The date is August 12, 2022. This is once again Mrs. Watanabe, we met in the previous post. And yes, I just lost all my money last night!
Let me back up. Please read my last post regarding my forex trading adventure. Until yesterday I was long $1,000,000 in USD/JPY in my forex trading account. This does not mean that I actually have that amount of money - I am just a housewife, where can I get $1,000,000? My forex broker lent me money 1:25 - I put up $40,000 and they let me buy 25 times that amount - $1,000,000. The reason I wanted to buy $1,000,000 was that my plan was to make 15,000,000 yen as the USD/JPY exchange rate went up to 150 yen per dollar (the exchange rate was 135 yen per dollar yesterday, and I was set to make 1,000,000 yen from each 1 yen increase in the exchange rate). Unfortunately, things did not go smoothly. I lost all of my money!
Here is what happened. I had my USD/JPY position open anticipating the exchange rate to go higher. On August 10 the USA had their monthly consumer price index announcement. As I explained in my last post, as we know that the USA has high inflation, I was expecting the CPI number to come in high, which would push the exchange rate higher. Then I would make money. But unfortunately, the CPI number came in lower than expected - just 8.5% price increase compared to last year. The number from last month was 9.1%, so the pace of inflation was slowing. I am not an economist, you know, I am just a housewife. Do not ask me to explain about inflation and interest rates. I do not really understand these things. But what I saw in the exchange rate was really scary. The exchange rate was at 134.90 before the announcement, and then it dropped to 132 right after. Actually, I was not even watching my account at that time, as this was at night Japan time. I was already in bed at that time. But when I woke up in the morning on the following day and checked my account, I had to face the harsh reality.
At 135 yen, which was my average purchase price for my $1,000,000 position, my account value was 6,000,000 yen. When I checked my account in the morning on August 11 after breakfast, I was down to 4,000,000 yen. The exchange rate was around 133, and I had lost 2 million yen! Well, technically I had not lost anything yet, as my account value went up and down with the fluctuations in the exchange rate. If the exchange rate went back up to 135, then I would be fine. I reminded myself of the lessons I had learned from my guru Mayumi Torii. I get swap points just for holding my position - 8,000 yen per day. So just keep calm and wait for the exchange rate to go up to 150, as it eventually will. So I shut down my computer and went along with my day. After all, I am not an active trader - I just hold my position until my take profit level is hit.
Then came the next day, August 12. I usually check my account once a day in the morning. As I logged in, however, I saw something I had never seen before. My $1,000,000 position was nowhere to be seen on the screen - it had been closed by my broker! There is this thing called a broker-forced stop loss cut, also called a margin call. Only that nobody called to ask me if I wanted to do something about it. I guess actual margin calls are a thing of the past. My broker just closed my account as my account value reached 50% of the deposit required to keep my position on. They have this 50% minimum requirement, so since the deposit required for a $1,000,000 position is 5,340,000 yen, I had to make sure to have a minimum of 50% of that, which is 2,670,000 yen in total value in my account at all times in order to keep my position open. So how did I go under this margin call level?
I already explained in my last post that I made 1,000,000 yen for each 1 yen move in the exchange rate. Well, it goes both ways. I also lose 1,000,000 yen for each 1 yen move in the market. My account value at 135 yen was just 6,000,000, and actually going up by 8,000 yen every day from my swap points. Unfortunately, these 8,000 yen are nothing compared to the exchange rate fluctuations - for just a 0.01 yen fluctuation my account can go up or down by 10,000 yen. These 8,000 yen add up over time, but they cannot compensate for moves against the direction of my trade. And what happened during the night on August 11th, around 21:30 Japan time, was exactly a move against the direction of my trade - a so called longs washout. There might have been some news announcement in the USA at that time, I am not sure. What happened was that the exchange rate went quickly down from 132.20 to 131.70. And around that level, at 131.67 to be precise, my broker closed my position. I had reached total value of 2,670,000 yen, so to protect me and of course to protect themselves from any further losses, they closed my account.
So on the morning of August 12, I was left with just 2,670,000 yen in my account. I had started my forex adventure with 5,850,000 yen, and had actually made 150,000 yen from swap points already. Now I had just 2,670,000 left and no positions open. So technically, no, I did not lose all my money. But still it was a lot to lose for me. What should I do now? Should I tell my husband? Should I continue to trade? Should I kill myself?