I met an old family friend today who works at an investment fund which also runs an "execution only" service for the clients. I told him that I traded FX and futures and he flat out told me that its a suckers game and that I should count my blessings that I made any money in it. He informed me that individual equities are where real winners are due to the risk reward ratio some trades have. The nature that some stocks can double/triple in a year or go up 20% in one day on some news. Working 40 years in the financial industry he's seen many guys get wealthy during large runs in individual stocks but never a guy who has taken a position in futures/FX and rode it to the top. This had me thinking about when I traded equities. I took really obvious positions and would make money on them. Such as buying AMZN and AAPl in pre market before they announced their new phones and cashing out by the end of the day. Trying the same in FX would get you killed if the info is already priced in. Off the top of my head I know Icahn, Ackman, Cohen, Einhorn and Loeb are all equity based hedge funds all with great track records. Food for thought I guess.
U can trade long equities via futures. I bet if most emini traders limited their leverage to 3-1, only traded long, and held positions at least 2 days, there would be a hell of a lot more winning emini traders. The drift is priceless.
It seems what the family friend meant is that most money is made on single company names, not on indexes. It makes sense, at least there are a bunch of people out there who do well trading those ( Xenomorph missed them but never mind). But I'm surprised the friend claims there are no very succesful futures traders, he might have an agenda to push.
In my limited experience the info is often not priced in, hence the big moves / change of direction after economic announcements.
Fundlord, I disagree with your friend. I've been in the business since 1981, about 34 years. I believe it is important to recognize that their are strategies that work well and have edge in every asset class. I like to keep my mind open to younger traders with new ideas. And, if I were entering the business after college now, I would focus on futures and options on futures. They are global, less fragmented and in the USA have a preferred tax treatment. Just my opinion....
What's the point of learning these complex instruments when 9/10 people lose in Forex? And I wouldn't be surprised if the odds are similar in futures/options. The odds are against the average person from the start. Most hedge funds that focus on complex instruments can't beat the S&P. Learn from their mistakes imo.
Stocks can be global too, you can trade asian, UK, european, US, australian stocks. In FX there may be 60 pairs to trade with your broker before getting into real exotic stuff. If there are no opportunities you have to sit on the sidelines or chase trades and thats when everything goes downhill. In stocks there are 1000s of stocks to identify opportunities.
I don't trade FX. Never have. My point is you have to keep an open mind. If 9/10 lose, and I don't know what the number is, that is because they are trading without any real edge, just some hope. You have to find that edge first.
Haha yep, futures/forex suck and equities are where it's at! Lemme just go load up my account on AAPL, TSLA, AMZN, BABA, and whatever else hype seems to be propping up the Qs. (continues trading futures and fx exclusively)
I think that statistic is heavily skewed. The crowd FX attracts are different that the crowd stocks attract. Little mom and pop trader will be seduced by no commission, no minimum $25k and high leverage etc. Someone willing to put up $25k to trade stocks will most likely put time into educating themselves in the art of trading. Someone with 500$ in an FX account will just gamble on high leverage.