Very Interesting Read

Not sure which Forum to post this but Risk Management does seem appropriate…

Yes… I have cut and paste this post I found in a very interesting forum I’m sifting through from a few years back (2012)
It has a lot of detailed information from obviously a very serious trader named Aaron… Read on…

"Here is my input for what it’s worth. I have 8+ years of experience, with the last 4 years traded full time, devoting up to 10+ hours a day to direct market participation. I am an educated (fool), mature adult with a degree in mathematics from a Russell Group university and more than a decade of programming experience, and i consider myself to be “sophisticated” (or stupid) enough to be involved in OTC markets. I have traded every possible combination of technical analysis, timeframe, fundamentals, with many brokers, ECN’s, MM’s and spread bet platforms, manually and with automation. I have put the best and most (un) productive years of my life into beating the FX markets. To cut a long story short, i have been around the block at least once and have the hairline to prove it.

When considering the FX market and the potential for manipulation, a “white lie” PR sound bite often used to muddy the waters is that the FX markets are just too large to manipulate, with ~$4 bln traded every day. Sounds HUGE right?
But as with any confidence trick, it’s a thing of scale; when you break that amount down into all the different markets, and break down the day into hours, minutes and seconds it turns out that only ~$2mil per second of flow is required to move the most liquid pair, EUR/USD, at the busiest times – and for the less liquid pairs the sums required to move a market are pitiful. What is a 2mil lot worth to a MM? Well, many retail traders trade with 1 mil lots using leverage… so the answer is, that to a MM, it’s not worth a lot.

The stone-cold truth is that if you place stops near the market they will be hit the overwhelming majority of times, and yes, they are specifically, targeted, and yes, it’s easy to do…just ask anyone with market making experience. And more to the point, if the MM was not legally allowed to do it, they would go out of business in a month. As a retail investor, your soul purpose as a short-term participant in the OTC market is to feed the MM’s book so they can lay off the prices at a future date, in layman’s terms – you are the fool at the table.

This function is not of the (misunderstood) kind where you place a trade and a institution or another investor takes the other side immediately, and it’s everyman for himself from that point… your function is that you implicitly expand the MM’s profit margin so they can take the bigger hits in the future from professionals who they are obliged to cater for. This can happen over minutes, days or weeks.

Having a “neutral book” is a misunderstood and an outrageously subjective concept; a MM can move a market some distance and still remain completely neutral within the constraints of their business model.
YOU provide “liquidity” to the market by putting it in the MM’s P&L margin, not by putting it in the spot market…99% of retail flows don’t get anywhere near the spot market, the real business is done on private platforms between extremely privileged institutional traders who “talk to each other”. That’s why you are offered and encouraged to use leverage (in most cases the option of trading without leverage does not even exist!

Why would it, that defeats the purpose! the ordinary sums in your bank account just wouldn’t do the job sufficiently).
Here is the long and short of it; it’s not in the interests of central banks that market makers and liquidity providers should face difficulties, especially not from retail investors.

Hence, they have all kinds of distinct privileges awarded to them to skew each and every outcome in their favor, this includes being allowed to move the market…and ripping off Mr. retail is their bread and butter. Ask your market maker to show you the contract they entered with the central bank and regulatory bodies of their given jurisdictions.

Also, don’t be fooled by the smokescreen of anonymity offered through ECN’s either. If you dig deep into all ECN providers, they have a clause that lets them share “any individuals data” with their liquidity providers.

Just think about that for a second…

Here is a word-for-word snapshot of the legal from a Swiss broker;

[I]“Dukascopy Europe is entitled to transfer all personal data of the client, transaction records and all other information submitted by the client or otherwise obtained during the course of the business relationship, to its affiliates or counterparties, in order to facilitate the consumption of, and to discharge its obligations under this agreement.”[/I]

So, I’m no lawyer, but I think we can all agree here that the premise of anonymity is a bit of a joke… that’s why this particular company, though Swiss, is legally based in Latvia where trade description requirements are easily skirted.

The whole industry; analysts, technical analysts, brokers, gurus, commentators, journalists, software developers etc…unwittingly… It all feeds off convincing people they too can have a comfortable life as an FX trader.

Trying to live as an independent FX trader is probably by far the stupidest thing an individual could consider, it borders on suicide…something many of us consider frequently. Scratch the surface enough, and you will find a lot of troubled individuals, who have been wrecked by a period of foolish desire to get something for nothing. Only to find they get a lot of nothing for just about everything they could give. Beware folks, trading can destroy you, turn you into a bitter and joyless individual and teach you a very cruel lesson…those with the money are intent on keeping it, and yours too.

Don’t say you haven’t been warned, the biggest mistake of my life was assuming I was smart enough for the job, when smarts really didn’t matter. The day trading (scalps, swings, noise) game is rigged".

Slightly disturbing - if true.

O.olll wow…

I’m sorry but that reads like a tale of woe from a guy who hasn’t succeeded at full time trading.

I too trade full time and have experienced none of the things in that post. I genuinely think it’s the best job in the world bar being a Formula 1 driver or a pro golfer.