Is Forex Rocket Science?

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JasonC2

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Hello traders, I have never traded forex before but in my examination of the basics,It seems to be quite complex, I have no problem with technical trading when it comes to Stocks and Spreadbets, but forex seems to be a bit of a foreign language

How complicated is it? Why do you guys favour it over stocks and over forms of trading, and is it more profitable than trading stocks? Do you find it a simple style of investment?

Also, I've heard of the "yen carry trade" where investors aim to capitalize on the 0% interest rate in Japan, but I don't understand how exactly this kind of trade accrues interest?

It seems the more I learn about forex, the less inclined I feel to give it a go...

Any advice is greatly appreciated

Regards
Jason
 
Last edited:
Forex - simplicity itself !

JasonC2 said:
Hello traders, I have never traded forex before but in my examination of the basics,It seems to be quite complex, I have no problem with technical trading when it comes to Stocks and Spreadbets, but forex seems to be a bit of a foreign language

How complicated is it? Why do you guys favour it over stocks and over forms of trading, and is it more profitable than trading stocks? Do you find it a simple style of investment?

Also, I've heard of the "yen carry trade" where investors aim to capitalize on the 0% interest rate in Japan, but I don't understand how exactly this kind of trade accrues interest?

It seems the more I learn about forex, the less inclined I feel to give it a go...

Any advice is greatly appreciated

Regards
Jason
Click to expand...
Jason

It's no more complicated than stocks. If you have no problem with technical analysis on stocks then you will have none on forex.

The main differences are:
- it involves a currency pair e,g, USD and GBP, so if you are long in one you are short in the other
- forex is the most liquid market
- forex is at present OTC (over the counter), so prices are determined by the broker because there is no real global marketplace. However recent announcements by CME/Reuters might be changing this. Brokers make their money on the commision and spread, which for major pairs starts at about 2-3 pips. As there is no market then market data is free.
- forex markets are open from Sunday evening UK through to Friday evening 24 hours a day
- like spreadbetting you can trade on margin: 100:1 is typical
- although there are perhaps 20 - 30 currency pairs that brokers might offer, most trading boils down to around half-a-dozen, so you don't really need to watch too many instruments compared to stocks

If your TA involves volume analysis then that part of the analysis does not really apply to forex, although some people look at a "pseudo-volume".

If however you want to get into fundamentals or into options, then it can be made more complex, but for spot currency trading its fairly simple.

Try this for a very simple introduction:

http://raghee.com/DesktopDefault.aspx?tabid=6103

Charlton
 
i wouldn't say FX is any more or less complicated than other form of trading i suppose it depends what you are used to. There are, of course, many very complicated aspects that you are free to look into but isnt that essential to most trades. I know many people that are good at trading equities but they never look at a company's annual report and i dare say dont even know how to read one. It just isn't that important to short term trading.
FX is influenced heavily by macroeconomics (the economy as a whole) and it would help to have a decent awareness of this. The biggest influence is the interest rate outlook. The main reason being if a currency is paying high interest and you have a lot of money you would be wise putting your money into this country to take advantage of the high interest (like with one high street bank versus another but only on a much larger scale). So if one country looks like rates are going higher i.e economy growing strongly people may be inclined to put their money into this currency in expectation on earning higher interest on their funds. There are other reasons why currencies move but this is the biggest reason.

In the spot market when you buy one currency you sell another one (because all you are doing is swapping money like when you go on holiday but on a much larger scale). Most currencies are versus the dollar, so if you go long eurodollar you are swapping your money from euros to dollars, i.e buying dollars selling euros. Its best sticking to the currencies versus the dollar as these "majors" are the most important and have most liquidity and lead all the others most of the time.

From a technical view point they are fairly easy to trade, they trend strongly and have well supported levels, however the moves can be quite strong when it wants to move which can iron out a lot of intraday traders so i would suggest trading them on a longer term basis, get a view about the economy and try and ride the trend.

As for is it more profitable than other forms of trading, simple answer, no trading is easier than any other form, it doesnt work like that, all markets are a zero sum game, if you buy something and make money somebody sold to you and either lost, or was closing out his own buy trade and therefore missed out on more profit, either way selling to you was a bad move on his part and you reaped the rewards. Now assuming for every winner there is a loser (isnt quite as simple as this but for a newbie assume this is always the case) you see the markets are like one big poker game, only everyday you are going up against the best poker player/s in the world. Over the long run you will lose, until, however, you learn to play poker like the best of them then you will make money, but like anything in life it takes a lot of time to be the best at anything, whether you are trading FX, equities, bonds, fruit and veg at your local car boot sale.

I reckon you should go for it, FX is a great market for the private trader because you can trade 24 hours a day and doesnt take much money to get setup plus you can trade small size

Hope this helps

Tom
 
JasonC2

FX is only as complicated as you wish to make it. If you can look at a chart, decide on the direction, apply a few simple profit & loss rules, and get it right more often that not, then you should make money. In other words it doesn't have to be "rocket science".

I think the main reason that new traders are often drawn to FX is that they may only have a small $ pot to play with. As has been mentioned above, leverage of 100:1 or even 200:1 is common in FX, so for the wide-eyed newbie it all looks possible to make a large amont of money from a small initial pot, in a short period of time. Whereas with stocks, leverage is not huge, and appeal for the big thinking small trader is therefore less, rightly or wrongly.

Good luck, and trade carefully.

rog1111
 
There are many who would have you believe it is and suggest you leave your brain to doze off while they do it all for you.

No other form of trading has so many signal services and do-it-all-for-you-producing-pips galore-while-you-bliss-out-under-the-palm-trees-and-watch-the-sun-go-down-as-the-profits-come-a-rolling-in....

Here's a good one. It has a dashboard with entry, exit, and loadsa other goodies so it's a bit like driving a fast car into never never land where every road is called easy street. :

:cheesy: :cheesy: :cheesy:

http://www.fxuniversal.com/dashboard-fx-screenshots.html
 
rols said:
There are many who would have you believe it is and suggest you leave your brain to doze off while they do it all for you.

No other form of trading has so many signal services and do-it-all-for-you-producing-pips galore-while-you-bliss-out-under-the-palm-trees-and-watch-the-sun-go-down-as-the-profits-come-a-rolling-in....

Here's a good one. It has a dashboard with entry, exit, and loadsa other goodies so it's a bit like driving a fast car into never never land where every road is called easy street. :

:cheesy: :cheesy: :cheesy:

http://www.fxuniversal.com/dashboard-fx-screenshots.html
Click to expand...

Thats shocking!
 
....perfect, they'll love that one !

rog1111

rols said:
There are many who would have you believe it is and suggest you leave your brain to doze off while they do it all for you.

No other form of trading has so many signal services and do-it-all-for-you-producing-pips galore-while-you-bliss-out-under-the-palm-trees-and-watch-the-sun-go-down-as-the-profits-come-a-rolling-in....

Here's a good one. It has a dashboard with entry, exit, and loadsa other goodies so it's a bit like driving a fast car into never never land where every road is called easy street. :

:cheesy: :cheesy: :cheesy:

http://www.fxuniversal.com/dashboard-fx-screenshots.html
Click to expand...
 
rols said:
Is this guy for real? I quite honestly do not understand a word of it. Am I missing something?
Click to expand...
I think there lies the problem. Unlike the publisher, you are not missing anything... !
 
Do a Google on FX signals and there are literally hundreds of 'winning' signals and systems.
This one with the modest name of FX Guru quite amused me as for once the results are not particularly impressive...

http://www.fxguru.net/

Our profit for this year is: 276 pips !!! *

This is hypothetical result from our signals this year

Their 'Head Manager' is a man called Spasov and another of the team leaders
is a Mr. Iliev who uses " Inconventional methods. Mathematical enterpretating of astrological aspects of forex trading."

------------------------------------------------------------------------------------------------------
"If something's hard to do then it's not worth doing." -- Homer Simpson
 
You too could make $52 million but its not for sale

chrisw said:
I think there lies the problem. Unlike the publisher, you are not missing anything... !
Click to expand...
But maybe if we were all not too simplistic we could also make $52 million from just $8000 !!

http://www.moneytec.com/forums/188914-post11.html

Hum - I will just have to keep on plugging away at my old maths texts !

Of course maybe Tradevector (also a member of this site) might help us, because he seems to have similar interests in planes:

http://www.trade2win.com/boards/showpost.php?p=146649&postcount=23
(plus the picture in his profile)

has similar vocabulary:

http://www.trade2win.com/boards/showpost.php?p=146715&postcount=29

and also uses the same name as an earlier version of the system created by our other member: 7thsignaltrader (MODS TAKE NOTE - or does having a guest status on one acccount not count ?)

http://www.trade2win.com/boards/showpost.php?p=236131&postcount=7


Charlton
 
I think amusing members should be allowed multiple nicks personally.

If this guy didn't, no-one would ever reply or agree or ask questions on how to impove their TCD's, PMT's or their AC/DC's! I very much doubt anyone who contributes to his thread other than to ask WTF he is talking about, is anyone but himself.

All good light entertainment in my view.
 
wasp said:
I think amusing members should be allowed multiple nicks personally.

If this guy didn't, no-one would ever reply or agree or ask questions on how to impove their TCD's, PMT's or their AC/DC's! I very much doubt anyone who contributes to his thread other than to ask WTF he is talking about, is anyone but himself.

All good light entertainment in my view.
Click to expand...
Wasp

Good point, I didn't think of that.

Mods - please disregard my last posting. Can we alter site rules to grant multiple nicks in direct proportion to amusement value please

:LOL:

Chalrton
 
Charlton said:
But maybe if we were all not too simplistic we could also make $52 million from just $8000 !!

http://www.moneytec.com/forums/188914-post11.html

Hum - I will just have to keep on plugging away at my old maths texts !

Of course maybe Tradevector (also a member of this site) might help us, because he seems to have similar interests in planes:

http://www.trade2win.com/boards/showpost.php?p=146649&postcount=23
(plus the picture in his profile)

has similar vocabulary:

http://www.trade2win.com/boards/showpost.php?p=146715&postcount=29

and also uses the same name as an earlier version of the system created by our other member: 7thsignaltrader (MODS TAKE NOTE - or does having a guest status on one acccount not count ?)

http://www.trade2win.com/boards/showpost.php?p=236131&postcount=7


Charlton
Click to expand...

Mr. Seventh Signal (another religious allusion?)
does not welcome pigeons in his engines. We may be next to be grounded!

7thSignalTrader said:
Banned List (No-Fly-Zone) of Internet Trolls. :idea:

Begin List

7th Error9000
FetteredChinos
dcraig1
Ripcord
Lighthouse
Zuke
Jezza888
pipforme

End List

Any replies and/or quotes from people on this list will be enough to add your own uid to the list until the moderator decides to do the right thing.
Click to expand...
 
Charlton said:
Wasp

Good point, I didn't think of that.

Mods - please disregard my last posting. Can we alter site rules to grant multiple nicks in direct proportion to amusement value please

:LOL:

Chalrton
Click to expand...

Bite-My-Tool for example :cheesy:
 
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