I merely ask; will this last?

[Torch]

I don't know if anyone else has noticed the extent to which 'Come Trade Forex and make a fortune' type banners are appearing more and more all over the net in the kind of billboard slots more associated with luring in mug punters to HYIP schemes and casino/bookie land.

Also one of Tradevector's extended posts (when he relaxed from 'selling' mode) got me somewhat concerned, specifically when he was discussing his prediction that over the next two years the FX markets as we know them will change radically.

I feel I jumped into full on live trading a bit sooner than I should have (warning to the headstrong!) but nevertheless have now reached a point where I'm comfortable with what I'm doing each day and with what I can expect to achieve.

The question I'm asking is, how much do T2W people think things really are going to change with increased noise on the charts from grail seeking hordes descending into Forex throughout 2005/6? And what areas should we be looking out for knock on effects in our strategies? Is it the case that there's 'nothing new under the sun' or is a substantial and unprecedented morphing going on?

This is an area where I simply do not have the experience to form a confident opinion.

I should add that I'm 60%/40% swingtrading/scalping at the present.
(By scalping I refer to 10-15 point grabs which some may not perceive as 'scalping' I know).

Any thoughts really appreciated (and I promise, no more posts about malibu mansions...)

 

[Mornington Crescent]

" noise on the charts from grail seeking hordes descending into Forex "

LOL

---- the answer is nil.

you need a great deal of capital and very deep pockets to have any effect at all.

and of course, once the 'hords' have placed their trade, they are effectively out of the market and probably passive losers.

 

[Rhody Trader]

I concur. In stocks we can see the impact of mass public involvement through increased volatility. The equity market, however, is much smaller than forex, and vastly more segmented. The forex market (at something approaching $2 trillion in volume per day) won't be pushed around quite so easily.

The thing I find more interesting is the parallel development of public forex trading and on line gambling.

 

[Naz]

The Forex market as you say is so big and cant be pushed around easily.It is interesting about the parallel development and public forex trading and online gambling.I trade Forex and it doesn't compete with the volatility that you can get from the hot US stocks where any decent story will suddenly alight the crowd into an emotional trading frenzy.To me thats where the action is for short term traders.

I was with some traders last week talking about cable and the set up that i was looking for.Now days later its just trundling along playing out the move.So it took four days to set up and its been playing out for two days.For 250 pips.

In contrast in the last five days Google has moved straight down and up a total of $40 being a 25% movement in its stock price.

Charts on all below.

 

[Donsmacs]

I see Torch's points

Since trading FX, especially at such high margins, and barely having any government regulations, also makes me concerned that things are going to change. Trading FX is closer to European CFD's than any U.S. securities. Heck, my accountant even had no idea how to handle my Forex transactions.

There also seems to be an opinion out there that Forex and gambling is similiar. That is questionable. Isn't daytrading or futures/options contracts also comparable to gambling? I say no. There are technical and fundamental facts that DO affect the Forex market. If you can read these things correctly you can make money in Forex.

Back to the original question I expect higher regulation of this market, or the ability for the individual to invest in them, especially in the U.S. . What exactly will happen I don't know. My contingency plan is not to keep all my funds in Forex but to diversify with stocks and other investment avenues. I really wish we had CFD access here in the States.

 

[anley]

FX for retail is pretty much a game of 'transfer money from clients accounts to brokers accounts' in my opinion.

Some of the brokers must be making big big money because when you can ALWAYS take the otherside of retail client trades, you've got yourself a printing press.

Why else do you think they offer such ludicrous margins, 200-1 or some I think even offer 400-1. At those rates it's almost impossible to make money over the long run, and so that's why they offer them. Make money on 95% of your trades and then slip up just a couple of times and bam, they've got you or rather got all your money.

 

[Donsmacs]

Anley,

Are you saying that the individual cannot make money in the long run or are you trying to illustrate the brokers ability to make huge profits?

If a disiplined trader limits his or her losses and wins 50% of the time they can still make a good return. Yes the brokers, or institutions, make money on every transaction, but the only way for an individual to lose his entire account is to have a series of bad trades or not limit losses. If a trader loses his entire account with a loss record of only 5% he has no idea what he is doing.

 

[BroadSword]

Why else do you think they offer such ludicrous margins, 200-1 or some I think even offer 400-1. At those rates it's almost impossible to make money over the long run, and so that's why they offer them.

I've never really understood why high margin ratios of 200:1 or more are automatically considered to be losing features.

With good money management, i.e. say 1%, 0.5% or less risked on each trade, it doesn't really matter what the margin ratio is, it just means less money on margin against your position if the gearing is higher (i.e. more money in your bank and less with the broker), which - in a disciplined trading case - can only be a good thing?

High margin / leverage is only a problem if people risk too much on each trade. On its own it is no more risky than lower leverage.

I wouldn't do any better (or worse) with 1000:1 leverage than at 10:1. I'd just have less in my brokerage account...

The problem is poor risk management, not high margin ratios.

 

[Roberto]

Make money on 95% of your trades and then slip up just a couple of times and bam, they've got you or rather got all your money.

Can't follow the logic of this, I must say. If you lose on only 5% of your trades (chance would be a fine thing!) you're going to make a pretty good living unless either your position-sizing or your stop-losses are very screwed up indeed.

If I'm risking only 0.5% of my account with each trade, why shouldn't I take advantage of 200/1 leverage? What can it possibly cost me?

Not easy to understand the contention that it's the _margin_ that gives them any advantage.

 

[jm99]

people are wising up that forex are better makets to trade at the moment, due to the better liquidity and volatility....and its easier to attrect newbies with the margin....hence the aggresive marketing were seeing. why trade index future/emini's when the main forex markets offers better trends, fills and lower spreads. Forex will continue to be hot imo until the usd is fully devalued and us trade deficit balanced

 

[FetteredChinos]

tell you what i am most concerned about, and that is the number of martingale strategies being discussed on various message boards..

on moneytec, there are at least 3 or 4 different threads based on doubling-up every time the price moves X number of points against you. one strategy honestly suggesting that you put on 32x your stake after the price has moved 300pips against you..

oanda has a similar number of strategies on their boards..

it is only a matter of time before things go disastrously wrong.. probably when the USD finally bottoms out, and we get a huge breakaway gap south on cable..

 

[SOCRATES]

Fettered, if the US$ bottoms out, how are we to get a huge breakaway gap south on cable, surely you mean north, or do I not get your drift ?

 

[FetteredChinos]

nope..

GBP/USD is heading north at the moment on the WEAKENING $. ie £1 buys more $

when the $ finally stops weakening, we will have hit a peak on GBP/USD.

and as you know, at major market turning points, we usually get breakaway gaps.

therefore having hit 2.500 or whatever the peak will be, there is a chance of a big move over a weekend when the price is likely to retrace some 2-3% and just keep going..

just look at the action after the Dow all-time high, or the bottom in march 2003 etc..

those people adding 32x , 64x, 128x etc their stakes are gonna be in big trouble..

 

[darrenf]

A cable chart (GBP/USD) shows how many USD you can buy for £1. ($1.9077 as I speak).

Therefore if the price on the chart is moving north, then USD is weakening, £ is strengthening.

Therefore if USD weakness "bottoms out", this will appear as a peak on the cable chart.

If USD weakness suddenly turns to strength, then this would be represented by a move "south" on the cable chart. ie £weakening. $ strengthening.

 

[darrenf]

FC

You are obviously quicker at typing than me....

 

[FetteredChinos]

nah, i just dictated that to my secretary...

she is 70wpm and 36DD

 

[s-a]

FX for retail is pretty much a game of 'transfer money from clients accounts to brokers accounts' in my opinion.

Some of the brokers must be making big big money because when you can ALWAYS take the otherside of retail client trades, you've got yourself a printing press.

Why else do you think they offer such ludicrous margins, 200-1 or some I think even offer 400-1. At those rates it's almost impossible to make money over the long run, and so that's why they offer them. Make money on 95% of your trades and then slip up just a couple of times and bam, they've got you or rather got all your money.

It should be noted that not all FX brokers are counterparty.

HG

 

[G-Man]

nah, i just dictated that to my secretary...

she is 70wpm and 36DD

I reckon I could do with one of those. She have a younger sister?

 

[SOCRATES]

Fettered and Darren F, many thanks for your replies. They are much appreciated. I now understand the angle from which you are viewing this.

 

[FetteredChinos]

no probs matey..

its an easy enough mistaka da maka.