The Truth about Forex

Discussion in 'Forex' started by SL321, May 3, 2013.

  1. SL321


    I originally posted this as a reply to a thread discussing about whether or not people can live off their forex trades exclusively, but it seems that that other thread was hijacked and took a different non educational turn.
    So am gona go ahead and post this educational post here in order for all to read and be aware of the truth.

    "I've been reading some of the threads on this forum for a while, and as amused as I was reading some comments, I also felt sorry for the fact that so many people are misled and compelled to believe some lies and rumours that are spread around.
    I will introduce myself, and hopefully what i will write in the next few lines will leave few of you doubtful about the answer to the question in this thread.
    I trade for a living, it's what I do, I am a small time hedge fund and portfolio manager as well as an financial investment advisor, and when I say am small time, I mean that I don't reap in tens of millions a year like the big time players (some of the top dogs even make billions), but I do make enough to earn me a decent living, that being said, am still a beginner by wall street terms, still young with a growing business.
    I trade stocks, bullion, Forex, commodities and bonds but what i will say may come as a shock to alot of you.
    Giving that I trade for people who entrust me with their retirement funds or lifetime savings or just people who are actually looking to invest their money rather than gamble it away, I don't use much leverage, and by that I mean, that on the average day I trade with 0.5 or 1x leverage, I go in, I go out make couple of hundred pips, and am out, thing is most of the people whose portfolios I manage won't accept more than 5-10% risk max/year on their investments, so although i'm managing multimillion dollar accounts, I usually am trading a couple dozen lots not more.
    These people expect to risk 5-10%/year of their investments in order to achieve 20-30% ROI, some can't even afford that, some people are satisfied with 7-10% ROI with minimum risk less than 2% risk.
    Sure occasionally, i get a demand from one of my high rolling clients that will ask me to double his 100k investment in a month or two, but this is very rare, and these people accept the risks that accompany such a demand, they know that if I am to double their accounts within a month or two I'd be using high leverage and that there's a good 20% chance that their account gets blown. And these people will immediately withdraw the initial investment after the account has grown by a hundred percent.
    I live and breathe economics, it's what I do, spending most of my days listening to the news and researching, on a bad week I average 500-600 pips/week , but 1000 pips ROI for me might be the equivalent of 50 pips ROI for you people with your overleveraging.
    And this might come as a shock to many of you but the most popular way of trading Forex is through carry trades, and we've been blessed this year with the chance of being able to engage in some very profitable carry trades, carry trades are the only trades in which i may use the leverage option, sometimes up to 3x or 4x, what I do is catch the pair i wish to trade on a very very good breakout, and then hold the position for years while reaping the rollover profit, i've been longing the AUD/JPY and the NZD/JPY for a few months now, and although im already in about 2000 pips profit, i have no intention of closing my positions,at least not until a couple of years, as these kind of trades are the only trades in which i make use of the leverage option in order to secure a bigger investment and secure constant profits, It's the way people who invest their money want it, small risks, decent rewards.
    With all that said, what i do is no easy business by any means, i have over 10 000$ in monthly subscription fees whether it being live up to the millisecond data feeds, data journals, analysis....
    And even all this, while it does give me an edge over little retail traders, is nothing compared to the technology the big dogs have, you've recently seen the Dow take a 150 point dip within a matter of 3 minutes, this cost some 200 billion $ in money changing hands, well this was the work of some very highly sophisticated trading robots, these robots actually interpreted the news that was released on twitter on directly analyzed it and traded on it all within some milliseconds, this is the kind of technology the big boys have, they use it to beat everyone and trade the news, and compared to them am just a small time hedge fund manager, with high frequency trading like this the big boys have a huge edge over all of you, and my 10k/month data feed subscriptions and hard work that i put in everyday, does little to mitigate the advantage these people have with their dedicated teams of financial analysts and super computers.
    At the end of the day, i do make a decent living out of this, but this is solely because i treat this as an investment, and rightfully so, and i guess i was also somewhat lucky to have had a chance to meet some fairly deep pocketed individuals that entrusted me and my financial advice, and trusted me with their investments.

    NB: I laugh at these people that claim to trade one or 2 pairs exclusively, a real trader knows that the whole forex world is inter connected, and if you're really informed and know what you're doing you will know what crosses to trade at any given time, know what's the weakest and strongest base currency that it to be traded for maximum profits.
    Hope my post was an informative one, and hopefully it answered the question.
    Cheers, and good luck with your investments."
  2. dev


    Your post will go largely unnoticed.. its not what people want to read about really.

    Not going to argue your 'truth' too heavily; you're correct that Fx is much bigger than a few pairs and most people don't have a handle on it. This my view too. Its amusing to watch, but also strangely comforting.
    In the same vein, I find it enormously lonely as no-one wants to discuss trends in zar, inr or mxn (for example). At least not in any of the internet forums I know of.

    However, while the masses are missing the bigger picture, I wouldn't laugh at them too hard; it's possible to do very well out of one or two pairs, if you happen to latch onto a repeating behaviour for a while. (past experiences have shown this).
    But yeah, far smarter to pick the right crosses in the first place.

    I can't agree that you need 10k/month subscriptions to do this. In fact, I'd argue that too much of the wrong data can be more hindrance than help, as it promotes a focus on noise. And noise drowns out signals..
    Depends on what moves you're seeking, I guess.
    The data I use, is very hard for retail guys to get; but it doesn't cost 10k/month either. In fact, its free beyond the initial software cost. But as most dont think about fx correctly, theyll never ask the right questions to realise what they need.
    And that's not counting the ones who won't invest any money into their own 'infrastructure' in the first place.

    I like your post though, it stands out a little in the sea of usual drivel. :)
  3. JB3


    Well, I think your situtation is different than most people on the forum. First, you are trading OPM. It is easy to not use leverage when you have a big fund, and 10% ROI is acceptable. Plus, you get management fees and trade rebates on top of it.

    If I had tens of million dollars to manage, I don't have to use leverage either and hit 10%-20% ROI. Unfortunatey, most traders are trading their own money and starting with a 10k account, and trading at 1x leveage will get you nowhere to make a decent livng.

    So yeah, apples and oranges. Start a 50K account, and trade it independently, and let us know how big you can make it with or without leverage. That will be more "educational". Trading OPM means your investors take all the risk.
  4. Thumbs Up :)
  5. Lucrum


    No offense or hijacking intended, but I wish I had a dollar for every time a new alias shows up making this claim.
  6. dev


    I wish I had a dollar for every post that was pure drivel or trying to say 'I don't believe you'.

    Its a far more profitable system.
  7. SL321


    It's not about how big you can get, it's about how safely you can get there, the drawdown your account is likely to go through, that's the message I'm trying to convey, and I sure hope it gets through.

    I can start with a 50 k account this morning and turn it into a 100 k account before the end of the trading day using ridiculous amounts of leverage, it will take me only one good trade .....
    But that would be risking too much, as Buffet has it it's not about how much you win, it's about how much you don't lose.
    Slow and steady, that's how the rise to the top should be, Charlie Munger talks about a friend of his who thought he could get rich quickly by over leveraging, he used to make fun of Buffet and Munger and belittle their investment strategies, you can see who turned out the better investor at the end of the day.

    You're right, trading a 10 k account won't allow you to have a decent living, it could....but you'd be living dangerously and exposing yourself way too much, again I'm sorry If am bursting too many bubbles here, but you can't live off a 10 k account, you can however invest it in a very decent way and have some respectable returns on your initial investment, this is the way to do it if you can't afford to lose your 10 k...otherwise, could probably live off your 10 k, but be prepared to suffer some huge drawdowns and possibly lose your initial deposit if you're not that careful or that good of a trader to start with.

    my advice to everyone who can't afford to blow their account is...please be realistic and regard this as a nice investment, it will do you good on the long run and will save you a lot of headache.
  8. JB3


    So then, lets talk apples to apples then. If you are not trading OPM, and starting small, lets say 50k. Can you do it full time by trading 1x leverage? Returning 20% will get win 10k which is below the poverty line in the US. So what would your advice be if you could not trade OPM? I can lower my risk significantly if I'm trading OPM too.

    In this game as a small retail trader, you have to take risks if you want to make the higher returns, there is no other way around it...kind of obvious. Or are you saying to not go full time as a retail trader unless you have 200k account or trade OPM?
  9. can you show us a few trades via account statements, as well as some more proof that you are not simply a vendor.

    note: I can start with 10k account this morning and turn it into 100 billion .......
  10. dev


    I think you're missing the point BlueTurtle.. he wasn't making a claim per se, just illustrating a point.

    Ah, you gotta love trading forum mentality.
    Full of anonymous people asking other anonymous people to prove everything they dare to say..
    #10     May 13, 2013