Real Cost of Non-Institutional Foreign Exchange Trading

Discussion in 'Forex Brokers' started by WmWaster, May 18, 2006.

  1. Real Cost of Non-Institutional Foreign Exchange Trading

    People who doen't know the reality of Forex Trading should read this immediately and save yourself from huge losses.

    Adapted from

    Table of Contents




    Table of Contents

    1. Understanding Forex price changes

    2. Losing Your Shirt ¨C A List of Unseen Trading Costs

    3. Trading thoughts

    4. Alternative Trading Methods

    5. The Best and Worst MM¡¯s

    6. The Fallacy of Market Size

    7. The Fallacy of Low Cost Trading

    8. Can you win?



    Most individuals entering the Foreign Exchange (FX) market anticipate a free floating, equitable investment market where a trader has approximately 50:50 chance of trading successfully with completely random trade selection, as I did initially 18 months ago. However the reality is that 80 to 85% of private FX accounts opened lose money overall. The purpose of this paper is to inform the individual trader of the many mechanisms in place that significantly reduce their chances of profitable trading, using a typical novice¡¯s skill, to an estimated average 17.5% success rate overall. I will also suggest methods to increase the probability of success using well established methods of trading including arbitrage and other non-standard methods that I have studied extensively and implemented with varying success. My opinion is that anyone who wishes to profit through trading the Foreign Exchange market should avoid trading in the normal manner through a Market Maker. I no longer do this except in very exceptional circumstances with very strong, long-term trends.

    Of the reader I ask only that you consider what I have written, research further the reality of trading for the individual, share your knowledge and experience with others, and participate in the FX market in a realistic and informed manner so that you may fulfil your hopes and dreams.

    (Go to for details)


    The Foreign Exchange Market implements complex financial and mathematical techniques to set prices. In 18 months of trading I have been unsuccessful in ascertaining any direct knowledge of the algorithms behind price variation (and I have asked), which in my view is fundamental to understanding the trader¡¯s investment selection and risk.

    I have assessed the odds against an individual trader profiting overall from investing in the Foreign Exchange Market as being approx. 85%, which agrees with statements made by market commentators who have stated 80% and 85% as being the percentage of closed FX accounts which lose money overall.

    In closing I urge you, before trading FX at a significant level, to understand your ¡®real¡¯ risk of trading. The idea that a random trade will produce near equal odds is definitely not the case in the FX market as your trade affects the market, and without question becomes a target for sophisticated price-manipulation techniques used by experienced market participants at several levels as explained above.

    Do not be naïve, if you trade on this market be prepared to lose, unless you can outclass the banks, Market Makers and institutional investors exercising nearly 200 years of professional experience to take your money through deception and manipulation. It is as simple as that. There are times where you can win against the odds, but you should strive to understand what you are up against or you will probably be wasting your time and money.

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  2. pathetic...
  3. sccz97


    agreed ...
  4. Yes. A major disappointment. Was actually looking forward to reading that piece... The author is a self-described professional programmer -- presumably a logical, rational, thoughtful individual -- and probably a very good one, judging from that screen pixel-capture app he mentions, to record and compare multiple price feeds in real-time.

    Unfortunately, after 18 months of trading forex (and supposedly 15 years of trading), he still seems to lack even a basic understanding of how all OTC, decentralized markets function. FXCM... Dukascopy... Tricom... IGMarkets... what a great, representative sample to study and generalize from. :D Especially back in 2004.

    Section 6, "The Fallacy of Market Size" and Section 7, "The Fallacy of Low Cost Trading" are particularly ill-informed and full of gross, jaw-dropping errors... fallacies of their own. That's a shame.
  5. So what're the fallacies?
    Would you mind pointing them out?
  6. Sure, when I get a chance. Incidentally, WmWaster, what's your connection to the author, if any?
  7. No connection, as indicated above in bold. :p

    I'm just a reader who come across this article and would like to share it with ours and ask for comments.

    I'm always willing to hear different opinions.
  8. ddunbar

    ddunbar Guest

    But you seem to ignore the virtues of Forex Brokers who have set themselves up as ECN's. They are as far from a bucketshop as Paris Hilton is from a PhD. (If you're sweet on Paris, you can sub in Jessica Simpson.)