Trading for a living with FX - possible?

Discussion in 'Forex' started by TSchulz, May 20, 2010.

  1. TSchulz


    I am new to this forum and curious if it is at all possible to earn enough with FX trading to live from it.
    To prevent really basic comments, I already traded about $ 500 mio in currencies and I am not totally new to the financial markets.

    In general, I am "concerned" that the markets are that efficient (I wrote my thesis about market efficiency) so that it is impossible to earn significant returns to live from that.
    I am thinking about trading full time on my own account. Actually, I want to risk at the beginning something in the $10k's but would be able to increase it to some $100k's.

    From my past personal trading experiences, I wasn't too successful but the results bear some confidence that I could be. I was mainly trading (average time in the trade 10min - 1.5h) in the evening after work. During one period, I was trading FT (due to job change) for 2.5 months. During this time I was able to increase my money by 250% due to hundreds of tiny trades (no significant single trade skewed that result; there were about 5 trade which earned 5-10% but non above that) and lost all my profits due to a trade which I sticked to (went to holiday and let that trade go and hoped it turns out good). Then after some days of coming back to earth, I started again and the whole story repeated almost 1:1 the same (went up 300% and lost even a bit more then my initial investment).
    I know, my money/risk management is probably the worst which ever existed on the face of the earth. But now I ask myself, if my profits were just statistical luck (potentially due to my tendency to hope losses to turn around) or if I am actually not too bad in trading but my money management is/was so bad that it was impossible to be successful.

    To come back to my original question, I would like to know your experiences if it is possible at all to make a living from FX trading. Are there any people of you who really did it? Or as FX markets are probably the most efficient markets, what do you think are the markets in which you could maybe still make some money.
    In general, there is so much scam that I really not sure, what I could actually expect.

    I better leave it like this for the moment and don't provide more info/background ;-)
    For those who made it through this long post, I would really appreciate any comments :)

  2. yes
  3. yes
  4. traderhf


  5. If you can take enough risk(big enough account) and you know what you are doing yes. You would probably want some other income to keep the pressure off your trading however especially in the beginning. Also if the volatility of f/x goes down you need to be prepared for that possibility.
  6. swil


    Absolutely, yes.

    Cut your freaking losses and stop being stubborn. There's always another trade to make money. Until you do that, you'll always remain a rookie...
  7. cigarno


    It all depends on the risk/reward ratio you are willing to tollerate. To trade for a living you must be prepared to lose a minimum of 50,000$, If you can stomach that then yes. But in the long run you would have as many wins as you would have loses. The FX futures market is much better
  8. traderhf


    ok let me give you a more helpful answer. I just wrote 'yes' in my previous answer since I was going with the flow, as two traders before me had written 'yes', and being a good fx trader => you gotta go with the flow many times :)

    You can be successful in FX, but you will need to develop an approach and stick to it. Some possible approaches could be and good skills to develop could be:

    1. Good Macroeconomic knowledge (Understand fundamentals): If your macroeconomics is good, trading FX is far easier than trading a stock, imho.

    2. Technicals: FX market is very technical dependent. I can tell you from experience that biggest FX traders (at least in the interbank market) use a lot of technicals.....mostly MAs, big figures, support/resistance and some also see Fibs, though I am not a great fan of Fibs.

    3. You can also trade on an intra-day basis, but then you will need to develop a mathematical edge...I do it and so yes, its possible. And pls don't ask me how I do it, since intra-day in FX could be liquidity sensitive...I know some people will find this surprising, but its true.

    4. FX lends itself very nicely to trends. You might want to do some research on how you can ride trends in FX markets.

    5. Understand and be stubborn in following money management - Ok, this should have been number one point, at the top of list! Hammer it into your head please!

    Some things to avoid:

    1. Don't trade size around major news release. Last year I lost 45k in 5 minutes :) so believe me. avoid positions around NFP/CBank announcements etc.

    2. Better safe than sorry => Cut your losses, at least don't keep doubling up. I have myself blown my account before I learnt this and became consistently profitable. As PTJ says, 'losers average losers'. Cut the damn losing trade, and move on. As soon as you are out of red position, you will get a clearer mind to think. However, there is an important exception: If you have a position based on fundamentals and you are a position player, looking to keep your position for weeks to months, then you can add in as price moves against you, to give you a better cost basis. However, you have to be on your toes and start scaling out also, when after 3-4 weeks or months you are proved to be incorrect. You gotta be extremely careful with this strategy. E.g. some guys might have bought E/U at 1.46 and again at 1.43 after E/U dropped from 1.52, thinking E/U will go up in the long term. Either they booked their losses, or got wiped out, trying to play this long term play. MORAL OF THE STORY: increasing your size to reduce your cost basis while playing fundamental economic views in FX is a good way to trade imo, however you have to be very very correct in your fundamentals analysis and quick in taking a loss, when your fundamental thesis change.

    Good Luck!
  9. traderhf



    I congratulate you on your confidence. Mind giving us some color on what basis you are saying this?

    And keep in mind, we are not talking if on the whole market can make money against the dealer or not, the question that thread starter asked was whether as an individual fx trader, he can sustain a good living or not.

    Are you asserting: an individual fx trader can't make living trading fx? I will be interested in knowing what makes you so confident in your assertion.
  10. traderhf



    You just repeated your assertion. But, my question is 'on what basis' are you saying this. You are using a flawed analogy of casino in which house has an edge. In markets, an individual fx trader can have an edge.

    See my point is: you come into a thread and post an 'opinion' using strong words. Care to elaborate more on what kind of research has gone behind the scenes, that make you so confident in your assertion. We are not taking being profitable for 1-2 months, not just random luck. We are talking about sustainable advantages using which you can be profitable for 10-20-30 yrs.

    Also, if you don't mind, are you currently in school (grad school doing phd etc.) or doing some work in finance academia ....just curious.
    #10     May 21, 2010