i don’t want this to be another ‘it depends’ kind of answer because i’ve done my fair bit of searching the net and searching various forums, however, i’m still confused about how profitable forex really is…
i come from a poker background, and i was profitable there, so i have a good understanding of the importance of bankroll and risk management, which i’m sure is one of the most important things for forex as well.
it’s obvious that most people lose at forex. just go to any FX broker and you’ll find a quick link on how to deposit, but usually how to withdrawal is so well hidden that often you need to do site search to find it.
advocates of forex say it’s better than stocks for the usual reasons: 24hr, leverage, macro, etc. but is that really true? i don’t think i’ve ever heard of a rich forex trader, but we hear of rich investors all the time. why is that?
and then we have sites that automatically trade for you based on indicators. sounds too good to be true. but still, if you do the math, flipping a coin +1 or -1 per trade and graph that over a couple hundred trades, and you’ll have both times where you win lots and lose lots.
which leads to my last question…isn’t the market “perfect”? if it’s perfect that means forex traders will always lose in the long run because of the spread…so where can forex traders find the edge?
which leads to my last question…isn’t the market “perfect”? if it’s perfect that means forex traders will always lose in the long run because of the spread…so where can forex traders find the edg
What do you mean about the market being “perfect”…?? It has far too many variables to be perfect…
I think he means perfect as in following the Efficient Market Hypothesis. Coming from a gaming background this is similar to a Zero Sum Game. If you adhere to the Efficient Market Hypothesis, the price action contains all possible information about the market therefore it is very difficult to outperform the market. In this situation any advantage would be instantly wiped out by the spread.
If we did believe that the forex acted in accordance to the Efficient Market Hypothesis, we wouldn’t trade it as there would not be any money to be made.
You can be successful in Forex but you have to get rid of the gambler’s mentality. There’s a set of pyschological traits that successful Forex Traders possess. Unsuccessful traders generally have a gambler’s mentality.
I think a lot of folks get into stock trading and Fx trading as a substitute for gambling. In a way its like going to Vegas … you know there’s a pretty good chance you’re going to loose but there’s a certain “high” involved with laying your money down on the line, especially when you get the short term gains.
Ultimately, I think to be successful you need to learn and apply the basics.
You especially need to implement a strong money management strategy and strongly consider targeting very small gains to accumulate over [B]years[/B] not weeks/months.
A lot of people don’t have the patience for that … [I]especially[/I] when they start to hit a winning streak and think the streak will continue indefinitely.
Hope this helps.
My advice to you before you spend any real money in the market is to Demo.
Some folks on here will tell you that its a waste of time but given your pedegree as a gambler I think it will help you get used to realizing that Fx trading isn’t the World Series of Poker.
Well. One could argue the same with poker. If you play each hand exactly as you should based on pot odds, odds of drawing a winning hand, etc. then it’s futile to even play as it will ultimately be a zero sum game. Or in fact a losing game since the house as to take their rake.
So what’s the winning edge in poker? When you play correctly, and the other guy does not. It’s human error in poker that creates an edge for the poker player.
In poker if you lost your hand and played it correctly, does that imply that you misplayed the hand? If you folded your cards and it turned out to be a winner on the river, does that imply you misplayed the hand?
No, to both questions.
When it comes to risk, where one can create a winning edge, the medium doesn’t matter. The principles are all the same.
it’s indisputable that there’s an edge in poker because you are not playing against the house. you are playing against other players, which most of the time make big enough mistakes that you can exploit and profit more than the rake.
the reason why i’m venturing over to trading/forex from poker is because eventually you hit a wall with poker. the players at $10NL and infinitely easier to beat than players at $1000NL for obvious reasons.
this is not the case for forex. the market does not discriminate against good, bad, average, rich, poor, players.
You’re not playing against the house in forex. You’re playing against other players. Therefore, there is the good, the bad, the average, the rich and the poor.
The only reason the market even exists is because of the differences of opinions of the players involved. It is in those differences that one can create an edge.
Good question - but if that were true, then full-time traders would have had lucky streaks in some cases I know of lasting decades. Their success isn’t dictated by randomness.
It’s true the spread always has to be defeated, much like the house edge, but it can be done.
And finally, most people blow up far quicker than if they placed trades by coin-tossing. If it was only the spread against them, their accounts would slowly bleed to death. As it is, they usually blow up far faster than pure chance would dictate. Go figure…