John Kicklighter

David,

It is important to remember that the FX market doesn't actually close over the weekend; it is just illiquid and trading conditions (spreads, volatility, etc) are very difficult to trade. Therefore, open positions are open to more risk than just a single release that can trigger price action before the open.

However, I understand that your question is about orders. When placing limit (stop loss) orders, they are typically 'at best.' This means that if there is a gap, you will be taken out at the prevailing, executable price that the pair trades at after passing your limit or stop.

Obviously, you would rather be stopped or hit your target exactly at the level you placed them, but it is better than missing your stop and it running without your noticing until it's margin called. This is the way the market works though and we have to pay some price for automation.

With all this in mind, I have to say that this is an unwise strategy. I have actually had an intern in the past that refused to see the impracticality of the strategy (even though I explained the entire thing out to him) and tried it anyway with a live account. He was margin called after the weekend.

john, if i placed a market order just before the close on friday, one order to go short and one order to go long, both potential trades would have stop loss trips on them to limit risk. If the news over the weekend prior to the open on sunday was so bad or good that one second after the market starts to move, not the fx trading station open, but prior to the fx trading station open, the price jumps or drops 200pips in a split second, will my order depending on the price movement get triggered or could it gap??

Hello Brendan,

If you want to get into the foreign exchange aspect of the markets, you need to first define what you are going for. Do you just want to have an interest bearing account on money market funds or bonds in Australia or were you looking to win capital gains as well on the actual currency exchange itself?

If you are just looking for the interest in a different economy (in your case Australia), your best bet is to go to an international bank and ask them to open an account that can invest in foreign funds. Be aware that you are still exposed to the exchange rates. Also, if you going through a traditional bank, the rates will be terrible - nothing you can really do about that as they have to look for the currency in their own reserves or make a special request of another bank to make the exchange.

If you want to take advantage of the exchange rates specifically and are okay with at least a little leverage (you can open a micro account), you can trade online Foreign Exchange. I believe we FXCM just opened an Australian branch. We offer roles (the difference in interest rates between two overnight lending rates) that is credit or debited to your account once every day.

As for this course guy, I have never heard of him. I don't see why he would need to hold 5k to hold in an account. It's hard to find real traders that are willing to teach others, but it seems suspicious that he requires an additional 5k to be held in a side account (you aren't buying a house).

Regardless of what happens with this guy, keep learning. The markets always change and those that don't know what is going on are merely giving their money to someone more experienced.

Hello John.

Could I please have some advice on the following matter. I Have read numerous books on FX and would like to get into trading. I would like to start now by buying some AUS $ ( I am in NZ). Yesterday the rate at my bank got up to .9050 ish....so I physically went down to the bank to see if I could buy some Aussie dollars and park that in some account. They said I needed to open up a foreign account which will take a few days....This is no good to me. I would like an account where I can go on line and click a button so I can buy aussie dollars when i feel the rate is right. How can I go about this? Where can I open up an account that enables this and does the money earn interest while it is parked up in foreign currency. I would like to start by trading NZ and Aussie $ as I am familiar with it and I think it would be a good starting point.

Also there is a couple of cents difference between the buy/sell rates at the bank. Eg we buy TT .9052, we sell .8880. So if I went to the bank I would change my NZ currency at the lower rate and when I converted it back I would get the higher rate, therefore I am up against it from the word go....If I open up some account do these rates still apply or is it different for online accounts and when you are trading in FX.

I am keen to learn more and I enjoy reading your postings. You seem experienced in this form of investing so any input is greatly appreciated. I was going to do a course here in NZ but the guy running it wanted 5k plus another 5k to hold in some account. Steve Donelly was his name. You heard of him???

Many thanks

Brendan

Thanks for the analysis John