as the ‘Santa rally’.

This basically refers to the fact that historically the major stock markets tend to rise over Christmas and New Year. Most of the big rises tend to occur in the middle of December, but prices will often continue to drift higher over Christmas and continue into the New Year.

It is not known exactly why this occurs. It could simply be related to the feel-good factor that everyone has at this time of the year, but it could also be related to bonuses because bankers and traders want to push prices up before the end of the year in order to balance their books and report bigger gains for the year.

Whatever the reasons, it is often a good idea to invest in undervalued stocks at the end of November or the start of December, and hold on to them until after the New Year.

Please note that the Santa rally doesn’t occur every single year. There are years when there is no real rally at this time of the year. However in general this is a profitable time for stock market traders.

Low Volatility Forex Markets

Although Christmas can be a very profitable period of the year for share traders, the opposite is true for forex traders.

That’s because volumes start to drop off quite sharply about a week before Christmas and continue to stay low for the next few weeks until after the New Year.

Therefore because of the reduced volatility, there is a lot of sideways price action and it can be a lot harder to predict which way the markets are going to go. Furthermore, even if you are right about a position, the resulting price moves are often quite small.

Final Thoughts

If you are a forex trader, I would always suggest that you take a complete break from forex trading over Christmas and New Year in order to preserve your capital.

However if you are a share trader, the Christmas and New Year holiday seasons can be very profitable and there are opportunities to make money from the annual Santa rally, but you still need to exercise caution because there are some years when we don’t see a rally over Christmas.

With all the uncertainty surrounding Brexit and trade wars between the US and China, 2018 may well be one of those years.

eToro Trading Update – 4 December 2018

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My Initial Impressions of eToro

I have been trading on eToro for a few weeks now (my profile is SteadyProfits), and it has been an interesting experience so far.

I have found that the platform is really easy to use, and it is really easy to open and close trades, monitor your portfolio and track your positions.

I also like the detailed stats that are provided about your trading, such as your overall win percentages, and the social aspect of the site because you can explain the rationale about your trading decisions.

Early Trading Results

As mentioned in a previous post, I only intend to trade stocks and ETFs with this account with the aim to grow my account steadily over time, primarily by trading and investing in good quality high-dividend stocks.

I have stuck to these rules so far because I have traded ISF.L (the ETF that tracks the FTSE 100), as well as Lloyds (LLOY.L), GVC (GVC.L), Imperial Brands (IMT.L) and Galliford Try (GFRD.L).

Results have been mixed because I am still limited to trading CFDs due to my relatively modest account size, which has forced me to take a relatively short-term view when finding stocks to trade due to the overnight fees that you have to pay.

Normally I would like to buy physical shares and hold on to positions for a lot longer, ie weeks, months or even years, and so as soon as I deposit a much larger amount of capital, my trading style will change and hopefully my average risk score will go down.

At the moment my risk score is 7 for this month (6 overall), presumably because my portfolio swung into profit after being 4% down at the end of last month, which is far too high, but hopefully it will come down when I start trading physical stocks instead of leveraged CFDs.

At the time of writing, I am currently up just 0.24% since I joined eToro, which is not too bad considering that many UK stocks are taking a hammering right now due to the possibility of a no-deal Brexit, but I am really confident that my profits will grow substantially in the future once the political picture becomes clearer and I have deposited more money.

SteadyProfits eToro Profile Page - December 2018

Limitations of eToro

One thing I have noticed is that although you can trade more than 300 UK-listed stocks, they don’t offer markets for every single share.

For example, they don’t have a market for Taylor Wimpey (TW.L), which is a large FTSE 100-listed housebuilder that I like to trade, and if you want to trade companies that are listed on multiple exchanges, such as Vodafone and Shell, you cannot trade the UK-listed companies, which is a little annoying.

However these are just a few small complaints that I have. Overall, I am more than satisfied with the eToro platform so far.

Follow Me on eToro

If you would like to follow my journey on eToro, simply go to the eToro website and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment advice nor portfolio management. 81% of retail investor accounts lose money when trading CFDs with this provider.

A Perfect Early Morning Breakout Trade – 27 November 2018

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Introduction

I used to trade early morning breakouts quite a lot in the past, and to be honest, I have forgot just how profitable they can be.

The downside is that you need to be at your computer early in the morning between about 6 AM and 8AM (UK time), which is why I haven’t really had the opportunity to trade these breakouts recently, but if you are available at this time, you can get some strong and predictable price moves.

As you may have discovered yourself, the GBP/USD is a very difficult pair to trade right now because it is so sensitive to any Brexit announcements, and seems to be waiting for any many major developments before moving strongly in either direction.

That’s why short-term day trading may be the best way to trade this pair right now, and early morning breakouts are ideal because an average trade may only last about an hour or two at the most, and they obviously occur early in the day when there is unlikely to be any market-moving news other than the occasional economic data release.

How To Trade These Breakouts

The key to success with this type of strategy is to wait until you have a very small overnight trading range between 12 AM and 6AM on one or more of the major forex pairs, and then trade the subsequent breakout on a short-term chart (I like to use the 5-minute chart).

It is imperative that you have a tight overnight trading range in comparison to the average trading range because then there is the potential for the price to move a lot more when it does break out of this range. Therefore you may not necessarily get a decent set-up every day.

Once the price breaks out, which could be before or after the London market opens, you can enter a long or a short position when the 5-minute candle closes, and either scale out of the trade in stages, moving your stop loss to break-even as soon as possible to effectively ensure a free trade, or set yourself a price target based on the chart.

I have found that pivot points act as excellent price targets because the price will often be driven upwards or downwards to hit these key points on the charts.

GBP/USD Breakout From Earlier Today

To show you how effective this breakout strategy can be, you only need to look at how the GBP/USD traded earlier today.

GBPUSD Early Morning Breakout - 27 November 2018

In this instance the price traded within a really tight trading range of just 15.8 points between 12 AM and 6 AM, compared to the average daily trading range of 101.8 points, and so when the price broke strongly downwards out of this range and closed at around 1.2800 on the 5-minute breakout candle, this would have been a good place to enter a short position.

As you can see, the price went straight down to the S1 pivot point level, which would have been a good place to exit your position or close half and move your stop to break-even, and the price actually continued to fall, falling just short of the S2 level.

All this happened before the London market opened, so the point is that you can find some profitable early morning breakout trades if you are available to trade at this time.

Of course not all of these breakouts will be profitable, but if you wait for the very best set-ups with very narrow overnight trading ranges, you should hopefully have more winning trades than losing ones.

I Have Joined eToro As A Trader / Investor

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Introduction To eToro

I have known about eToro for a long time because they have always been one of the most popular social and copy trading platforms.

Indeed as a seasoned trader myself, I have always been attracted by the idea of other people copying my trades, but have never really been tempted to join eToro because the spreads are quite large for many of the major forex pairs, and they didn’t really have many other markets that you could trade.

However after discovering that they now quote prices for FTSE 100 and FTSE 250 stocks and enable you to actually own stocks and receive dividends, in addition to being able to go long or short via CFDs, I have now decided to open an account and start trading.

SteadyProfits Profile Page on eToro

Trading Capital

After going through the verification process, I have already made my first deposit and started placing a few trades.

My initial deposit was actually quite small because I wanted to test out the trading platform first of all before I start trading with serious money, but I soon learned that this wasn’t really enough because the minimum trading size for stocks is $500 for new traders who have joined after 2017.

So I will be adding some more funds soon because I don’t really want to be trading stocks with leveraged CFDs because of the overnight fees that you have to pay every day.

eToro Goals and Ambitions

As I mention in my trader profile (SteadyProfits), I have been trading stocks for around 20 years now, and therefore have a lot of experience.

I have already built up a decent sum of money in my ISA over the years, but I hope to achieve the same results with eToro so that I can ultimately become a Popular Investor, build up a large following and help other people make some money.

To be honest, I also view this as an exciting challenge and a chance to really test myself, which is why I have set my sights high. My goal is simple – to become one of the top traders on eToro.

Trading Style

Although I have traded forex for many years as well, hence why I originally set up this website, I don’t currently intend to trade currencies with this account because I actually enjoy trading stocks a lot more, and don’t necessarily want to be sat in front of a computer screen all day.

I have no intention of trading cryptocurrencies either because this is far too risky for me, and in some respects is little more than gambling, even if you are using technical analysis.

So I will primarily be trading UK stocks and ETFs, and although I may make use of CFDs to open some short or medium-term trades, I will generally be buying stocks outright once I have a fully funded account to avoid paying overnight financing fees.

I always look for oversold / undervalued stocks and tend to focus on large-cap dividend stocks because this reduces my risk and gives me a steady flow of income, and by reinvesting these dividends into other high dividend stocks, I have found that you can really benefit from the effects of compounding over time.

I am prepared to hold on to stocks for days, weeks, months or years, and if a company is consistently growing both their earnings and their dividends year on year, I am prepared to hold on to a stock forever.

I don’t really set myself any profit targets. My goal is simply to build my capital over time through trading and investing in high dividend stocks, and consistently reinvesting the dividends and profits.

Early Trading Results

I have only been trading for one week so far, but have already placed three trades in that time.

As mentioned above, I am still using a small amount of capital and haven’t fully funded my account yet, so I have been confined to using CFDs with 5x leverage, which is far more risk that I would ordinarily like to take on.

Nevertheless, the early results have been OK. I bought LLOY at 54.74 and sold the same day at 55.35, and also bought one of my favourite stocks, GVC, at 760.18 and sold at 800.78 three days later.

I also bought IMB (IMT.L on eToro) and collected the dividend on ex-dividend day, but this position is still in the red at the time of writing. However it is looking massively oversold and should hopefully move higher soon.

Follow Me on eToro

If you would like to follow my journey on eToro, simply go to the eToro website and search for SteadyProfits to view my live trading results.

I will be posting regular updates on my eToro feed, but will also be posting regular updates on this blog as well.

Whatever happens, I’m really excited to be a member of eToro because it has given me a whole new challenge, and once I have added some more funds, I will really be taking this seriously.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment advice nor portfolio management. 81% of retail investor accounts lose money when trading CFDs with this provider.