i might give you an insight (one of many truths why trading forex can mathematically not be profitbale) of why it is that if you trade stocks and commodities you are much more likely to make gains than trading forex.
but i have to brake the rule number one on this forum, and my own personal rule number one:
- never ever be usefull to anyone/make a usefull post
here it comes:
forex is a debt market while shares is a asset market and commodities is a neutral market.
that explains it all. does it not?
no? it doesnt?
what does that mean you may ask?
ok ill give more details
here:
shares makes you own parts of a company which is producing a surplus. a win. a gain.
this manifests in dividents of anually 3,5%. (in case of US stocks)
contrary, owning a currency you own nothing but debt. legal tender. it stays on the USD "THIS NOTE IS LEGAL TENDER TO ALL DEBTS; PUBLIC AND PRIVATE"
a currency does not produce a surplus, it does not produce an average 3,5% annual divident return, and therefore produces no surplus.
no it doesnt create a surplus, it in fact costs you money.
the central banks base interest rate is the cost of the money, it is how much you must pay for the right to hold/own this money.
so owning a stock creates money while owning a currency creates debt you ask?
that is very much correct my friends.
now understand it?
no? hmm… i must go into greater details
here:
immagine you have 2 pools (which is the truth as governments, banks, institutions and central banks deal only in those two pools)
those two pools are
assets which create wealth
cash at hand which creates nothing untill its put into assets
now both pools have their reson for existance, but one pool exists only to serve the other pool.
money serves the asset. not other way around, money is the slave of the asset. money is the b1tch of the asset.
and owning money but no asset is bad. bad for you, bad for the money, bad for the country, bad for everyone.
owning asset is good for you, good for the money and good for the country.
ok now im going into too deep details, as we are entering economical sciences here. ill stop right here and go back and explain things in simple manners.
simple explantion:
put all shares together, let them be worth 1 trillion USD (an false, but easy and round number to make the calculation simple and selfexplainatory),
they pay an anual divident (in normal times without crisis) of 3,5% which equates to “created money” of 350 billion USD every year.
those 350 billions are then spread to everyone who participated in this.
now lets put al money into one basked and pretend people only own it.
1 trillion again to make it easy.
the central banks who issue that money demmand you to pay interest on it when you hold it. 2,5% a year.
so if you hold all USD 1 trilion you own the central bank 250 billion every year.
now tell me one thing, who in the right of his mind would own money for the right to give away money?
nobody.
who will own stocks that make him money? everybody
and that is your explanation of several questions asked:
- why is it easier to make money in stocks?
- why is it hard to make money in forex?
- stocks are a urplus market, this means they generate money, the more, the longer you hold them the more money you wil recieve.
this means that whoever participates in this market, in a relative intelligent manner and in a relative save way, can only earn money. because the 350 billion (mentioned above in the example) will be spread among everyone who owns stocks)
this means that in stocks in normal times theres only one direction. up…
that means that you dont even ned any intelligent or innvative strategy to make money on shares. buy and hold, the easiest and dumbest strategy every existed, and works perfectly fine for a 5-10% anually gain in “trading”.
- forex is a debt market. everything i said about number 1 is true for 2 aswell just the complete opposite way. whoever owns cash does owe the central bank every year money.
he does not earn. whoever owns cash only owns cash cause he doesnt know (yet) where to put it in, that is true for private people as well as governments, banks and central banks. so to make it understand simple, owning cash is not desired by anyone. so if cash is available the currency price does as logical, as soon theres opportunity avalable, the currency goes logica. this means that currencry constantly go up and down on behalf of demand of cash or assets, their direction is hard or close to impossible to predict (while the direction of shares is easy to predict, they go up). owning money is bad, as soon a currency goes up because many peers hold money, it is doomed to reverse sharply because those peers only reason to hold big amounts of cash is to put them into a asset.
very basic explanation:
assets are easy to predict, they have a reason for existance, to SERVE humans. while forex is impossible to predict, their only reason for existance is to SERVE the assets wich SERVES the people.
add to this that money is a highly manipulated thing. countries (lets say trump and xin jin pi) want their currency to be worth less so the exports of the ASSETS is more competitive on the world. so presidents, governments and central banks will talk, manipulate and drive the valuation of their currency there where they want it to be. gov and presidents want it cheap, banks want it expensive (for other reasons, no need to mention them here) so it is constant propaganda war in which YOU, as somebody who is no president and no central banker, have 0 insight.
and all you can do as a forext trader (not only retial but also professionals institutions etc) is to GUESS where it might can go, or not.
did anybody ever make money on guessing?
yes
bookmakers
but never the person who guesses.
now you may ask “do i need a master degree in economis as MrDE has it to understand this and make money in the markets?”
no you dont. you just need to be intelligent enough to listen to people who have more insight in fields where you have less insight.
and that is where 99% of people fail in. they have their eyes and ears shut and walk in the dark on a bumpy road, and they hit the ground over and over again and stil refuse to listen. and in my opinion, they deserve to hit the ground every freaking day.
not knowing is nothing that must be punnished.
not listening is beeing punnished.
thats a concept that was valid and true since your birth and when your parents started to raise you. just at some point in time, the dumb think they know it all and forget that “not listening” is being punnished. just now with 30, 40., 50 it is not your parents who punnish you, its the “more intelligent people” who punnish you by taking your hard earned money away.
But that was eons ago and I can’t speak for banks nowadays!
