Forex trading opinions/experiences

[sheymyster]

Hey guys, been looking into forex (currency options) trading, and was thinking maybe the wonderful sythe community could throw some words my way about the topic.

Way back I got very interested in stock trading. The problem is that most brokers (online and IRL) have a commission that hits you too hard to make small day trades and still profit. Given the lowest I could find was $5 per trade flat rate so after buying and then selling, I would need to profit at least 10$ just to overcome the commissions I was paying my broker (in this case an online stock trading platform). This means that I couldn't mess around with $10 or $20, I would have to invest at least $100 and that was still not likely to generate a 10% rise for me to just break even (remember I owe my broker $10 no matter how the stock rises/falls).

I forgot trading for awhile, but I recently did a lot of research into Forex trading. For those of you unfamiliar with the currency market, the brokers work a bit different. They have a spread they profit from, so if they can buy the currency from their sources for 1.324 per unit, they will allow you to "BUY IN" for 1.327 at the lowest, and if you sell you can only sell for 1.321. This means that no matter what, they make 0.003 "pips" of profit per unit you buy or sell because they buying 0.003 pips below your buy price and selling 0.003 pips above your sell price.

The benefits: Because the actual # of trades isn't commissioned, you can afford to trade on much smaller profit margins, because you only have to profit after the spread. This means if you buy and sell at a higher rate, you have profited and don't owe your broker anything after the trade is done. Also, forex trading is much more accessible to the "day-trading" method, such as buying and then selling in the same day or even the same hour for small gains or small losses "should you have predicted a rise/fall incorrectly".

Gain possibilities: Forex trading is similar but not identical to just taking a sum of one currency and changing it into another, planning to switch it back later when the exchange rate is more in your favor, ending in profit. (this would be a very small profit margin because they exchange rates don't change drastic enough). When trading in forex, you instead buy-in only on the volatile area of currency exchange. This means that when you put in $20 you actually buy in or "invest" and a broker somewhere buys an entire lot of that currency with you as the dependee. This means that if it goes down, you lose a chunk of your $20 to pay the broker (because THEY never lose, you cover their losses should your purchase make them lose money). The good part is that you also gain more for your measly $20 investment should you predict correctly. The broker always only profits the spread, no matter how much you make. this means that if you predict well and the currency you invested in raises several pips, all the money your broker made buying how ever many hundreds of "dollars" in the currency goes to you and they, as always, only profit from the spread that was established at the beginning of the trade.


I know it was a lot of text, but if this topic interests you and you read the whole thing, let me know what you think and if you have had any experience in this field please share so that I can be enlightened more before I throw real money at this pursuit. (right now I have only used virtual currency to test the waters and more importantly my skill at reading the charts and placing good trades).

 

[Pockets]

After reading your post, I would avoid it if I were you. Unless your have a very in-depth knowledge of currency markets, you are going to be at a huge disadvantage to those who do. This coupled with the fact that you will still be paying for your trades to go through will make the chances of substantial profits pretty low.

 

[sheymyster]

Thanks for the response! Since I posted this I have made a few investments "fake ones of course, with virtual money" but I still stayed very low, as low as I would if It were real money. I invested a total of $50 virtual money on 5 different trades ranging from like $5-$20 depending on how confident i was that the market was trending the way I was predicting it to.

I lost on one of the 5 trades and made small gains on the other 4. If it were actually $50 of my real money, It would now be around $65. Sure, it's not a whole lot, but just being able to use indicators from my research so far has enabled at least some sort of educated guess that ended in profit. I plan to use this virtual currency, and no matter the wager the number is not important to me. I just want to get my returns in % gained and % lost for each trade and make sure my methods are at an overall consistent profit at the end of the week.

I have decided that I have spent money on stupider things in my life and if I can produce a consistent gain over trades each week for a few weeks I will most likely deposit the minimum ($50 for the platform I will be using, etoro) and see what I can do with it. At worst I lose it and learn from my mistakes, but who knows, over a few weeks or a month I might actually produce enough profits to be worth it, especially since I can monitor currencies on my ipod during class and plan trades that I will make when I get to my computer.


If anyone would like to get their feet wet with me, etoro web trader 2.0 offers a very nice virtual exchange, their platform is user friendly so far, (i.e. setting stop losses and take profit levels is simple). Also, the youtube videos from Nial Fuller (selfmade wealthy business man from australia I believe) are very helpful. He has a full course that is paid but if you can follow his lingo on the videos on youtube he gives alot of information away for free.


Any other comments from the lovely sythe community on the topic?

 

[bigboi2572]

I say give all you got. the biggest thing with trading Forex is balling up and grabbing your dick. the only way to learn any kind of market is to jump right in. obviously start small and learn from your losses. also know your platform like the back of your hand. set up maybe 2-3 indicators and don't forget to map your trends. stick to one pair at first i would recommend the EUR/USD its a good place to start. watch the news everyday but stay away from the bullshit. i like to google current advents.

what platform are you using?
trading style?
starting cash?

 

[sheymyster]

Thank you for the response man!

I like your style, I often think that more people don't mess around with these types of ventures (stocks/options/forex) because it is mocked up in our society as a wallstreet big-trader only area, but I think there are profits to be made from the normal guy, and without too much risk.

I will be using the etoro platform I think, it was rated #1 on a few top platform lists I found, unless you have any other suggestions for a better platform?

My trading style is mainly based on the simple minimal indicator charts. I look at the 5 minute and 15 minute charts at first to see what the short-term trends are telling me. But I always take a gander at the 1 hour and 1 day trends to make sure that a short-term up trend isnt just a wave in a month-long spiral downward. I use the pin-bar setup mostly and it's been pretty honest to me so far.

I think once I use real money in a week or so (I'm still practicing with virtual currency as of now) I will deposit around $50-$100.

I always set up stop-losses and take profits because there is no sense in riding a crashing currency all the way to the ground. I usually set up a take profit twice as high as my stop-loss so that if the trend opposes my prediction I lose some but if I predict correctly I profit twice as much. I figure that way I only have to be right 1/3 of the time to break even because my gains are better.

If you don't mind sharing, what type of system/platform/ect do you use?

PS: if i use an indicator at all its normally a moving average based on the past 20 or so points, just to make sure I didn't miss a huge underlying trend in the opposite direction of what I suspected, but that's about it, I try to keep it simple and not overthink the numbers.

Also, I have been sticking to EUR/USD and GDP/USD for most of my trades.

 

[bigboi2572]

etoro is not bad but i prefer an out of web platform. i recommend thinkorswim by TD. its has some great features and it would be worth your time to check it out and has great support for other markets like options. I feel like your starting cash is to low. when trading forex the margin is very high like in the range of 1:100 or 1:200 so when trading with 50-100$ your stops have to be really really low and your going to miss some good trades there. i recommend starting with 1000$ so you can trade a full 100k block. or split in to 50ks. with 1000$ you dont have to make very many trades maybe 5-10 a week to pull in some great income.

the only indicators i use are a 20-30day moving avg and full stochastic, but i like to trend things out most.

we should get on msn some time and do some trading i would like to see what your doing.

I am not at all a pro and still learning as well.

 

[sheymyster]

that sounds like a lot of fun. What exactly do you mean by "out of web" platform? Like you trade by phone? Also, I'm glad you mainly stick to trends, imo from what I've already researched too many indicators just confuses you and a lot of them don't really help you all that much. As for the money issue sadly I don't have much to deposit that I don't depend on each month so i'm hoping for the first few trades to still kind of be practice with my $50, building on technique more than actual profits. I plan to add some each month to my account so that my trades will actually start turning a healthy profit. Also since my budget will be low at first, I will probably try to stick to 1:50.

As for the MSN thing, that sounds like a great idea, I will most likely deposit my $50 this weekend and get started with some basic low-risk trades, my msn is [email protected] I will be on a little bit through the week but I have a few exams at the end of this week so I will definitely be on more casually and long-term this weekend if you wanna hit me up. It's good to find someone who is still learning too, hopefully we can help each other dodge some of the beginner pitfalls of forex, haha.

 

[bigboi2572]

cool ill add your msn and talk to you there

 

[sheymyster]

added ya m8, I figure your already off though. MW3 came out today so I've decided to skip classes tomorrow, LOL. I only had two of em, but I will be on and off 2morow night, I have 2 tests to study for but I'm sure we can catch each other for a conversation or something sometime 2morow, ttyl!

Also, if anyone else wants to post on the topic, feel free I'd love to hear your responses!

 

[sp for real]

Because of low margins, its unnecessarily high-risk trading--You need a lot of capitol to provide substantial profit; however, luck is always part of the volatility of the markets... maybe it will be your day to shine.