why retail FX traders loose

[Martinghoul]

RSH is right about what exactly, that spot FX is not a zero sum game? that on average over time top tier players dont make money on their spot FX transactions? that you cant use a zero sum game argument as in some cases banks may take a loss on some spot FX transactions and generate revenue elsewhere?

Indeed, as rsh explained, spot FX doesn't have to be a zero-sum game and often isn't. Due to extremely tight margins, spot FX is often treated as a "loss leader" and the costs are subsidized by fat margins elsewhere. For example, one of the biggest sources of large FX transactions is cross-border M&A and related deals. In such deals, the FX trade is most commonly done at a loss, but that loss is more than compensated for by the other fees. On average, over time, dealers at top tier institutions do make money on spot FX. They do that by charging bid/offer, not by trading against retail flows or anything like that. And no, you can't use the zero sum game argument, 'cause most of the time it's not a zero sum game.

As for your condescending post about avoiding talking about things I have no direct experience of, well I guess I am no match for you big brain huh? No I dont have any experience of being a spot FX dealer at a bank and their relationship to prop desks.

My post isn't condescending. I am trying to to respond to your incorrrect assertions, which are flawed because of lack of experience and understanding. The fact that you persist in the face of people telling you otherwise is pure arrogance. So I would suggest that it's not me being condescending, but rather you being arrogant.

Actually you advice to me to avoid talking about things I have no direct experience of says more about you than me. You see I know what I need to know. I DO NOT need to know how IB's account between their flow/prop desks to trade profitably. All I need to know is that they are there, how they are likely to operate. Your advice to me is typical of an over analysis approach like you need to cover all bases you must be an expert in absolutely everything to succeed, again another reason why a lot of traders fail. The inability to zero in on what matters and what doesn't matter. It is telling that the issues RSH and you have raised have no bearing on whether a retail trader is profitable.

Analysis, more analysis, more analysis, too much. Unless you zero in on what matters and focus on that you can be a walking investopedia or knowledge but you cant trade for toffee (and I dont mean YOU cant trade, I dont know you)

How do you know all this? How can you be sure that you know all you need to know? What amount of experience do you have to judge what constitutes "over analysis" and what doesn't? This echoes what I have said above about arrogance. So let me tell you one thing for free. I have been doing this job for a good long time now and if there's one thing I know with absolute certainty, it's that I DON'T KNOW EVERYTHING I NEED TO KNOW.

all I know is that when I am in the market as a small trader there are larger traders out there who can and do move the market and more often than not these larger players make more money than the smaller retail players. that's all i need to know to zero in on what matters before further analysis.

There are always people in the market that are larger than your flow and this holds true not just for retail traders. What exactly this is supposed to help you with is beyond me.

since you gave me a little guidance I will give you some.

Why don't you make a positive contribution to the forum? All you seem to do is chime in now and again to flex your brain muscles and give your own little judgement from all that precious material you have read as if to stamp out all us little retail traders on T2W.

Well, firstly, I believe I have made all sorts of positive contributions to the forum, but that's really for others (like yourself) to say. I try and help with stuff where my experience is relevant. I don't offer opinions regarding issues where I have nothing useful to contribute, which is, possibly, why you don't hear from me as often as other people. Secondly, when I do "chime in", please rest assured that it's not based on "the precious material I have read". Most of my contributions are based on my first-hand experience in the mkt.

 

[ChocolateDigestive]

and daily target hit for the day always good to finish at lunch time lol.

 

[Big Stones]

and daily target hit for the day always good to finish at lunch time lol.

That's the glory of trading off the smalls using the currenex platform and a secret indicator combo, son, bud mate. Off out for a run now?

 

[ChocolateDigestive]

On average, over time, dealers at top tier institutions do make money on spot FX.

that's all I needed to here everything else is pointless. the zero sum game argument was ill thought out by me but as you have stated above I am ultimately correct on the matter.

My post isn't condescending. I am trying to to respond to your incorrrect assertions, which are flawed because of lack of experience and understanding. The fact that you persist in the face of people telling you otherwise is pure arrogance. So I would suggest that it's not me being condescending, but rather you being arrogant.

the truth of the matter is you were being condescending and you know it. I am also arrogant but i am sure you are too hence the clash. it's all good it doesn't matter anyway, all I care about is making money.

How do you know all this? How can you be sure that you know all you need to know? What amount of experience do you have to judge what constitutes "over analysis" and what doesn't? This echoes what I have said above about arrogance. So let me tell you one thing for free. I have been doing this job for a good long time now and if there's one thing I know with absolute certainty, it's that I DON'T KNOW EVERYTHING I NEED TO KNOW.

that is not the point I was making. the point was the thread has been derailed into an over analysis of my ill thought out argument on zero sum game. quite literally in the grand scheme of things you have bitten hard on a minor point where the subject of the thread is why retail traders loose. you dont see it but it is like arguing about how to tie your shoe laces when you are serving for the final at wimbledon, it just doesnt matter.

There are always people in the market that are larger than your flow and this holds true not just for retail traders. What exactly this is supposed to help you with is beyond me.

I cannot argue this on a public forum because I would have to reveal details of my edge so I am not going to do this. I find thinking about the participants who have larger flow than me useful, if you dont fine, there is no right or wrong.

 

[ChocolateDigestive]

That's the glory of trading off the smalls using the currenex platform and a secret indicator combo, son, bud mate. Off out for a run now?

exactly stones, once the rsi, macD and ichimoku all line up on the 1min, that's when the size moves in

 

[Martinghoul]

Right, OK... I would be happy to specifically respond to the particular point that you were making originally, which, as you say, has been lost in the discussion that followed. Can you please re-iterate exactly what your original point was?

 

[ChocolateDigestive]

Right, OK... I would be happy to specifically respond to the particular point that you were making originally, which, as you say, has been lost in the discussion that followed. Can you please re-iterate exactly what your original point was?

the thread is about why retail traders loose. I was intending to proceed to show how the bigger players are able to manipulate price and that most retail traders dont realise how accurately the bigger players are able to do this. some people tried to derail the thread by casting doubt on the FACT that most retail traders loose, some even started arguing about the exact % that failed - like that matters lol.

someone even piped up that the larger players dont go after the small money - something which I personally felt was hilarious.

I suppose the gist was retail traders lose for dumb reasons much of the time but they also are being gamed by larger players.

 

[Martinghoul]

the thread is about why retail traders loose. I was intending to proceed to show how the bigger players are able to manipulate price and that most retail traders dont realise how accurately the bigger players are able to do this. some people tried to derail the thread by casting doubt on the FACT that most retail traders loose, some even started arguing about the exact % that failed - like that matters lol.

someone even piped up that the larger players dont go after the small money - something which I personally felt was hilarious.

I suppose the gist was retail traders lose for dumb reasons much of the time but they also are being gamed by larger players.

Right, I understand... Would you care to hear my response to the above?

 

[meanreversion]

someone even piped up that the larger players dont go after the small money - something which I personally felt was hilarious.

[/COLOR]

Interbank traders go after punters on 50p/point? This is why the majority of spreadbet clients lose money?

 

[The Leopard]

Right, I understand... Would you care to hear my response to the above?

I would. I usually find your posts interesting and well-written. For the benefit and enjoyment of all, scribble away with a will.

 

[ChocolateDigestive]

Right, I understand... Would you care to hear my response to the above?

Yes I genuinely would.

 

[ChocolateDigestive]

Interbank traders go after punters on 50p/point? This is why the majority of spreadbet clients lose money?

That is an extreme example you have quoted but the larger players will know where the net balance of retail money is. The larger players need to build positions stealthily for obv reasons. They also need plenty of liquidity to get out. In short one of the reasons small traders fail is that they let the bigger traders take it from them which translates to them being 5hit at trading.

 

[The Leopard]

That is an extreme example you have quoted but the larger players will know where the net balance of retail money is. The larger players need to build positions stealthily for obv reasons. They also need plenty of liquidity to get out. In short one of the reasons small traders fail is that they let the bigger traders take it from them which translates to them being 5hit at trading.

They should talk to that Trader7 guy or whatever he was called. Nobody is stealthier than him.

 

[meanreversion]

That is an extreme example you have quoted but the larger players will know where the net balance of retail money is. The larger players need to build positions stealthily for obv reasons. They also need plenty of liquidity to get out. In short one of the reasons small traders fail is that they let the bigger traders take it from them which translates to them being 5hit at trading.

Who are these "larger players" building positions? Are you talking about macro hedge funds now? It can't be interbank spot desks, as most of those guys are flat at 5pm every night.

Just as an aside, given that you readily admit to having no experience of seeing institutional flow, why do you believe so strongly that you know exactly what goes on at a bank, or a fund, or anywhere else?

 

[ChocolateDigestive]

They should talk to that Trader7 guy or whatever he was called. Nobody is stealthier than him.

Lol I forgot about trader #7 and the picture of that stealth car you posted. That was all very bizarre, the guy clearly knew a lot about EBS v fXAll v hotspot and all that but you baited him so hard he got banned. I found him interesting as long as he stopped talking about FXCM, I swear he is going to firebomb the office.

 

[Martinghoul]

the thread is about why retail traders loose. I was intending to proceed to show how the bigger players are able to manipulate price and that most retail traders dont realise how accurately the bigger players are able to do this. some people tried to derail the thread by casting doubt on the FACT that most retail traders loose, some even started arguing about the exact % that failed - like that matters lol.

someone even piped up that the larger players dont go after the small money - something which I personally felt was hilarious.

I suppose the gist was retail traders lose for dumb reasons much of the time but they also are being gamed by larger players.

Right, so I agree with your statement that most retail traders lose. There are all sorts of reasons for this, such as, for example, 1) a poor fundamental understanding of what the risk-taking process involves; 2) a lack of appreciation of the nature of leverage; 3) impatience; etc.

However, I completely disagree with your contention that the collective failure of the retail community has anything to do with larger institutions specifically targeting them. This is simply a matter of basic cost/benefit, as well as the structure of the dealers' market-making infrastructure. In an overwhelming majority of cases, it's simply a waste of time (and therefore money) for a dealer to "game" retail traders or specifically manipulate prices to cause them pain. This is especially true in very liquid parts of the FX mkt, which, incidentally, is where most retail traders are found.

 

[ChocolateDigestive]

Who are these "larger players" building positions? Are you talking about macro hedge funds now? It can't be interbank spot desks, as most of those guys are flat at 5pm every night.

Just as an aside, given that you readily admit to having no experience of seeing institutional flow, why do you believe so strongly that you know exactly what goes on at a bank, or a fund, or anywhere else?

I don't know who the specific larger players who are taking the positions I just know they are doing it. I hazard a guess it is a hedge fund, prop desk or other larger player.

I don't know exactly what is going on in at a bank, fund or elsewhere. All I know is a large player is building a position stealthily and they need liquidity to get out. Of course larger players are better informed so once they realise another is accumulating they may join. So it needn't be one big player. Are you going to contribute?

 

[meanreversion]

Are you going to contribute?

I can if you like. (In my opinion) there are many reasons why punters lose money, and this applies to punters AT BANKS (I've seen it, I've done it).

1. too much leverage
2. no stop loss - ego takes over, the trader runs his loss far beyond the original "mental stop" because loss aversion is a powerful bias.
3. over-trading - too much crossing of spreads
4. no plan
5. inability to deal with drawdown, which leads to ill-considered changing of plan, market, trading style and so on

It's always thought-provoking to ponder on the very high % of retail accounts that blow up, but I'm pretty sure interbank traders shifting large amounts of FX is low down the list..

 

[barjon]

That is an extreme example you have quoted but the larger players will know where the net balance of retail money is. The larger players need to build positions stealthily for obv reasons. They also need plenty of liquidity to get out. In short one of the reasons small traders fail is that they let the bigger traders take it from them which translates to them being 5hit at trading.

choc

I know sweet fanny adams about forex, but isn't it the case that the vast majority of retail punters have their broker as the counterparty who may, or may not, hedge their net exposure on the "real" market at some stage.

So, where is the retail money on the "real" market that the big players can identify and manipulate?

jon

 

[ChocolateDigestive]

Right, so I agree with your statement that most retail traders lose. There are all sorts of reasons for this, such as, for example, 1) a poor fundamental understanding of what the risk-taking process involves; 2) a lack of appreciation of the nature of leverage; 3) impatience; etc.

However, I completely disagree with your contention that the collective failure of the retail community has anything to do with larger institutions specifically targeting them. This is simply a matter of basic cost/benefit, as well as the structure of the dealers' market-making infrastructure. In an overwhelming majority of cases, it's simply a waste of time (and therefore money) for a dealer to "game" retail traders or specifically manipulate prices to cause them pain. This is especially true in very liquid parts of the FX mkt, which, incidentally, is where most retail traders are found.

That is interesting. Let me be clear I am talking about larger players manipulating price to take from smaller players. This does not mean jump to extremes of deutsche bank v. Oanda micro account but it very much does mean participants who trade daily yards to participants who trade under say a 50 lot.

I could provide examples where price has been manipulated by larger players to the detriment of smaller players in most liquid markets but that would compromise me somewhat.

Probably best we agree to disagree on this one.

Interesting discussion though.

By the way if you had 10 yards of volume to trade and you were looking to make a directional play how would you enter your position without moving the market thus giving you a poor entry? For now let's all assume none of us has traded 10 yards and also that 10 yards would be enough to give a bad entry (in case anyone attempts another derail about how much moves the market - that's not the point)