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Originally Posted by Davidaw  Right now working hard to accumulate my grubstake to at least $50 000 to quit my business and trade full time. |
Don't put all your money into the account. I speak from experience. Once you get a lot of money in the account you'll start feeling invulnerable and letting your losses run (or even worse, averaging them down til you're neck deep in them - it's very easy to lose track of the fact that 2000 dollars in margin can buy you 200,000 Euros when using 1:100 leverage). Worst thing you can do. I started off with 1000 dollars, made 600 in two months with day-trading the 5 minute chart (closing my positions very quickly, almost never holding them overnight). Then I got stupid. Annoyed at having to watch the charts non-stop (my job allowed me to do that) and stressing over and babysitting the open trades, I thought I was smart, deposited 12,000 dollars and tried to do carry trading (think of it as buy and hold while you collect interest on your position). Guess what, the EURUSD tanked like crazy, meaning the dollar strengthened like crazy and all my carry trades shot up like rockets (precisely the opposite of what I wanted them to do, because I was short the dollar i.e. long the high yielding currencies). I managed to close all my positions with an uncanny precision just as the market reversed, meaning that if I hadn't broken down, because the stress was eating me alive, I would have made 60% on those 12,000. Now I'm bruised and gun shy and 7,000 dollars short. And I found that most brokers expect you to lose, because it's almost guaranteed (if you don't, they'll start making sure that you do).
You really want to trade, don't put more than 5-600 dollars in an account, hell, go as high as 1,000. Use 1:100 leverage and be happy with 20-30 dollars a day on average (that's 1 dollar/pip at a 10,000 k lot) which is pretty doable. Say you manage to make 20 dollars a day, that means 400 dollars a month, that's 40% on your initial thousand (beats the crap interest rate in the US). All while the rest of your money is secure in the bank. There's nothing like peace of mind when trading, if you really want to go down this road, then the one you get by knowing you can't lose more than is in your account is priceless. Although I am beginning to have doubts about whether one can win long term. Bucket shops don't like it when you win (and make no mistake, every last one of them is a bucket shop, even those who claim your order goes straight into the interbank market - retail orders are too small to be accepted in the market, so usually it's your broker who is your counterparty). When I was doing carry trading, they let me do it at first and then they cut the interest I was earning to basically nothing, only to put it back to what it was after I washed out). Another time, when I was looking to go back in the saddle after my demoralizing loss, I started looking for other carry trade candidates, I saw they had raised the interest they paid on the EURO/Turkish lira to an eyepopping level. Being once bitten, twice shy, and since I am distrustful by nature, I became a little suspicious as to why they would all of a sudden pay such high interest on that pair. Turns out it, soon after that it starting going in the opposite direction. Had I shorted it in an attempt to collect interest, it would have depreciated by 37%, which meant a loss of more than 3,500 dollars on a lot of 10,000 units, a loss which the interest earned would not have been able to cover (while successfully picking the absolute top, or bottom if you will).
Another thing that happened to me with the same broker. They said they needed to truncate my trade history (and that my full statement would still be available for a small fee). In the process of truncating the trade log, a software error caused my account to be credited with the equivalent of 3,000 dollars (I trade in my national currency). This happened after the aforementioned loss. I should have taken the money and run so to speak, especially since what I made them in fees would have more than amply made up for that amount, and after all it just goes to show that nowadays money can indeed be created out of thin air. However, since I was worried they had actually credited the wrong account, I actually called them on the phone and told them they had made a mistake (yes, I'm a schmuck, anyone else would have taken the money and kept mum). I swear, when the girl who was my account representative heard me on the phone say "I think you made a mistake" you could tell from her voice she'd gone white in the face. I told her how they had mistakenly credited my account, and she said "well, ok we'll see how to fix it". Guess what, I was unable to connect to the server for 30 minutes while they "figured out" how to reverse their blunder. They fed me some line about how it happened to all their clients. I'll bet it did, especially if everyone received a lot of money. But the fact that brokers have the ability to unplug you or to delay your execution (which they frequently do - that's what requotes are, actually) is really worrisome.
You'll probably say I must have traded with some unregulated brokers. Not so: I was extremely paranoid (I am about everything, as I am very distrustful due to my life experiences) so I checked them out: they are regulated in several countries, they were even among the few forex brokers that were regulated by the Securities Commission in my country.
They entered the market by offering a Porsche Cayman as a prize, to whoever won a virtual trading contest. Some obscure guy won, god knows how. I looked at the Metatrader Statement: the numbers didn't add up. Somehow I think they doctored the statements after the fact, since the statements weren't audited by anybody, you can imagine that would have been pretty.
Another thing that was funny with the same brokerage: they used to invite prospective customers to meet their team for coffee in a coffeeshop. Everything paid by the firm of course. I met a guy there who acted like he was very knowledgeable about forex (not employed by the firm). He claimed he was an independent trader (you know, that thing many people wish to be). He claimed he was making about 2,300 dollars a month, which let me tell you in my country is a really big deal, if you make that much money you're basically a god, to decent people anyway). Well, upon hearing I had 12,000 dollars in my account, he started pressuring me into "working with him". Which meant, he "had an infallible method" but of course, he "could not share it with me for free". Because, you know, that would have been "unfair" and "impractical" (his words). The more he tried to convince me to work with him, the more I was skeptical. My skepticism became even more pronounced when I saw his car. It was ages old, one more day and the wheels would fall off. I mean if he had such an "infallible" method, why the hell couldn't he afford at least a second hand shiny BMW? I actually found out later he was divorced, and his second wife was the only one working in the family (lucky bastard) while he "traded" everyday. Of course, all the little money that he had went (and he once invited me to his place to have dinner with him and his wife) and on the way he told me not to tell her that he had lost the 3,000 Euros he had in one account with Oanda.
The story ends like this: some time later, the forex brokerage in question called me to tell me they were hosting a (very expensive) seminar about trading techniques at a luxury hotel at the seaside. Guess who was one of the speakers on the panel? None other than my old loser "buddy" with the "infallible" trading method. His speech was called: "Myth and reality in trading". How very appropriate? Like Gordon Gekko said in "Wall Street": "I guess he's giving lectures on how to lose money". I mean, really: "The myth is that I am a succesful trader, but in reality, I am mooching off of my wife".
As you can tell I am pretty ambivalent about this, and this industry is filled with half truths, snake oil salesmen and unscrupulous characters.
Perhaps you can make money with it, but you really should go into it with both eyes open and be extremely cautious. I strongly recommend some reading about this before you start if you're really serious:
Edwin Lefèvre - Reminiscences Of A Stock Operator (not a forex book but very good advice for a wannabe speculator) it's a book about
Jesse Lauriston Livermore - Wikipedia, the free encyclopedia
Agustin Silvani - Beat The Forex Dealer.pdf
8 Reasons Not to Daytrade Altucher Confidential
Jason Alan Jankovsky - The Art of the Trade - What I Learned And Lost Trading the Chicago Futures Markets.pdf
I can recommend some more if you're interested but these four are a must because they tell you some of the not so pleasant things about the game of speculation.
Most of the books written about forex aren't worth the paper they're printed on.
Friendly advice: just because you can use 1:500 leverage doesn't mean you should. I'd suggest going for 1:10 or even 1:5. I am even considering trying no leverage at all, to see how it goes.
You must have heard about the recently bankrupt brokerage firm MF Global. They were using 1:40 leverage. Which to me seems crazy, even though I traded with 1:100 myself.