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Hello LP,
I don't know what is the original subject about and I wont go into details
of your post now, but your view on the forex or as you said (read casino)
doesn't reflect today's reality of this market.
VictorB.
>-----Original Message-----
>Cc: omega-list@xxxxxxxxxx
>Subject: Re: Foreign exchange newbie
>As Mark has kindly pointed out, there are a lot of scams out there, so
>CAVEAT EMPTOR.
>The chances of someone who, took a course or two, read a few books and
spent
>a few years trading forex and making in excess of 1000% a year with > 70%
>winning trades is close to 1E14 (1 with 14 zeros behind it) to 1 odds.
There
>are, of course, aliens that live among us on earth that we don't know about
>and have technology that we can't even comprehend... should I go on???
>As someone who has taken many, many courses at one of the better
educational
>establishments that money can buy and read many, many books on the subject
>and who has traded forex for top banks and himself over many years, let me
>say that I am lucky if I break even on money and %. But then again, I'm a
>idiot so don't use me for comparison...
>You want to make money in the forex market? Have a few billion dollars in
>the bank(s), have billions of dollars of trading lines with those same
>bank(s), wait for a quiet day with one or two markets closed (preferably
>London and New York together), call all the banks you have dealing lines
>with and buy or sell a few billion dollars and you'll probably move the
>market 50-100 points... Ahhh, the problems is getting out the next day...
>On a serious note, to answer your questions.
>1. The forex markets are the biggest, deepest markets in the world. I
>haven't checked the numbers recently but there have been surveys performed
>by the fed and other central banks that show that the daily volume is
>somewhere between 1 to 2 trillion dollars. Compare that with the dollar
>volume of all the major stock exchanges around the world and you'll start
to
>appreciate the depth of the foreign exchange market. Because of this, you
>don't see 5-10% moves very often as you can probably see in individual
>stocks. A recent example of a large move was when USD Yen dropped from
>around 145 to 100 in about 2 days but that's another story.
>The average daily movement is around 1-1.5%, very steady eddy. That's why
>banks, trading houses and "bucket shops" especially are willing to give
>small investors (read punters) a 100 to 1 leverage. You can't loose too
much
>in one day that they (the house) can't call your margin or cut your
position
>without losing too much money. Think of it this way, can you get a line for
>a million dollars at a Las Vegas casino? Probably not. Could Li Ka Shing
>(one of the riches man in HK)? Probably Yes. He can afford to lose a few
>hundred million and everybody knows that. If you lose a million bucks and
>can't pay, how do the casinos their money?
>Another important factor is that the forex market (read casino) is opened
24
>hours a day from the Asian open on Monday morning to the New York close on
>Friday afternoon. This means that they can call you anytime (day or night)
>when your margin runs low or out and if you don't pay up, then they cut or
>'hedge' your position immediately. So from a risk management point of view,
>this is manageable risk bet for the house.
>2. The spreads are usually very reasonable, partially because of the
>liquidity but also because of market traditions. Interbank deals on
>reasonable size is usually quoted in 1-2 pips. The market has become
>extremely efficient since the advent of electronic trading systems like EBS
>and Reuters matching, etc where all participants can see the other side so
>the spreads are very tight. A lot of times, the bid and the ask price is
the
>same, waiting to see who's willing to pay the brokerage.
>The narrow bid-ask spread is also a trap. For example, the interbank market
>is 10-11, I quote you 9-12 which is a very narrow spread without knowing
>what side you are going to trade on. You pay 12 and I pay 11, making 1 pip
>for me. However, when you want to get out of that trade, the market is
30-31
>and I quote you 25-28, still a narrow spread but I 'read' you as a seller
>because I know that you had bought previously from me. Without much choice,
>you sell at 25 and I sell at 30, making 5 pips for me... Starting to see
the
>picture?? By the way, I was being pretty nice when I quoted you 25-28. I
>could've quoted you 20-23...
>3. Forex markets do exhibit directional persistence because they are the
>'stock certificate' of countries instead of companies. When a country, like
>the US or Japan or an economic trading bloc like the EC wish to push their
>'stock' price around, you bet they can do it. They own the printing
>presses... Various central banks are key players in the forex markets,
>either to speculate (MAS, etc) or to intervene (Fed, Buba, BoJ) to effect
>government policy... Will major developed countries let their currency
(read
>stock) value fall to zero? No way! Would various countries try to
manipulate
>their currency value to get an advantage over their trading competitors?
>Absolutely!
>4. As Mark suggested, try Goggle and the internet. There should be a ton of
>stuff, good and bad, available on the internet now. When are you meeting
>her? Make the appointment for 5 years from now...
>A final note: I don't want to come off sounding like no one makes money in
>the forex market or else I'm going to get spammed to death. Some people do.
>Those with a good trading plan and very good discipline can make money in
>the forex market. Then again, these kinds of people can make money in any
>market....
>Another pearl of wisdom: The "Absolutely Very Best and Never been Wrong"
>forecasting tool that I have seen in over 25 years is to watch the 'client'
>positions at banks and trading houses (read bucket shops) build up. The
>client positions start to build up and grow whenever there is a 'trend'
>developing and these clients are usually 100% on the wrong side of the
>trend... I've seen it first hand... Why do you think banks are in this
>business for?
>Good luck and good trading,
>LP
p.s. By the way, is the 'gal' young and pretty? If not, move the appointment
out by another 15 years...
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