Buy: 1.00 lot, GBPUSD at 1.22583 => $100,000 at 1:200 leverage. 100,000/200 = $500
Sold: at 1.22812
1.22812 - 1.22583 =.00229
So, it looks like it was just the standard lot price times the price difference; $100,000(.00229) = $229. I had less than $5000 in my account at the time. So, buying one lot was like risking 10% of my account (500/5000 = .1). Now, that was my plan, but I wasn't confident I was actually doing that. I ended up earning nearly 5% on that trade. Going forward, have to be more aware of the risk.
I entered another position (two actually) of USDCHF - US Dollar vs. Swiss Franc - for a volume of .40 lots each; a sell at .97223 and another at .97225. I meant to modify the one, but it turned into two. Stop losses are both at .97842. This is called 619 points, which threw me off. It's 62 pips. T/P is approximately the same distance away, so they're both 1:1 risk to reward trades. Note: When you modify, you can only modify the S/L and TP, the lot size is kept the same.
$80,000/200 = $400. That should be how much I'm betting on this trade; .8 lots = $80,000. Sure enough, as I look in the trading window, it says Margin: 400.00. That means that 400/5000 = 8% capital on this trade. The 62 pips to the SL and TP becomes .0062 (80,000) = $496. So, really, I'm risking another 10% in both directions. Alright, as I type, I moved the SL's down to .97664 to decrease my exposure. That's .97223 - .97664 = -441. So my risk reward is a little better; 44:62 is like 1:1.4. Alright, enough tampering. By the way, this trade was entered using the Trend Rider strategy. After these adjustments, I moved the SL between EMA 36 and EMA 12, when the SL should actually be on it. Here's a picture.
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Option Strategies
- Volatility chart - typically, lowest values are found near the strike price, which are very close to the current market value of the underlying asset. The further the strike price is from the current market, the greater future price change is expected by traders. The chart form resembles an arc is called "Volatility Smile".
- Gamma shows how Delta changes when the underlying asset price changes; 2nd derivative of the option price. if Gamma = .01, and Delta = .05, then an increase of the underlying asset by 2 units will lead Delta to increase by .01*2 = .02, so it becomes .05 + .02 = .07. Great explanation.
- Vega shows how an option value changes with the change of implied volatility. It is calculated as the ratio of a change in the option price to a change in the implied volatility. If Vega is 10, then 1% volatility growth leads to 10-unit growth in the option price; volatility:option$ = 1:10.
The Help menu mentions the feature of creating a custom strategy. That's a goal when I'm versed in the basics. Just like chess, I have the most fun utilizing my own strategy. Typically, it's just based on other strategies with 10% or so of my own fixings. Some games I'm more ambitious. Failure can easily bring me back to a comfort zone, and these basic strategies should provide that for me later.
For the sake of time (I have to give the kids a bath), I'll introduce the strategies section. The built-in strategies are broken down 1st into bullish, bearish, sideways, and regardless of trend. 2ndly, they're divided into:
- Volatility up - Used when a growth of the underlying asset volatility (UAV) is expected.
- Volatility down - Used when a fall in UAV is expected.
- Regardless of volatility - Self-explanatory.
- Limited Loss - involves limiting of possible losses.
- Unlimited Loss - the loss is not limited in case of unfavorable outcome (what? why?!)
All built-in strategies assume the purchase and sale of options with the same expiration date. Are you excited?! I am. At first, I felt information overload. Thankfully, I've received reassurance via motivational speakers and podcasts.
A great metaphor is seeing trading like driving a car. The vehicle is the market, its tools, trading strategies, etc. Like a car, it is very complicated. The brake assembly, the chassis, the electronics, the wiring, the combustion engine, the frame, hydraulics, and the list goes on. Approach trading like driving a car.
You know where this is going. You don't need to know everything about a car to drive it, and indeed most people don't. Steering wheel, gas pedal, mirrors, gears, good to go. Instead of attempting to learn everything about trading, figure out what's important to get behind the wheel and on the road. Most people don't learn how to change a flat until they have one. Beyond that, they can still be great drivers.
The goal is to get from point A to point B. In the case of trading, the goal is to make money. Everything should be with that objective. When I go negative, I'll learn more to avoid that. At this point, I've cranked the car, and I'm learning how to drive in a parking lot before I get out on the road, but Lord knows I'm excited to get out there.
Leaders are Readers.
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