32% return in about 6 hours trading currency

Because of leverage, the size of the returns that you can get trading currency is just amazing. I bought the EUR/USD at 1.3902 at around 10 pm. I happen to get up several times a night due to the new meds, so I left my computer on and would check the trade through the night.

At around 3:30 am it was trading at 1.3966, and even though I believed it had more to go I decided to close the trade because I was overwhelmed at the run and just wanted to capture it. It was a 64 pip run. The trade ran to over 1.4 the next day, a potential 100+ pip run.

The math is that a $10,000 trade costs $200 to place because of the 50 to 1 leverage. For that size trade each pip is $1, so for a 64 pip profit I got a $64 profit, or 64/200 = 32% return.

Leverage cuts both ways, but the basic principles of risk/return apply. I had a stop on this trade of about 40 pips below where I bought it, so it was a risk/reward of 1:1.5, which isn't super-duper. Had I held the trade to its conclusion it would have been 1:2+, which is very respectable.

Its natural to do this math, though, and imagine what sort of return you could make by doing this regularly. The charts indicate that a trade like this occurs once a day or more on the long side and short side -- once on the long side, once on the short side. That means that if I nailed it perfectly I could double my money in a couple of days. Of course, that's not realistic. Not all trades will be winners, and you never catch the top and the bottom. I'll keep track of this, though, and if I am successful at it I will keep increasing the size of the trades.

Prudent trading says 'risk 1% to make 2%'. Because the absolute dollar sizes are relatively small I'll probably go with 'risk 2-3% to make 4-6%'. I have $3,000 available for this, so I can put $400 into a trade and risk $60 to $90 to make $120 to $180. I should be able to find out if this will work or not based on that. I think good discipline is to let the profits pay for the next trade instead of adding funding to make larger trades; allow it to grow organically. If this works it could be very profitable, and if I trade on the profits I'm playing with the house's money.