I decided to start this thread after reading thread after thread with people requesting indicators or Expert advisers or systems that are profitable. I also see arguments about profitability, broker scams ( got tangled in one a few weeks back, I have sworn that shall never happen again). I am determined to bring some kind of positive attitude to trading. Not because trading has made me millions (I hope it will) but because I have seen and know too many people making a fortune not just from currency speculation (I don’t like using the word FX) but from Stocks, commodities and derivative speculation.
What’s wrong with what everyone is doing that is not making them serious profits? Anyway I tried putting in some research on what the answer could be in a bid to kill any excuse that failure is the result of market malpractice or inefficiency. If anyone wishes to contribute any other research feel free to do it. I won’t be replying as such I intend this post to be a pin up for any currency speculation positives and should be a positive thread for new people looking for answers.
This article deserves more than a mere “like;” Understanding “Bank traders only make up 5% of the total number of forex traders with speculators accounting for the other 95%, but more importantly that 5% of bank traders account for 92% of all forex volumes. So if you don’t know how they trade, then you’re simply guessing.” in the article is the holy grail if you’re looking for one and if not, it definitely should be the goal of your trading method.
The only part I disagree with is how you get there. The article promotes one approach, but different experiences, understandings and situations will determine how you make the journey. When I started I used a ton of indicators and my charts were and sometimes are very clutters. With a little experience I’m down to three in general, but I wouldn’t hesitate to use more if I needed to. The number or time frame is not important and as long as your approach is directed towards the 1st paragraph in my opinion.
As I said great article. I hope everyone reads and follows it.
Gp
Thanks for the input GP. You are quite right, indicators do simply summarize large amounts of data into a graph. It is knowing when to use them that is important. I don’t use a great deal because I grew an interest in volume as an indicator and Fibonacci.
The truth is if one day you got hold of $100m to trade you will be one of those market moving institutions. However no one will give you unless you have proved you can speculate with a smaller account. I like the article too. It really brings out the basic idea behind speculation i.e. large speculation drives the market based again on that old premise of volume.
A very useful starting point eliminating some of those indicators. I have a little learning myself on Elliott wave and I am pleased to say that even the bankers of old struggle. So you are not alone…
The author was a trader at Chase Manhattan now JP Morgan after the merger. He is well known is he field.
Many, many “floor traders” simply were phased out of careers because they couldn’t adapt to the electronic method of trading off many screens. Floor traders had access to something we never will- the “feel” of the market in the pits.
Yup- one of those things which isn’t new to human behavior- eat or be eaten, get on board or be left behind. Need to always be willing to adapt to survive.
Thank You for all the great information…if you are not familiar with the Proact Guys maybe you should look into them…there systems are all based on these concepts and they are very powerful.
Great to see some thought in EWP. Market Psychology is very important in trading. I see Elliott wave as identifying the key stages in market based on the Economic concept of Asymmetric information.
E.g. The first impulse wave is started by the insiders, i.e. banks that do large deals and move the market. The 3rd impulse wave consist of hedgefunds and institutions that have enough man power to know what the insiders have done hence this wave has the most volume and travels far. The 5th impulse wave consists of the public usually sucked in by the news at this point the market is extended and the smart money on the 3rd wave is selling out and usually the correction is quite violent and most accounts get wiped out with the A correction of the 5th impulse wave, it is fast and usually you cannot react and plungers are usually on this wave as this is the market top.
It is this reason I respect Elliott analysis. Explores market psychology alone. This forum desperately needs an Elliott wave thread. Which I will start…
Wow. What a great grouping of stellar reads. Thank you bud. I like your overall attitude towards “currency speculation”. You’re spot on the money(no pun) that once you put in your time and start truly understanding how this beast moves it’s not impossible to get some fantastic profits. The overall attitude among these forums tends to be a bit negative as most are getting their hard knocks experience. A personal favorite watch of mine in reference to the days gone by is “Floored: into the pit” on youtube. I was never their, I’m 28, my dad’s got a friend who was on the Chicago board of trade and said it’s a very accurate depiction of how it was. As jake said “eat or be eaten mentality”. And their feel for the markets was truly felt as they experienced crowds go nuts and saw friends make a fortune or lose all they had. Shouting orders, plotting PnF by hand faster than I can write my own name. Computerized trading came along and nobody understood why you could make money by doing things that don’t make any damn sense. And in the long run, you can’t…
I’d post the videos link but it’s your thread. Thanks again man great stuff!
Floor trading is different to electronic trading. Now the market is run by robots thanks to Goldman… A lot of the big names of the 80’s got out of the game seeing where it is all leading. Back then it was a game now we are actually witnessing a massive world order flow of wealth. To be on the wrong side will mean the end of our way of life.
I stayed on this forum with the hope of sharing my little knowledge acquired from educating myself on the financial system. A lot of people still approach trading from the wolf of wall street idea, getting rich fast or just breaking free from a crappy job. More than looking cash, it is their expectation that is crushed.
The reasons are simple…Pre the 1987 crash trading was about arbitrage. Exploiting weak links in the system to make money. This evident with all the iconic traders. Then machines came and now the game is rigged in favour of the market makers who seek to kill you with fees and charges. By machines carefully reducing volatility and arbitrage you now have to be smarter and can’t just press buttons.
Trading is harder but not impossible. Returns are lower but exist none the less. Note, the banks no longer ask your permission to trade your wages, almost all products from pensions to ISA’s have investment elements. Shockingly even bonds (debt) is convertible to shares. The truth is we are all knowingly or unknowingly speculators in the markets. This is now finally extended to bricks and mortar.
So all the negativity is pointless. The concept is simple for me. Cash is a worthless FIAT that is inflating every day and no longer holds as a store of value, so has lost its economic status of being money, it is simply currency. By trading this along with other worthless instruments regularly mitigate inflationary pressure as you create new money out of rate differentials anyway.
Secondly convert this useless FIAT into physical gold or real assets free of debt. Both of these have intrinsic value. Wages and employment is simply a means to raise capital to acquire wealth the sad news is with the value of the average asset 10x the average London wage leverage is inevitable, meaning to simply not invest and use wages as a wealth creation vehicle through consumption of worthless Chinese products is silly.
I have no need to be negative. All cash is worthless so why care so much about speculating with it? Better loose it with a chance of gain than to buy a 10k car that won’t last 5 years.
Well said. I’d summarize with saying that once a currency leaves a gold backing it’s only worth what people agree it is worth. And what really is the driving heart of any currency is it’s utility and ability to provide liquidity between assets. What can a $100 bill really do? Provide warmth for 5 seconds if you set it on fire? But what utility is capable of that’s “agreed upon”? Firewood, lighters, food, guns, ammo, etc. I don’t view any of my money in different aspects. Every single dollar is utilized as I view it to be providing it’s best utility for me. Physical products, vehicles, speculation. Not to get abstract but having great results from currency speculation(forex) would all be for not if the other 95% of my money was poorly managed/used. Here’s the link…