Is trading FX for living a myth? | Forex Factory

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Is trading FX for living a myth?

  • #1
  • First Post: Jun 15, 2007 3:48am Jun 15, 2007 3:48am
I am new to FX, but I have traded stocks for few years.

I think I know most of the TA indicators and some risk management, but I cannot have an acceptable result in demo FX account.

Is trading FX for living a myth?
(I mean trading for living like having a job; I do not mean trading for rich.)

Can anyone give me some insight?

Thanks in advance.

________________________
Living needs faith!
Living needs faith!
  • #2
  • Jun 15, 2007 4:14am Jun 15, 2007 4:14am
Quoting Faith

Is trading FX for living a myth?


________________________
Living needs faith!
NO It's NOT a myth. You can do it. Everyone can do it
  • #3
  • Jun 15, 2007 4:16am Jun 15, 2007 4:16am
I would say it's doable, I know people that trade other markets for a living. So it has to be doable on the FX market. I've found indicators, especially those that indicate over bought and sold. Aren't as effective, because of the trendiness of FX they give a lot of false signals. They do help with trend strength, but I've had the best success with price action and support and resistance (trendlines, H/L/C, MA's, fibs, previous high/low and round numbers). I mostly just look for PA around those areas, the more in the area the better the PA will be most times.
  • #4
  • Jun 15, 2007 4:55am Jun 15, 2007 4:55am
I think that your question makes sense and I loved the dichotomy of your question and your username

But if you allow me, I would like to share my view here, of course, this question is populating my mind for quite some time.

I my opinion, forex can be traded for living if it is traded as a business. Any business. And now it is easier to me to understand this concept better, since I started a real business with my sister, producing fitness clothing.

In a real business your gains a pretty predictable as your gross margin. You know how much your products cost (and you know they are at good costs or not) and you know for how much you CAN sell (and you know if your prices are good).

In forex, you know for how much you bought, but you don't know for how much you WILL sell.

The difference is that in real business sales are harder to make (so you know how for much you CAN sell, but you don't know IF you're going to sell). In forex, however, you sell at a click, but you don't know for how much you will sell (and when to sell), and this is NASTY.

In a real business you have a predetermined P/L and then you have to work hard to make sales. In forex you know you can sell how much you want at any time, but you don't know your P/L in advance.

So I came to the conclusion that forex for a living is easier if you force it to work as a real business. If you control your losses to a minimum, you should also decrease your profit demands. It's pretty easy and fast to make, say, 0.5% of your capital a day in forex. But that would give you about 10% a month. This is pretty good compared to real business, but with a $250 account you make $25. With $25,000 you make $2,500.

Bottom line, I think now that yes, if you have a good amount to start trading forex, you can live out of it, working hard to decrease the risk and to accomplish your profit target (sales are granted, you have to work on the gross margin)

In a real business you need a good amount to start working and you have to work hard to improve your sales, since you're gross margin (price-cost) is more or less fixed.

That's why the "million bucks" out of a $250 account is as unthinkable as trying to build a real business with $250 of working capital
  • #5
  • Jun 15, 2007 5:51am Jun 15, 2007 5:51am
No, living off forex trading is not a myth.

What it is INDEED a myth is newcomers' believes that they will be able to turn a 5K account into 100k in their first year.
  • #6
  • Jun 15, 2007 8:13am Jun 15, 2007 8:13am
Quoting shadeslay
I would say it's doable, I know people that trade other markets for a living. So it has to be doable on the FX market. I've found indicators, especially those that indicate over bought and sold. Aren't as effective, because of the trendiness of FX they give a lot of false signals. They do help with trend strength, but I've had the best success with price action and support and resistance (trendlines, H/L/C, MA's, fibs, previous high/low and round numbers). I mostly just look for PA around those areas, the more in the area the better the PA will be most times.

Dear shadeslay,

Thanks for your opinion. I always use crossover systems with triple timeframes for trading decision, but it cannot have a effective results, or I need more money and emotional management. I think yours PA is very good way to trade, because Jesse Livermore also used PA in his great times (eg. 1907 and 1929). However, unlike crossover systems (MACD, K%-D%) having clear signals, PA seems hard to have a clear signal to entry and to exit. Nevertheless, I will start to look at PA for trading decision.

Living needs Faith!
Living needs faith!
  • #7
  • Jun 15, 2007 11:17am Jun 15, 2007 11:17am
Quoting cesarnc
I think that your question makes sense and I loved the dichotomy of your question and your username

But if you allow me, I would like to share my view here, of course, this question is populating my mind for quite some time.

I my opinion, forex can be traded for living if it is traded as a business. Any business. And now it is easier to me to understand this concept better, since I started a real business with my sister, producing fitness clothing.

In a real business your gains a pretty predictable as your gross margin. You know how much your products cost (and you know they are at good costs or not) and you know for how much you CAN sell (and you know if your prices are good).

In forex, you know for how much you bought, but you don't know for how much you WILL sell.

The difference is that in real business sales are harder to make (so you know how for much you CAN sell, but you don't know IF you're going to sell). In forex, however, you sell at a click, but you don't know for how much you will sell (and when to sell), and this is NASTY.

In a real business you have a predetermined P/L and then you have to work hard to make sales. In forex you know you can sell how much you want at any time, but you don't know your P/L in advance.

So I came to the conclusion that forex for a living is easier if you force it to work as a real business. If you control your losses to a minimum, you should also decrease your profit demands. It's pretty easy and fast to make, say, 0.5% of your capital a day in forex. But that would give you about 10% a month. This is pretty good compared to real business, but with a $250 account you make $25. With $25,000 you make $2,500.

Bottom line, I think now that yes, if you have a good amount to start trading forex, you can live out of it, working hard to decrease the risk and to accomplish your profit target (sales are granted, you have to work on the gross margin)

In a real business you need a good amount to start working and you have to work hard to improve your sales, since you're gross margin (price-cost) is more or less fixed.

That's why the "million bucks" out of a $250 account is as unthinkable as trying to build a real business with $250 of working capital


Dear cesarnc,

Thank you for your detail explanation in comparing trading forex with conducting business, as it is very convincing, especially in part of controling losses by reducing profit demand. It is a fact that protect captial is the most important issue in such trading business. At the present moment, i wish i can constantly earn around 80 to 100 pips per week with demo account before trading live.

Faith!
Living needs faith!
  • #8
  • Jun 15, 2007 10:40pm Jun 15, 2007 10:40pm
Quoting cesarnc
It's pretty easy and fast to make, say, 0.5% of your capital a day in forex. But that would give you about 10% a month. This is pretty good compared to real business, but with a $250 account you make $25. With $25,000 you make $2,500.

Bottom line, I think now that yes, if you have a good amount to start trading forex, you can live out of it, working hard to decrease the risk and to accomplish your profit target (sales are granted, you have to work on the gross margin)

In a real business you need a good amount to start working and you have to work hard to improve your sales, since you're gross margin (price-cost) is more or less fixed.

That's why the "million bucks" out of a $250 account is as unthinkable as trying to build a real business with $250 of working capital
hellow, in real bussiness it is ok to loan from the bank, will it be ok to do it on forex? this question haunts me over and over again.
please gives us some insight
  • #9
  • Jun 16, 2007 1:22am Jun 16, 2007 1:22am
[quote]
Quoting Gwan
hellow, in real bussiness it is ok to loan from the bank, will it be ok to do it on forex? this question haunts me over and over again.
please gives us some insight]
Friend Gwan,

Good question. A few things to consider. If you borrow money to start a business, in most cases, you would be buying equipment, inventory etc. These things could be sold off if the business failed and at least part of the loan could be repaid by selling these assets. You would also have initial payroll expense and other start up costs that couldn't be recovered. But you would probably have some of your own money in the business as well. My point is that when you borrow for most businesses the loan would be at least partially secured.

With what we do in Forex there is a high risk of losing the borrowed money and no way to pay it back.
However if you were successfully trading a small account with consistent positive results I could see the temptation to use borrowed money to grow your account faster. I guess if you had enough income from other sources to repay a small loan you might consider it. But only if repaying the loan wouldn't be a burden. Even then I don't think you would find many who would condone it.

I think if you started with a small loan and lost it, it would be tempting to take another loan. See the problem?

I lived in Reno for a few years (gambling town) and I saw many people destroy themselves and lose everything. I don't consider Forex gambling, but my time in Reno has made me look at things from the conservative side.
With all that being said, I have to admit to buying mutual funds back in the eighties with borrowed money. Borrowed at 6 or 7% and 25-35% returns.

As for the topic of the thread, I don't think living off Fx is a myth. I do believe it's harder than most people expect. I've been self employed for the past 30 years and owned several small businesses. None of them have been as unforgiving as Forex.

A myth? Nope. Difficult, demanding and uncertain? You betcha!
  • #10
  • Edited 8:57am Jun 16, 2007 7:19am | Edited 8:57am
IF you are successfully trading an account, no matter what the size, then borrowing money to trade is just another business decision. If you aren't, then borrowing is tantamount to financial suicide.
  • #11
  • Jun 16, 2007 7:27am Jun 16, 2007 7:27am
I think that trading forex for a living for some people may be a myth, as they may not possess the necessary experience/psychology/disipline to make a living out of trading the forex market.

But maybe for others who possess the disipline, the experience, and the psychology it may very well be achievable.

For example, some people wouldn't like to work in an office all day, while others may. Some might want to work on a construction site, some in customer service, some in manufacturing...and so on.

Different people are suited to different professions/businesses. I think that is a basic fact that can't be ignored. Trading forex for a living is a business. That's just my opinion.
  • #12
  • Jun 16, 2007 10:22am Jun 16, 2007 10:22am
Quote
Quoting phil3526
I think that trading forex for a living for some people may be a myth, as they may not possess the necessary experience/psychology/disipline to make a living out of trading the forex market.

But maybe for others who possess the disipline, the experience, and the psychology it may very well be achievable.

For example, some people wouldn't like to work in an office all day, while others may. Some might want to work on a construction site, some in customer service, some in manufacturing...and so on.

Different people are suited to different professions/businesses. I think that is a basic fact that can't be ignored. Trading forex for a living is a business. That's just my opinion.


Very true Phil. I think the washout rate is so high because this just isn't what people expect. There is a difference between discovering something doesn't agree with you and flat out failure.

I believe a lot of people are drawn to Forex attempting to escape the very demands that Forex requires. Certainly not all but a very big share. Doesn't make these folks bad, more like victims of misinformation.
  • #13
  • Jun 16, 2007 10:25am Jun 16, 2007 10:25am
[quote=billflet;1468248]
Quote


I think if you started with a small loan and lost it, it would be tempting to take another loan. See the problem?
thank you, Bill, i almost have no experience aboul loan , (maybe somebody consider leverage as loan too, or loan as leverage?) , it is excatly as what you say, ... since forex works with leverage, it would tempting to leverage it one step further,... and thus gives the same problem with it :d

and congratulations for your bussines too
  • #14
  • Jun 16, 2007 10:25am Jun 16, 2007 10:25am
[quote]
Quoting Dopey
IF you are successfully trading an account, no matter what the size, then borrowing money to trade is just another business decision. If you aren't, then borrowing is tantamount to financial suicide.[/quote
]


Thanks Dopey. That's the answer in a nutshell.
  • #15
  • Jun 16, 2007 10:54am Jun 16, 2007 10:54am
You're welcome.

Quoting billflet

Thanks Dopey. That's the answer in a nutshell.
  • #16
  • Jun 18, 2007 12:05pm Jun 18, 2007 12:05pm
A little background on myself....

I am a painting contractor by day, and part time Forex trader. I speak 4 languages, play 6 instruments, and once tested completely out of all required history courses for the college I attended.

And I still SUCK at Forex.

A typical play in Forex is this: Two good weeks, one bad one. It comes out to flat even.

However, I recently met someone who makes a living trading Forex. He trades for Rubbermaid and before that traded for Scott's (The lawn care supply company.)

He lives in a 400k house. (I painted it, saw it, so it's true.)

He explained to me, at any given moment, he might be selling anywhere from 20-200 million Euros......or buying them. He also has to deal with the Brazilian Real. (Main currencies that Rubbermaid has him working with.)

Sometimes, they are buying Euros on the cheap, to pay workers over there. Sometimes its also speculation, but the latter is rare.

More often than not, he is buying because he NEEDS to, and the price doesn't matter. They have to pay German workers for example.

So yes, he makes a living. Oh, and here's something EXTREMELY IMPORTANT: He does NOT trade Forex for himself. He trades stocks. This says a lot I would think. (Certainly he knows when his company is about to dump 200 million, and still couldn't be bothered with it.) He told me I was crazy to do it. And that he never would.

When I asked him about indicators, he said "Price."

I then asked about Fibonacci, he said "If it works for you. But let's put it this way: Which time frame? How do you know to follow the 15 minute, or monthly?".

As for the rest of the market, I don't know. I really don't know if it is possible to make a living. When you have him buying 200 million EUR/USD, it will throw things out of wack. Is it really possible to trade against that?

The truth that you will never hear: most substantial forex transactions are out of necessity, not because John in Cleveland thinks the CAD is going to tank.

And even if he thinks that? Why? What does he know that a major firm or bank like Barclay's doesn't?

The truth is that this game was never meant for retailers to get into. If you want to see what forex is really about in its purest form, check out some historical charts from the 1970's for example. (Before we came in and killed REAL movement.)

However, I must admit I believe that you need a large account to do this. There is a theory (paper) going around from a much loved trader here in FF, and it states that if you only make 5 pips a day, in 18 months you will be at like 250,000 dollars. (starting with something like 1000 dollars.)

Ok, so where do we find our 5 pips? By the way, the pseudo-system prescribes a 20 pip stop-loss to get your 5.

Oh, and there are others making a living at this, I have no doubt. The "gurus" do well.

However, I suppose in theory it's possible. But trust me on this, MOST people bragging about making a living doing this, or the great trade they made yesterday, are flat out lying.

The stats don't like, most estimates are that 90-95% of all traders fail. So since there are so many successful traders at FF, either the learning curve has been sliced in half, (God I wish that were true. ) or there are some lying fools here. (Although, let me the first to say that I am sure SOME are doing it...but most probably aren't.)

However, if you want to do this, please start SMALL. That way, you will only lose time, and not money. I assume that with your background you must have made money in stocks, which is why I don't understand why you would play with this. (Forex behaves nothing like stocks. When's the last time you heard someone selling Walmart stocks to pay someone in Kansas?)

The truth of the matter is that banks are making more than ever in this market, wonder where they are getting the money from? You and I.

And I for one don't think that 5th/3rd doesn't need more money from me.

But, I treat it as a hobby, that way it never really upsets me. I took it serious once, and learned that there isn't a lot to learn. Just read through the posts, you will get 5 million different ideas.

But, there is also brokers killing their clients positions, lying gurus, panic trading because Trichet farted in the general direction of England, etc.

I think there are trends out there, but smaller time frames will kill you, and if you are trading a daily chart, you need like 200 pips leeway, so you can't trade much money in that. (Unless of course, your account is big enough.)

However, there may be some hope on the horizon. CME/Reuters are in the process of offering a centralized exchange. It's not for us of course, but in theory, some brokers will jump on board.

A lot of "successful" traders will tell you not to use more than 10:1 leverage, and less if you can. So in reality, you need to trend trade, and might get a positive return of 20% in a year. Sounds like the stock market to me. But again, money, money, money, is what you need to have, in order to get it out of this market.

Just my observations, and I hope they are wrong......
  • #17
  • Jun 18, 2007 1:58pm Jun 18, 2007 1:58pm
This is a topic that is dear to my heart. My ultimate goal is to trade for a living. Since I’ve found FF, I am glad to say that I’m on my way. My goal to start trading for a living is 5 years. I spent (year 1) 1st year learning all I could and (year 2) 1st year live struggling and (year 3) 2nd year live do very well at this point. So now I’m in my 3rd year and I actually should be ready to trade for a living by the end of this year, but I will wait and continue to work on my trading consistency, capital preservation and mental makeup. Just like everything else in this game … you have to take steps to get to the next level.

Happy Trading 2 All ….
If it is not broken, fix it until it is!
  • #18
  • Jun 18, 2007 8:06pm Jun 18, 2007 8:06pm
Quoting clockwork71
A little background on I think there are trends out there, but smaller time frames will kill you, and if you are trading a daily chart, you need like 200 pips leeway, so you can't trade much money in that. (Unless of course, your account is big enough.)
Just my observations, and I hope they are wrong......
You have good points there. But I have to disagree that you need 100-200 pips for stop loss. In my trade of Fiber and Cable, it takes only 50 and 70 (max) respectively using daily charts. And the friend of yours is a hedger. Hedgers never plan to make money in market.

Forex reminds me of futures market. Originally, people (hedger) trade futures out of necessity before the speculators (people who never need any commodity but take paper profit instead) came in.

You can trade forex like stocks as well. Buy, hold for a year and use no stop loss. But you have to use zero leverage.

Using zero leverage will result in lower profit. So you need leverage and this demands an elaborate money management and usage of stop loss.
  • #19
  • Jun 19, 2007 12:19am Jun 19, 2007 12:19am
Quoting luqmanz
You have good points there. But I have to disagree that you need 100-200 pips for stop loss. In my trade of Fiber and Cable, it takes only 50 and 70 (max) respectively using daily charts. And the friend of yours is a hedger. Hedgers never plan to make money in market.

Forex reminds me of futures market. Originally, people (hedger) trade futures out of necessity before the speculators (people who never need any commodity but take paper profit instead) came in.

You can trade forex like stocks as well. Buy, hold for a year and use no stop loss. But you have to use zero leverage.

Using zero leverage will result in lower profit. So you need leverage and this demands an elaborate money management and usage of stop loss.

True, he is a hedger, which is my point exactly. He sells millions because he needs too. Multiply this by God only knows how many companies, and this creates an issue for us little guys.

I happen to know that in my city, (as he told me) there are a few companies you may have heard of, Rubbermaid, Scotts, Limited Brands (Victorias Secret, Express, etc.), Honda of America, and Batelle all trade in this market. All need to make trades, therefore this is my point exactly. Hedgers. Chopping us up.

So now that I think of it, if Honda of America is a local deal, and they are sending their dollars back to Japan.....I guess the carry trade is coming out of the Columbus, Ohio area?

Huh....go figure, and the banks all think that it's Japanese retail guys are doing it.....
  • #20
  • Jun 19, 2007 12:54am Jun 19, 2007 12:54am
Quoting clockwork71
True, he is a hedger, which is my point exactly. He sells millions because he needs too. Multiply this by God only knows how many companies, and this creates an issue for us little guys.

All need to make trades, therefore this is my point exactly. Hedgers. Chopping us up.
It is a problem if you do not adapt to it. With every problem comes solutions, so find a way around it. Use this "knowledge" or what you believe to be causing you problems to your benefit. Bemac discusses how years back before the slew of "clickers", he was discussing with fellow partners(or traders he knew), how this would effect the current environment they grew to know. It is this thought process of always trying to be ahead of and adapting to the environment, instead of falling victim too it, that makes a true long-term successful trader(in my opinion).

Mike
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