Replies to post #1595 on Cap's Trading Diary

[Toofuzzy]

Hi Cap

Thanks for the really clear example. It helped me understand what people are doing, not that I want to take that risk myself.

>>>>Now what happens if the dollar drops to only 119 yen? I am short 1,200,000 yen, and originally that was balanced by my equivalent $10,000 long position in dollars. But now my dollars are only worth 1,190,000 yen. In order for me to pay back my loan from Japan, I need to come up with 10,000 more yen. At 119 to the dollar, this would cost me 10,000/119 = $84.<<<

I suppose it is a little better than the example above because you are taking in $450 in NET interest / year so it would take a 5 point increase ( to 115) in the value of the YEN to break even and then down to 114 to lose your capital.

A drop to that point doesn't seem imposible either though (only a 5% change).

Toofuzzy

[Toofuzzy]

Hi Cap

I had asked you about forex in previous post and you explained how with 100:1 leverage off of a $100 investment you could make $450 / year with the YEN at 119 at the time.

The YEN is now 114

I think you said you would lose $84 per $.01 increase in the YEN or $84 x 5 = $420

Still making $30 on the initial $100 investment but I guess yo would have to come up with another $400 in equity (or would you need thousands?)

I suppose you could use less leverage for less risk but also less reward.

Anyway my real question is in my next post.

How is the trading going
Toofuzzy