FX burn

I made a mistake trading FXP today. Bought it at $64.80 and sold it at $64.30 on a stop loss order.

First mistake: placing a stop loss. The stop loss at $64.30 was a mistake because it was too close to my purchase price. In retrospect, I would have been happier holding the stock lower.

Second mistake: not monitoring the f/x spread. The broker tried to take $0.03 on the transaction. The buy was done at a rate of $1.001 and the sell, 13 minutes later, was done at $1.031. As you can see from the daily USD/CAD chart below, the broker added a shocking bid-ask spread to the transaction.

For a share bought at $64.80 and sold at $64.38 the transaction loss should be ($0.42)/share

However, add the f/x translation from USD to CAD and the math on the transaction becomes:

Buy 64.80/1.001 = $64.7352
Sell 64.38/1.031 = $62.4442
Loss/share = ($2.29)

In the end I was able to negotiate with the broker to cover the f/x loss (I get the feeling they get a few of these compliants). He settled the trade out of the USD money market account rather than the CAD account and the f/x loss was negated.

LESSONS LEARNED: Give a stop loss trade room to breathe and never trust a broker when it comes to f/x spreads. The biggest error here was my judgment on the trade itself, but I also felt like this guy.

Missing the Boat

Phillips Van Heusen – 5 day chart

Issue: Tried to buy at $35, tried to buy at $36, tried to buy at $37, tried to buy at $38 and missed it all the way up by being too fancy with market limits.

Lesson: Trade with conviction.

Company website:

www.pvh.com/