Forex trading. Pro or no? What's the deal?

Beginner Questions
1

Hello all. . .

It�s my first post here after a number of weeks lurking the forums. I�ve completed the (excellent) Pipsbaby School with flying colours and I�m extremely interested in getting involved in the forex markets as soon as I�m confident enough.

However� I�ve read many forum posts, done umpteen Google searches, downloaded numerous free articles on forex trading, I�m currently practicing with a demo account with Oanda, but I�m still a little confused about the possibilities and technicalities.

Firstly, I think I�d love to one-day trade Forex full-time, but, depending on whom you ask, it either can or can�t be done on a full time basis. Some say it requires a huge initial outlay, others say that if you take your time and make the right moves you [I]can[/I] do fx as a full time occupation.

There are seemingly many helpful souls out there who are prepared to let you into the �secrets� of their success and tell you all about their unique ultra successful forex systems. . . providing you�re prepared to pay for it� These �gurus� claim to be full time profitable forex traders and do provide some snippets useful info in their websites.

But my question is, if they�re so rich and successful in what they do and are pulling in thousands per month on the markets, why are they charging for their info?

If I had a �magic� formula for trading the markets I�d either:

A) give it away for free because I�m earning enough already, or

B) keep it to myself.

But� There are so many brokers out there, It took me ages to decide on which broker I to go with� surely there must be people making a handsome profit on the fx markets…? Or is the market really full of part-timers and losers, with only the major corporations and banks making any real money?

I ask this because some of the other posts I�ve read regarding full time fx trading have had quite negative responses such as, �You need at least $20,000 in your account� or �You�re better off doing it as a second job and working a 9-5 job as your main source of income�.

I�d be interested in hearing the opinions of some [B]experienced[/B] fx traders on this subject. I also have some probing questions about technical analysis but I�ll save those for another post�

2

Hi Finebalance. I’ll be brief as I’m not an ‘experienced trader’ but i think I can help with a couple of points or at least make a couple of suggestions.

You first question - FT day trade. I suggest you dont even think about that for quite some time…I’ve read many times how the failure rate is 90% & graduating babypips (which was EXCELLENT) is the first rung on a very long ladder.

Second - the guru’s and thier secrets - the quicker you realise there are NO secrets and there are NO easy ways the easier this difficult path will become. From what I’m learning the only way to succeed is hard work and a whole lot of mistakes.

Every time I loose I say to myself - “right you do not do that again”. Rushing into trades has killed me more often than anyting else.

Your final point I’m not qualified to give an experienced answer but I will give you my honest answer: anyone can make money in these markets, however the odds against you are huge…why? Becasue we’re all greedy & impatient to make a gazillion.

I dont know how much money you need but I can tell you I started with �200 in the finspreads training academy, which lets you trade for 10 a pip. I cannot stress how invaluable that was to me. Live trading makes you learn REAL fast.

The market makes money because of loosers. Think of the quality’s you associate witht the word looser and analyse yourself - watching for those quality’s appearing.

3

First off, I’m no experienced trader (I’m opening a live account jan '08 so still demo).

I’m not sure if you’ve checked out the “free trading systems” section here on babypips, but if you have then you’ve probably seen James’s 40-100 pips daily system.
James himself really seems like a great guy. He’s giving his great system for free and not only that, he’s also got a live group with which you can trade together with him 5 days a week through Skype. Right now he charges some money for that but when he started he did the first 3 months completely free. I learned quite a lot about real live trade thanks to him and the relatively small payment that you give to him is well worth it.
So there are some people that are actually really good and are willing to teach you.

There definitely is money to be made in Forex trading. There is money to be made in everything. I’ve even heard of someone who has become a millionaire selling pet rocks…it’s true, look it up.
Even one of my teachers in College (who was a forex and gold trader before) says it’s a very good place to make money though it can be very stressful. Ironically he now teaches a class (international economic relations IER) in which Forex is one of the main subjects.

And to the question, can you do this fulltime?
Of course I can’t tell you for sure, but I’ve managed to make between �80-�150 on a daily basis for about 2 weeks with an extreme of �650 on particularly good news day. And that was not while trading fulltime, but more like 4 hours a day.

Btw, I think there is actually a thread where people post there (daily) earnings, so check that one out too.

4

Instead of viewing such comments ad negativity, perhaps view them as advice.

I personally think 20k isn’t enough to even attempt to go fulltime without the added stress that the market can have. It’s one thing to lose 100 pips on a trade. It’s a whole different issue if you lose 100 pips on a trade and rents due next week and the baby is running low on diapers.

Keep in mind the benefits of employment. My health coverage is extremely cheap. It’s only going to cost me $20 for my wife to have her baby. My employer matches up to 6% of my 401k. That equates an incredible 100% return on my investment. If I were to pursue any level of higher education, my company would pay for it all. I could get a Master’s degree for free.

When you are self-employed, which I’ve been in the past, there’s a lot more expenses that you’re not even aware of. Health insurance is probably the biggest. To equate the coverage I’m getting now, it would cost me over $1000 a month on my own. I would lose the 401k matched funds. There’s a lot at stake there.

The name of this financial game for me, isn’t to make a living day to day, but to secure a nest egg for the rest of my life.

I personally won’t give up my job until I can live off of 4% of my liquidable assets to sustain the low six figure lifestyle I’m accostomed to. In doing so, the stresses of the day to day blows that the markets can bring dramatically shrink.

Even if it takes me 10 years to get there, that’s a much better alternative than working the next 37 years till my retirement. I don’t know about you, but I don’t see too many 38 year old financially free guys walking around.

5

Here here! I am in this for the long haul also.

6

Thank you all for your answers. Very useful and interesting. You�ve basically told me what I pretty much thought all along. . .

You are right, requiring $20k to start a business is not in itself �negative� but it is when there are websites galore telling you that you can turn $200 into $20,000 in next to no time then you hear the bitter truth later on.

It�s such a shame that there are people out there trying to raise false hopes but so good that there are sites like this that tell it how it is. . .

Now don�t get me wrong. I�m not looking for a �get rich quick� scheme. I just want to work for myself and I don�t really care if I don�t earn that much. Financial independence (not financial freedom) has been a dream of mine since I was a young boy. I�m now 37.

And yes, I agree you can make money doing pretty much anything, even selling rocks (bottles of water cost more than beer in my local supermarket.) But what I found so unique and attractive with forex is that you don�t need a customer base, advertising or marketing strategy, just a PC and some brainpower.

I�ve always been a methodical kind of person, which is why I�ve enjoyed learning this stuff so much. But it looks like the only way to do fx professionally is to have a huge initial outlay. It just saddens me that people are advertising that you can make big money doing forex with just $200 (so long as you sign up to their $80 course!)

I�m also a bit sceptical about all these technical indicators such as MACD, Bollinger bands, Stochastics etc. (I read somewhere that Fibonacci numbers were devised to track the breeding patterns of Rabbits!) As far as I can see, trading the FX market is all about guessing what�s going to happen in the future. I don�t see how scrawling lines and squiggles all over your chart is going to help predict the future.

As far as I can see, candle sticks and trend following would seem to be the best indicators. Buy hey, what do I know! I�m just a baby in this game!

I shall still persist with forex as I do really enjoy it, but I also have other business ventures that I�ll peruse in parallel (I�m a keen web designer and musician in my spare time too.)

I guess I�d be right in assuming that professional forex trading is achievable, but just like any other business venture it requires skill, patience, practice and a bit of luck.

I shall be going live with my Oanda account in the New Year. I�ll let you know how I get on. :wink:

7

This and the rest of mastergunner99’s post make very, very important points. If you’re going to trade for a living that means making steady, extremely consistent returns. Generally speaking that means not taking large risks and settling for more frequent relatively small gains. You can’t afford big drawdowns when you’re counting on the income for your living expenses.

Let’s do some math. Say you need to make $1000/wk to live on (after taking into consideration all your expenese). It would be most conservative to expect to make 1% per week (think about what that mean in annual returns and it won’t seem like too small an amount). To make $1k based on a 1% rate or return you would need to have a $100k account.