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Hi,
>
> 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.
Your broker does not take you out of the market, but the trading
platform software does. It takes you out (closes all positions) when
you do not have sufficient margin (Guaranteed, rest assured).
>
> 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.
Sometimes, you have to have narrow stops, sometimes wide stops and
sometimes no stops (combine options with the straight underlying
instrument) to Cut losses short and Let profits run.
>
> 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
Well, I don't just trade because I'm smart, but because I'm the
smartest man in the world... That is exactly what you say every time
you buy and sell; You are calling the whole world a fool, every time
you buy and sell... That you bought or sold the underlying
instrument (whether stocks, bonds or futures or FOREX) before
everybody else did... Trading is the most ARROGANT thing a human
being can do... If you want to make money trading, don't be just
arrogant, be smart too...
Regards,
Pal
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