Is anyone else here a decade trader?

Beginner Questions
1

I thought that stock traders were hyperactive and daredevilish. Currency traders make stock traders look like Warren Buffett in comparison. Why are FOREX traders mostly leveraged hyperactive traders?

I fully agree with Warren Buffett that you shouldn’t own a stock for even 10 minutes if you aren’t willing to own it for 10 years. I like to think of myself as a junior Warren Buffett or junior Benjamin Graham. Of course, now that I discovered the world of international investing (recently bought DFJ and FXY), I now also like to consider myself as a junior John Templeton. (Of course, it will be many years before it’s obvious if I actually am.)

I also do NOT believe in the use of leverage, even for something you consider to be a Sure Thing Investment. If you use leverage, your position in Sure Thing can be liquidated if its price moves against you in the short term. This means that you won’t own Sure Thing when it finally makes its move and vindicates you. That would make me feel SO ripped-off - being right but losing money instead of making money.

On the other hand, if you don’t use leverage, you CANNOT get a margin call, no matter how much your investment moves against you. Warren Buffett wouldn’t be where he is today if he bought Washington Post (one of his best investments ever) on 100:1 margin or even a more “conservative” 10:1 margin.

As a Buffett/Graham disciple, I would only buy a stock if I thought it was very undervalued and of good quality, in which case I would hold it until it was no longer undervalued. Of course, it takes YEARS to correct undervaluation. So you could call me a “decade trader”.

As a Graham disciple, I would only buy a currency if I thought it was substantially undervalued in terms of Purchasing Power Parity. Of course, it takes YEARS to correct undervaluation.

I realize that I sound like a nutjob, but I like to position my portfolio so that time is ON MY SIDE. I like not having to worry about missing an opportunity just because I had to use the bathroom during a critical minute of the day. I like not having to worry that something is going to happen while I sleep. I like not having to worry that my portfolio will tank while I’m on vacation for a few days. Given that every trade clips you for spreads and the risk of making the wrong move, doing nothing is the slickest maneuver of all. Investing is the only activity I can think of in which slothfulness is a virtue.

Am I the world’s first FOREX decade trader? Surely, I can’t possibly be the only one or the first one out there.

2

I understand what you’re saying, but Forex trading is different from stock trading, as I’m sure you’re aware.

While there are some individual Carry Traders (or, decade traders as you call them), most of them are large institutions who have the money to buy and hold long term. Even then, Forex is not like the Stock Market, where you buy and hold for years at a time. The nature of Forex is generally much shorter trading, as currencies are tied to a country’s economy and the constant changes in that economy will affect that country’s currency, some to a great or lesser degree than others.

As you said, things can change very quickly with currencies and, while using leverage creates more risk than outright purchase, proper use of money management can reduce that risk considerably. Just because someone doesn’t use leverage, it doesn’t mean they’re immune from loss.

Leverage is part of many forms of trading, including Futures, which is another huge market. I couldn’t imagine trading Futures or Forex without some kind of leverage. Of course, large traders use considerably less leverage than the average retail trader.

Leverage is also used in all types of investing. Surely nobody believes that Warren Buffet et al spend hundreds of millions of dollars of their own money to buy their investments. Loans are a form of leverage and there isn’t a millionaire or billionaire on this planet who doesn’t use loans regularly. Using OPM (Other People’s Money) is still the standard investment technique to maximize ROI.

If someone’s use of leverage means that they can be wiped out by using the bathroom at the wrong moment, then they’re doing it wrong. Plain and simple. :slight_smile:

Terry