|
PureBytes Links
Trading Reference Links
|
A recent thread here has seemed to suggest that Forex trading is
somehow easier or less risky or more profitable than other forms of
trading. Most of you on this list know that to be largely poppycock,
and can probably hit the 'delete' button right about now. This
message is only for those tempted to buy into such claims, or for
those with memories that don't go back very far.
First of all, to address the claim that you cannot lose more than
your investment in Forex trading: Pure, unadulterated horse hockey.
I'm sorry to be the bearer of bad news, but I am positive that you
can lose more than your initial investment on ANY leveraged play. I
am 100 percent positive that if you look at the fine print on your
brokerage contract, you will see something along the order of: "will
**attempt** to liquidate your position should your equity value
suddenly break certain levels", zero being the last ditch, they will
first have a level for a "margin call" and another level for a
liquidation below that. Note however, that it will NOT always be
possible to get you out at a price that ensures you do not experience
negative equity, and further note that your brokerage does NOT for
one hot second intend to take a hit on a position you created if it
goes against you so suddenly that your equity becomes negative.
Believe me, they intend to come after you for the balance; I'm *sure*
it's in the fine-print of your contract (if not the bold-print); and
yes you CAN lose your house. Will you lose it? Probably not. But
you can, or at least you can take a hit far in excess of what you
planned to risk, and you should not be deceived about that. Enough
said on that.
Next, the joys and perils of leverage:
It is, as most of you know, a very sharp double-edged sword. When
you are right, it is a gains multiplier. When you are wrong however,
it is a loss multiplier IN EXACTLY THE SAME PROPORTION. There is no
way I know of to have the potential for huge gains, without also
having the potential for huge losses. Anyone who suggests otherwise
is either sublimely naive or has an agenda, IMNSHO.
Finally, a bit of a historical note:
I have been around for some unreal yen/dollar moves. I have seen the
trends reverse on a dime, with explosions in the other direction that
will rattle your teeth and turn your position to ashes, especially a
leveraged position. Take a look for example (and this is a rather
mild one) at the "trending move" in late 2001 that took the yen from
about 120 up to about 135 very suddenly. Then look at the yen at 120
6 months later going the other way. These things are just as tricky
to time as stocks or futures or you name it. They are not one bit
"easier", and if they were, so many sharp people would immediately
come into the market that any "easiness" would soon vanish as the
sharpies started dueling with each other. Do not be deceived about
this for one second.
None of this is a plea to avoid the currency markets. They can be
traded, and they can be traded successfully. They are not casinos
where the odds have been turned in favor of the players, however.
They are dangerous places where very sharp people hang out, people
(not to mention central banks that can print fiat currency at will)
with REAL CASH in quantities that can OVERWHELM your puny little
high-leverage position. They are just waiting for you to make a tiny
little mistake, believe me. Keep that in mind, and you can probably
play (somewhat) safely.
Okay, I said my piece. Back to work everyone. ^_^
Yuki
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Rent DVDs from home.
Over 14,500 titles. Free Shipping
& No Late Fees. Try Netflix for FREE!
http://us.click.yahoo.com/ArdFIC/hP.FAA/ySSFAA/GHeqlB/TM
---------------------------------------------------------------------~->
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|