Not sure how to title this: “How To Lose Your Money Currency Trading,” or “How Can I Be So Stupid?” Over the past two years or so, I have lost more money than I care to think about by trading currencies with Interbank FX and their new owner/partner TradeStation. By the way, the previous owner of Interbank FX is now heading up currency trading with Tradestation. (the fox moved to a higher-class hen house)
Because of space limitations, I will attempt to use an analogy to illustrate my point. If you go into a casino and play the roulette wheel, you will notice that there are 38 possible slots that the ball can land on. If you play one of the basic 36 numbers; this leaves the house with a 6.3% statistical gain (36/38). This presumably will keep them in business even though they are paying out 93.7% of the bets. Now as you may know, most of the currency traders, such as you and I, have winning trade’s percentages of around 25% (or less). This means that someone is receiving 75% of so of your money. That could the banks, the brokerage firms, discretionary traders, etc.
Now let’s return to the casino table, and you pick any block of numbers (9 or 10 numbers) representing 25% of the 38 possibilities, thereby leaving you with roughly a 75% or so, chance of losing your money ------ would you do it? That’s one chance out of four of winning. Sounds like a pretty dumb bet to me, but that’s what the typical currency trader like me and maybe you, are doing. And remember, these are random bets, no manipulations or skill involved. So if there’s a 75% chance of you losing, let’s face it, you are going to go broke.
Let’s talk about manipulations: trade going against you until it hits your stops, or trade going against you until you are margined out and then immediately changing course. Trade reversing course just as you reverse your trade, re-quotes, internet problems. I’ve had them all happen. Here’s one that really confuses me. When the trade is going against me, it is nothing to see it move 20-30 or more pips in practically no time at all. However, when the trade is moving in my favor, it takes forever to even move 5 pips. Very strange, indeed. I can think of many times that I have been down $100-$150 within 30 minutes or so, but never up $100-$150 in the same time frame. Do these things happen? What do you think?
Let’s talk about skill. If 75% of traders or losing, obviously their skill level leaves much to be desired. The 75% who are winning must know a great deal more about currency trading than the rest of us.
What’s the point of this assessment? To put it bluntly, I believe that for the average Joe, currency trading is nothing but legalized robbery and furthermore, none of the regulatory agencies are doing anything about it. I’m no longer trading currencies, but waiting for a class action suit. Get busy lawyers.