I’m interested in getting involved in spot FX trading but at this moment I am a bit skeptical. I have done a little research and I have found that there are many credible people who deride FX traders as coin flippers and dismiss the idea that TA has any merit. I would greatly appreciate it if someone here who has made a significant and consistent profit over a long period of time (over a year) could post in this thread and attest to the fact that it is possible to play this market and come out a winner.
To give just a little bit of background, I’m a college student and I’ve done fairly well playing online poker as a small stakes grinder and I would like to use a portion of my earnings as starting capital in FX. I first approached online poker with this same skepticism until I was convinced that, with study and practice, it was indeed possible to profit. Before I am going to spend countless hours studying FX trading I would like to be convinced once again. But, I suppose that I will spend those countless hours in any case because frankly I find this **** fascinating. Thanks!
As an accomplished poker player myself. I can attest that there are my parallels between the two businesses. If you fare well in poker, then I believe you already have an advantage over most as you understand risk/reward, bankroll management, and analysis.
Poker players are called gamblers and coin flippers as well.
I know a professional trader that’s been doing it for years and is quite wealthy. I’m not that good yet, just a beginner. fx is a skill, like anything it takes lots of practice. Best thing to do is try it with low stakes. give yourself a good education first though. You wouldn’t sit down at a poker table without knowing anything about the game, so don’t do that with forex. go to babypips school, then dig in and have fun.
That describes the situation very well @present. Since Lehman collapsed in September 2008 FOREX trading has gone in that direction.
A very successful trader [Jim Sinclair] for the last 50 years wrote the following on his website a couple of days ago…
[B]“You can take your waves, percentages, algorithms, quants and quarks and throw them directly into the basket. The time for lines and squiggles are behind us.” [/B]
What he refers to in the above are TA traders.
Over a year is not a long period of time. If you survived your first three years you have done very well.
If your still trading FOREX after five years with consistent profits your on your way.
The secret…?
Adapt to changing market conditions and be nimble to adjust quickly and don’t rely solely on TA.
Also, stay out of the market if you don’t understand what’s happening. And by that I don’t mean TA.
I know very profitable traders who know only the barest minimum of TA but they [B]know and understand[/B] the markets they are trading in.
FX is a market like any other. It operates on the principles of supply and demand. The supply and demand for contracts of any given currency pair will fluctuate as price moves up and down over time.
Quite simply, for example, if you can pick out a price where you expect supply to overwhelm demand, you have an excellent short entry. Use that in context with technical confirmations and analysis of the overall direction of the market (ie. on a higher TF) and you have yourself an edge. But of course not every little trader figures out how to turn that edge into a profitable business, that’s how most fail!
Now supply and demand are fickle little things, and can turn on a dime if the big players want it to. But nobody said this wasn’t risky, you have to be prepared every day you trade, fully capitalized and with years of experience and education backing you up before you can expect to actually make good money.
But that’s in the past.
Nowadays…because of QE…unlimited easy credit a.k.a. bank bail-outs with applied 200:1, 400:1, 500:1 leverage is what’s driving the FOREX market and equities for that matter. This can go on until infinity because there is no limit in QE.
And the overall direction of the market changes x times in a session.
Why…?
Because robot-like TA traders chasing each other and trying to pick each others pockets.
And before a major move from the interbank players with unlimited QE funds a stop sweep is initiated because TA traders putting their stops in the same area.
A retail trader is always at a disadvantage to IB players hanging on QE. That’s the first thing one [B]needs[/B] to accept in order to be successful as a retail trader.
akeakamai is right. Forex is market as any other based on supply and demand, but that doesn’t mean its easy. You have to read news a lot, making analysis and having a sense for the economics as a whole. And of course first being prepared for trading.
Earning money in Forex is something real, but this is not “a fast winning machine”. Losses are also part of traders daily round.
Actually one year is quite short period for making big profits. Your first year is more like a training period. But if you are consistent and have a desire to succeed in Forex by the time you will.
Be prepared, trade wisely, stay away when you don’t know what will happen.
Success and many pips
Everyone says that I don’t think anyone really understands it. “Adapt to changing conditions” - if you trade based on price action, how does it matter. Ranging, trending, it’s all a price action to trade off.
You have an infinite supply [QE] of worthless paper crap called $US. EUR, GBP, CHF and the rest of it. Because QE is global. All central banks have gone that way. QE means monetising every [B]worthless[/B] piece of financial paper instruments in sight with no real value.
So where is the demand…?
I have asked this question a couple of times in this forum…
[B]Who is buying that worthless paper crap called currencies with it’s TIPS, bonds ect…?[/B]
There isn’t any demand…!
The only reason the USDX hasn’t broken down and sent the $US on it’s way south to !0! value is because there is [B]no[/B] alternative yet to the $US as world reserve currency.
Now that has got nothing to do with supply and demand, market forces blahblah. It’s political.
Let’s assume a person started trading a year ago. The market conditions he’s been trading in the past 365 days are shaped by QE, Index funds [nothing else than TA on a big scale] and close to zero interst rates across the board. Also a reduction in carry trades because of interst rates environment.
That person [B]only[/B] knows that kind of market environment.
That person trades price action and TA because the majority of participants doing that. Regardless what side they belong to.
Long time and experienced raders who don’t trade TA are staying out because they are waiting and have positioned themselves at critical price support areas they [B]know[/B] from experience will not hold for that much longer.
A trader who has been trading for 365 days doen’t know this because he doesn’t have the experience and he only knows QE shaped market conditions. He has never experienced a near breakdown of a currency like in 2001 and the rattles that went through Forex and the commodity complex because those critical price support areas where hit.
Wait till you see and experience it what it means.
It is coming soon.
China demands the SSCI by the end of 2009. It means nothing else than the [B]total exchange of it’s dollar reserves.[/B]
I am pretty sure you will not be able to trade your price action when that’s starting to unfold because you will not be able to place an order.
But for those of us who trade supply and demand nothing of this matters!
If what you think will happen to the USD reserve currency status does happen, we’ll just find those nice shorting setups and profit from that.
The basics of trading supply and demand is human psychology and that never changes or at least changes extremely slowly over the decades.
However, RSI and Bollinger bands and what not may not work as in the past during these new times. But that doesn’t affect those who basically trade human psychology aka price action.
edit: one thing though: something not many think about - your account base currency. I have EUR but most of course have their acounts in USD. If the USD is about to hit the chinese wall, one might want to think that choice over.
Those who are suggesting the end of technical analysis likely never understood it in the first place. TA is the study of the impact of transactional flow and market psychology on prices. Fundamental analysis deals with the determination of value. Technicals deal with what folks are actually doing. There is always going to be transactional flow and there is always going to be market psychology. That being the case, there will always be value in TA. As has been stated already, however, the analyst needs to be adaptive to changing conditions (which often means changes in volatility) just as the fundamental analyst must adapt to changing factors in the valuation equation.
Cas has put forward the suggestion that all the QE and market involvement of gov’t and central bank forces has changed things. Change is constant in the markets, and we must deal with it or get washed away. Intervention in the markets is nothing new. Central banks have bought and sold securities to manage money supply for a long time, and intervenion in the forex market has happened numerous times over the years. Fundamental analysts just add all that into their estimations of relative currency values and technical analysts watch to see how the market acts, just as they’ve always done.
Nowadays TA is the following of the herd where the leaders of that herd are followed no matter what the underlying conditions are.
The Ministry of Truth is believed without question and the confidence game is played for another session, day, week, month ect.
45 POMC interventions from the FED since May 23rd to date is a concentrated level of manipulation…ahm…intervention…not seen in the past and likely to increase.
The world reserve currency backed by worthless financial paper instruments is a situation not seen in the past.
The central bank of the world reserve currency running out of it’s own balance sheet capacity to take on an ever increasing mountain of worthless financial paper instruments is a situation also not seen in the past. There is only 300 million USD left on the FED balance sheet.
Ever increasing USD Swaps in order to prop up 3/4 of FOREX currencies is a situation also not seen in the past.
The expansion of $US Cash Management Bills in order to prevent US Treasury from declaring bankruptcy is a situation also not seen in the past.
If fundamental analysis deals with the determination of value, as suggested by you, everybody would come to the conclusion that the world reserve currency backed by worthless financial paper instruments has [B]NO[/B] value and sell.
That’s true quite often in the markets. Current conditions are not unique. Look to the middle 80s or the late 90s in the stock market for glaring examples of herd mentality.
The world reserve currency backed by worthless financial paper instruments is a situation not seen in the past.
The world’s reserve currency hasn’t been “backed” by anything since Nixon took the US off the gold standard almost 40 years ago. No major currency is anything but paper (more like electronic digits now).
Ever increasing USD Swaps in order to prop up 3/4 of FOREX currencies is a situation also not seen in the past.
The swap lines have actually been on the decline, but they had nothing to do with propping up any currencies. That was about ensuring sufficient availability of USD in overseas markets, which were choking from lack of it.
If fundamental analysis deals with the determination of value, as suggested by you, everybody would come to the conclusion that the world reserve currency backed by worthless financial paper instruments has [B]NO[/B] value and sell.
But that hasn’t happend yet.
How is that possible…?
You are looking at things in absolute terms, which doesn’t work in this case. The forex market is a relative market, not an absolute one. USD/JPY is not the value of the USD. It’s the value of the USD relative to the JPY.
Selling the USD (which many folks have done, to be sure) means having to buy some other currency. Remember, we’re not talking about speculative traders here. We’re talking about those with big capital and/or multi-national operations. They are the ones who mainly drive the currency trends. What other currency is it going to be? All the other major global currencies are in basically the same boat as the US. They are all doing QE and running budget deficits to a greater or lesser degree. The next tier ones such as Australia and Canada do not have large enough markets and trade balances to be able to attract substantial capital and when you start moving out to places like China you add in capital controls which make it a challenging or risky proposition.
Well even if the Bank traders have a million times more money than me, they will still be looking to enter the market at specific prices. I would never try to trade against the massive money flows on the IB, I just try to join in on their operations. If they are going to run stops, then prepare for that! If you know what’s going on, you can adapt to it.
The world’s reserve currency hasn’t been “backed” by anything since Nixon took the US off the gold standard almost 40 years ago. No major currency is anything but paper (more like electronic digits now).
Let me re-phrase that…“exchanged” is a better word.
We both know all currencies are FIAT and worthless.
The swap lines ensured that big banks in europe didn’t go bankrupt and taking the EUR with it. If you have a bank like Deutsche Bank having balance sheets liabilities of more than 80% german GDP p.a. you are looking at a potential currency meltdown. Same in Japan with the JPY.
Those swap lines were used to prop up balance sheets from banks like Deutsche Bank, UBS, RBS and so on in Europe, Japan and other parts of the world.
AIG bail-out FIAT got used as well.
You are looking at things in absolute terms, which doesn’t work in this case. The forex market is a relative market, not an absolute one. USD/JPY is not the value of the USD. It’s the value of the USD relative to the JPY.
It doesn’t really matter. You can pick a pair like you did above, which is relative or you can pick the USDX basket of currencies, which is absolute.
In the end the result is the same.
What other currency is it going to be?
Gold.
In the end…when this is all over…gold is all what will be left.
It only depends what name tag is chosen…SSCI…modernised and revised FED Gold Certificate Ratio…or whatever.
All the other major global currencies are in basically the same boat as the US.
With the important difference that the USD is the world reserve currency.
But the thing is that also gold is FIAT and worthless isn’t it. It only holds the value that we assign to it, just like one of your “pieces of paper”. There’s no difference at all.
All other commodities are also FIAT, since they only hold the value they do, because we choose to believe that’s what they’re worth. Everything is subjective here and that’s why FIAT currencies have worked for many decades and will continue to do so.
But I guess that if you hold that belief of yours, some gold-digging nations currencies might not be a bad buy huh
