_[classroom] Just so everyone is aware, I am a RETAIL forex trader. I have no back screens or internal bank knowledge.
This is a profitable HOBBY for me. I am a Broker and insurance agent by trade. I took up forex trading in 2004. (with mixed results). It is not an easy profession. practice a long time beofre you trade for real. After some basics on the forex market, I will go in to managed accounts.
I have a few more basics for you on the Forex market. Forex stands for Foreign Exchange.
[classroom] What is Forex? If you've ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet (if you're a dude) or purse (if you're a lady) or man purse (if you're a metrosexual) into the currency of the country you are visiting. You go up to the counter and notice a screen displaying different exchange rates for different currencies.
You find "Japanese yen" and think to yourself, "WOW! My one dollar is worth 100 yen?! And I have ten dollars! I'm going to be rich!!!" (This excitement is quickly killed when you stop by a shop in the airport afterwards to buy a can of soda and, all of a sudden, half your money is gone.)
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_When you do this, you've essentially participated in the forex market! You've exchanged one currency for another. Or in forex trading terms, assuming you're an American visiting Japan, you've sold dollars and bought yen.
Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed. It's these changes in the exchanges rates that allow you to make money in the foreign exchange market.
The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial market in the world. Compared to the measly $74 billion a day volume of the New York Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4 TRILLION a day trade volume. Forex rocks our socks!
The largest stock market in the world, the New York Stock Exchange (NYSE), trades a volume of about $74 billion each day. If we used a monster to represent NYSE, it would look like this...
You hear about the NYSE in the news every day... on CNBC... on Bloomberg...on BBC... heck, you even probably hear about it at your local gym. "The NYSE is up today, blah, blah".
When people talk about the "market", they usually mean the stock market. So the NYSE sounds big, it's loud and likes to make a lot of noise.
Forex market 4 Trillion per day NYSE 74 Billion per day Toyko Stock Exchange 18 Billion per day London Stock Exchange 7 Billion The currency market is over 53 times BIGGER! It is HUGE!
[Thankful] Is one required to trade a certain volume or number of transactions to remain a forex trader?
[classroom] No .... you can trade for pennies or thousands of dollars per trade that is if you are a self trader
[wisewarrior] Where can we buy gold in other currencies like the pound sterling?
[classroom] Gold is priced in Dollars worldwide, like all commodities .... to build a position in gold/Pound you have to do a synthetic position and that is beyond the scope of this chat
[shar35] Was there a particular forex trading course that you found helpful? Or did you mostly learn from trial and error?
[classroom] If you are a beginner the best site for basic knowledge is www.babypips.com. A pip is the unit in price of forex movement. There are more systems than good traders you have to find one that works for you.
[shar35] When you trade the forex - do you use technical analysis or fundamental or news as your main decision points?
[classroom] I am a chart reader or technical analyst. I do follow the fundamental news. News comes out daily about all currencies, and can move the market dramatically.
[DBF] Do you own IQD or VND, what made you buy it?
[classroom] I own both currencies. A fellow forex trader is a retired navy seal from the war in Iraq.... his dad was a seal in Kuwait and knew of fellow shipmen that profited on the Kuwait revalue. He told me to buy the dinar in 2005 or so... I have been on the BUS a LONG TIME!!!!!!
[maple] Is there any one forex site we should watch? Is Netdania just as good as forex.com ?
[classroom] They will all have it over time. No telling who will be first. I bet it will be the CBI website first but that is a guess. Forex.com is a broker and you can open a retail account through them if you choose but the IQD is NOT on any platforms yet to trade. Brokers will add it after RV if there is enough demand
[shar35] How successful are managed forex trading accounts? How does one find and evaluate a provider?
[classroom] You have to do a bunch of research. Not all are created equal. Some are self directed and some are more turnkey. DRAWDOWN or previous losses are key in evaluation. The higher the return the higher the volatility.
You don't get something for nothing. It cracks me up when people ask, "where can i get a fixed 8%" in other chats - YOU CAN'T. BANK saving accounts are .25 where is someone going to get 8. 10 yr treasuries are less than 2%.
If you go to international banks overseas, you might get a higher rate but you have currency risk. Sorry bit off question
[Thankful] What is considered a "good" rate of return?
[classroom] In forex managed accounts .... i think you can find good traders that can average 2 - 10% ...... per month. In managed stock accounts if you can do 3 per Year over the Risk Free Rate .. (90 day tbills) you are doing good. Stocks have done nothing really for 10 years.
[DBF] What other currencies would you be watching if you wanted to invest / speculate?
[classroom] Not there yet DBF .... but If Iran folds, or Syria .... they could be in the fold. IF you want to just hold cash in another currency instead of the dollar, you need to go with a country that has a commodities based economy. Canada, Australia ....
[Corpsman] What would be considered a reasonable spread when selling one currency to buy another?
[classroom] Different if electronic or paper at the bank ....... hard to quantify that corpsman
[punkybrewster] What kind of person/personality makes for a good trader in your opinion?
[classroom] If you have a "need to be right" personality, you will not make it.
You have to take losses and get out. If you get married to your trades thinking you are "right" you will be divorced from your money. You have to be very risk-adverse. Women tend to make good traders.
[sfmhi] In your opinion do you see Forex trading as a "risky" investment strategy and should be for those younger than 55?
[classroom] It all depends on the trader or the system. I know of a trade system that averages 16% a year with very low volatility and i know of some that do 200% a year. You can build a portfolio of traders for every risk level.
Make sure they are registered with the National Futures Assoc (NFA) or over seas equivalent. They tend to be the better trader and more experienced. I am Registered with NFA and FINRA as a broker
[ugrant] What is your advice on the abc's of how one should begin trading in FX?
[classroom] First go to babypips.com and do self study. Then find a trader that is successful and hire him to teach you. There are so many systems out there you can buy, but if it was the "holy grail" of systems - why is he selling it?
Would you want the goose that lays the golden eggs or the egg? Babypips starts with kindergarten and ends with college .. very good basics there and if you go to work with someone you are going to have to know the terminology before you can even get started.
[FGump2] Do you subscribe to any paid newsletters to evaluate your thoughts against theirs? Or are you predominately self-directed. Thanks for coming out today.
[classroom] I subscribe to some stock and option newsletters but nothing for forex. I read charts .... and follow price movement
[jimmy] If you could only tell us one thing to focus on post RV, what would that be?
[classroom] Don't worry about the return on your money ... act like a wealthy person and worry about the return OF your money and take it slow .. and consult wise advisors.
[divinegrace] Is platform trading considered forex trading alone or a combination of stock and forex? and (2) can you suggest a good platform or is that out of your realm?
[classroom] there are many platforms to choose from. Metatrader 4 is a third party platform that is used by most brokers and is pretty good. I like the platform at FXCM. It comes down the features you want in the platform.
If you want to combine stocks and forex in the same account, I use THINKORSWIM. They were bought out by TDAmeritrade for the technology.
[rjandrj2] What exactly are penny stocks?
[classroom] Penny stocks are low priced stocks under $5 dollars ... but most of the penny stocks are less that a dollar. If you want to do stock investing on your own, I recommend Investors Business Daily. Great paper and get information. There are MEETUP.COM groups all over the USA. I help run on in Detroit area.
[dinarhero] Is there a way to verify a managed forex companies' claim of returns? Thank you
[classroom] Ask for PROOF ...... and statements. A solid company can provide that to you. If they won't, run away or make sure the returns are AUDITED
[artdiva] When you are watching/looking for an investment, what do you look for and how long are you prepared to wait for a return on that investment?
[classroom] It really depends on the investment. Some may take years to payoff, others you should know tomorrow. In managed forex you can have access to the returns daily. I look at the people running the show and do I trust them. Its hard to judge character but you have to find a way.
On major investments I like to get my wife involved. Women tend to be better judges of character than men. I like to buy stuff too much, it must be on my forehead!
[painter] What's a hedge fund?
[classroom] There are many hedge funds, types and styles. They were designed in the past to make money in up and down markets, but not so much anymore. They normally take 1 million to get in and you have quarterly lockups.
Not real liquid. Comparted to managed forex you can have liquidity up to daily depending on the program.
[wisewarrior] If I'm concerned about a major extended decline in the USA and I want CAD or AUS or maybe even yuan, would a managed forex account require my constant attention? I am tired of being in front of my computer
[classroom] NO not at all....... you can go to EVERBANK.com and they have CDs denominated in other countries. Good outfit. They have brick and mortar offices in Florida or online.
[racehorse] What percent of your investments would you recommend putting into forex?
[classroom] Forex is in the Alternative Investment section of your porfolio. A good rule of thumb is to keep it under 20%. I do go a bit higher right now because US stocks scare the crap out of me. We are going to do a class next week on other alternative investments.
[DDDD] How do I choose a successful trader to hire? Do you have a list?
[classroom] Best I can say now is research. I promised not to give any recommendations today.
[mike1422] Isn't leverage in the forex markets what creates a lot of the volatility in forex?
[classroom] YES .... leverage is KEY. A trader I work with uses NO LEVERAGE and averaged 16% the last 2 years. 16% per year ....... other traders using a ton of leverage can average up too 200% per year but with higher returns come HIGHER DRAWDOWN or downside volatility.
[shar35] In finding the good forex traders that offer managed accounts are the successful providers more institutional types, or 'lone wolf' types?
[classroom] I am sure there are good 'lone wolf' types but unsure how to quantify the returns. I tend to stick with a larger firm.
[bogeyboy] What do you think of covered calls?
[classroom] Covered calls can be very successful IF THE MARKET doesn't tank and drop 30%. It can increase your yield, but you are risk of a falling market. You can buy puts to protect your downside risk, but that cuts into your yield.
[DBF] Will you still trade after the RV, if so full-time still?
[classroom] Yes I trade for MYSELF and also hire other traders to diversify. make sure you have money with more than one trader.
[.FG] What brokerage house do you use? Any comment on FXCM?
[classroom] FXCM is good .... I like their platform. I use them and THINKORSWIM
[Montreal] What do you think about investing in companies like Haliburton, John Deere, etc. that will have major contracts in Iraq?? Thank you!
[classroom] Very good, long term companies to invest in and a safe way to invest in Iraq post RV but in a falling tide all ships sink ... you have be able to ride it out if you are LONG TERM.
[owl2] averaged! 6% per month? Per year?
[classroom] 16 per year. I know of some that average over 10 per month tho! Rock on!
[ram1] Is there anywhere we can go for a class to learn about day trading?
[classroom] I will have a MOD post some in the forum after the weekend. I need to give it more thought.
[JWL] Can we carry cash (dinar) into FOREX and get USD wired to our account?
[classroom] No ... retail forex is not designed for that. Follow cash in instruction through 3sintel or other sites. They will want dollars wired to your account. (unless you are in a different country).
[racehorse] Which currencies are the "strongest" or most stable?
[classroom] It goes in cycles ..... different every year ....... Today i like Canadian and Ausi ... maybe GBP .. pound . Oil based economies. The pound tends to do well based on oil too.
[classroom] What is Traded? The simple answer is MONEY. Because you're not buying anything physical, this kind of trading can be confusing.
Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company.
The price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy. Like we are buying the IQD on the premise that the country will be sovereign and trade internationally. (and prosper)
When you buy, say, the Japanese yen, you are basically buying a "share" in the Japanese economy. You are betting that the Japanese economy is doing well, and will even get better as time goes.
Once you sell those "shares" back to the market, hopefully, you will end up with a profit. In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to other countries' economies.
[OhanaNena] Is there a computer program that will help you do day trading? One that works?
[classroom] Yes that wil be in the forum later ... systems and software.
owl2] I realize "consistent performance and limited loss" are 2 main goals... Do you have confidence in someone claiming to yield 10% per month?
[classroom] If it is an individual, ask for trading history for his claims and it MUST be a LIVE account. Never trust "demo" or system track record
[jonnywg] THANKS SO MUCH ......... EXTREMELY EDUCATIONAL
[classroom] You're welcome, Jonnywg. Its been my pleasure.