Forex, not what it used to be. | Forex Factory

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Forex, not what it used to be.

  • #1
  • First Post: Mar 20, 2008 10:06am Mar 20, 2008 10:06am
Lots of sharks in the waters these days since there are fewer and fewer places to make money for investment banks. My suspicions have been confirmed based on some earnings reports from brokerages reporting record currency trading revenues.

I am starting to think it's time to get back into equities. The Forex game is getting very much about guesswork, because big houses are using arbitrage to eliminate risk and price movements have ZERO basis in reality. Commodities are in a similar situation.

Todays correction is due to a change in margin requirements for hedgefunds, but what does that mean to Forex going forward? The lack of liquidity is already brutal in the spot market, so it's just a playing field for contract holders looking to move the spot in the right direction for maximum return on thier contracts. We can try to follow the big money, but it won't be easy.

CLosed 2 profitable trades tocay, but I am in and out for very short term trades. Best of luck to you all, perhaps you can tell us your current success rate to prove or dispute my theory.

  • #2
  • Mar 20, 2008 11:20am Mar 20, 2008 11:20am
Quoting TIckerShuffl
Lots of sharks in the waters these days since there are fewer and fewer places to make money for investment banks. My suspicions have been confirmed based on some earnings reports from brokerages reporting record currency trading revenues.

I am starting to think it's time to get back into equities. The Forex game is getting very much about guesswork, because big houses are using arbitrage to eliminate risk and price movements have ZERO basis in reality. Commodities are in a similar situation.

Todays correction is due to a change in margin requirements for hedgefunds, but what does that mean to Forex going forward? The lack of liquidity is already brutal in the spot market, so it's just a playing field for contract holders looking to move the spot in the right direction for maximum return on thier contracts. We can try to follow the big money, but it won't be easy.

CLosed 2 profitable trades tocay, but I am in and out for very short term trades. Best of luck to you all, perhaps you can tell us your current success rate to prove or dispute my theory.

So you think Equities are better?
Patience + Humility + Study = Success
  • #3
  • Mar 20, 2008 1:59pm Mar 20, 2008 1:59pm
I don't think stocks are any different. Sharks are everywhere in all markets. The markets never change, the only thing that changes is the way they trend. If you are not confortable in today currencies markets doesn't mean they are harder to trade and stocks are easier.
Trading = a mirror to your human flaws. Fix them or be fixed.
  • #4
  • Mar 20, 2008 3:39pm Mar 20, 2008 3:39pm
Yeah liquidated my Forex spot market account. If there is a screaming currency trade I will just grab the ETF for the action.

As far as equities go, I am very suspicious but my plan is you buy small cap value to hold for a few years. Trading is taking too much time, and I have other money making opportunities that need attention.

Good luck guys!!! Get rich!!
  • #5
  • Mar 21, 2008 1:35pm Mar 21, 2008 1:35pm
Have you tried some long-term trading? It seems from what you wrote that you are a short term-trader.
  • #6
  • Mar 21, 2008 8:56pm Mar 21, 2008 8:56pm
Quoting TIckerShuffl
Lots of sharks in the waters these days since there are fewer and fewer places to make money for investment banks. My suspicions have been confirmed based on some earnings reports from brokerages reporting record currency trading revenues.

I am starting to think it's time to get back into equities. The Forex game is getting very much about guesswork, because big houses are using arbitrage to eliminate risk and price movements have ZERO basis in reality. Commodities are in a similar situation.

Todays correction is due to a change in margin requirements for hedgefunds, but what does that mean to Forex going forward? The lack of liquidity is already brutal in the spot market, so it's just a playing field for contract holders looking to move the spot in the right direction for maximum return on thier contracts. We can try to follow the big money, but it won't be easy.

CLosed 2 profitable trades tocay, but I am in and out for very short term trades. Best of luck to you all, perhaps you can tell us your current success rate to prove or dispute my theory.

I dont know about equities but what you say about the forex is perfectly right. And I will add that those making money are not those that are swimming in the shark infested waters. But instead it's those that are sitting comfortably on their whaling ships that is the big players that control the market. So even sharks are getting done in this market so what's the chance for us small fish, the retail traders? I'm using an analogy but that's the basic reality of the forex market.
Myself, I dont spend much time in the market, quick ins and outs several times a day. Otherwise, I feel it's too risky. Sharks may have poor eyesight but when they small blood it's game over
  • #7
  • Mar 21, 2008 10:50pm Mar 21, 2008 10:50pm
I just got into 4x about 4 months ago. I started out doing 15 and 30 min charts...couldn't seem to break even. Moved to 4hour / 1 day charts and am doing better. i know nothing about equities.
The ForEx giveth and the ForEx taketh away. (more taketh than giveth).
  • #8
  • Mar 22, 2008 1:06am Mar 22, 2008 1:06am
The only thing I look for in a market is its ability to provide a trend. The forex market provides excellent trends that can last for months. The weakness in the dollar started at the beginning of 2006. If you look back further you see how long the yen provided a trend trading opportunity. Equities provide excellent trend opportunities and that market has a known upward bias since after the great depression. As a trend trader the usd, chf, jpy, and eur provide all the action I need to trade.
{Link Removed}
  • #9
  • Mar 24, 2008 2:32am Mar 24, 2008 2:32am
an interesting thought: correction due to hedge fund's margin requirements changes.

I'd like to offer another theory: central banks in europe got extremely nervous when eurusd went close to 1.60. they may not have openly talked about intervention, but who is to say they wouldn't quietly do that anyways? there is a ton at stake, not least of all credibility. traders with real money at large institutions like DB and UBS know these things and follow along, accelerating the effect.

another thought: I'd venture to guess that the majority of FF members trade very small accounts (few thousand dollars worth [if you're not one of them, please don't take offense.] ), and do so in bucket shops, of which there is a ludicrous number around these days. Your trades aren't seen by any of the prop traders - only the overall hedge trades from the pool you participate in are even seen by other systems. My charts alwasy look different from the oanda charts people sometimes post here. We're almost at a point in Forex where we were with stocks in the 90's when Datek and etrade etc revolutinoized stock trading. The reason thing's don't follow the fundamentals as much as they used to is that you now have hordes of so-called "unsophisticated" market participants making guesses. At the end, this still results in hedge-based price action, of course, but look at what happened in the 90's stock market: things didn't make sense after a while either. Add to this all the anxiety at Wall Street, and you get a concoction of weird interconnections that no one can feasibly make sense of anymore.

In short, I really don't think the issue TickerShuffl mentions is attributable to arbitrage, but to a funky market psychology, driven by a large number of people who enter the market without knowing what they're doing.

And lastly, and this is complete conjecture on my part and may result in me being yelled at, it might be possible that things went bad on a number of trades, and the account has become too small to really make enough profit to make the effort worth it. Calling it liquidating might be a way to save face. But who am I to speak like this, I have no idea, but it is a reasonable consideration - so I hope I am not inviting rage...
  • #10
  • Mar 24, 2008 3:59am Mar 24, 2008 3:59am
I appreciate this comment and find it useful to me and other novice traders. I think the problem comes from the trader not the market. This, as you've said is due to gambling-psychology of most inexperienced traders rather than identifying the trend and make profit with it. New traders are always confused of the best time frame and indicators to use thereby jumping from one strategy to the other. Inadequate fund is also a great cause of losing in forex.



another thought: I'd venture to guess that the majority of FF members trade very small accounts (few thousand dollars worth [if you're not one of them, please don't take offense.] ), and do so in bucket shops, of which there is a ludicrous number around these days. Your trades aren't seen by any of the prop traders - only the overall hedge trades from the pool you participate in are even seen by other systems. My charts always look different from the oanda charts people sometimes post here. We're almost at a point in Forex where we were with stocks in the 90's when Datek and etrade etc revolutinoized stock trading. The reason thing's don't follow the fundamentals as much as they used to is that you now have hordes of so-called "unsophisticated" market participants making guesses. At the end, this still results in hedge-based price action, of course, but look at what happened in the 90's stock market: things didn't make sense after a while either. Add to this all the anxiety at Wall Street, and you get a concoction of weird interconnections that no one can feasibly make sense of anymore.


And lastly, and this is complete conjecture on my part and may result in me being yelled at, it might be possible that things went bad on a number of trades, and the account has become too small to really make enough profit to make the effort worth it. Calling it liquidating might be a way to save face. But who am I to speak like this, I have no idea, but it is a reasonable consideration - so I hope I am not inviting rage...[/quote]
  • #11
  • Mar 24, 2008 5:44am Mar 24, 2008 5:44am
if you can't swim with the big dogs get out the water, best of luck ticker.
If I Go Broke Trying Then I Will die happy.
  • #12
  • Mar 24, 2008 6:30am Mar 24, 2008 6:30am
I am starting to think it's time to get back into equities. The Forex game is getting very much about guesswork, because big houses are using arbitrage to eliminate risk and price movements have ZERO basis in reality. Commodities are in a similar situation.


All depends on your definition of reality.The markets change every day and accepting this allows us to change with them.Every pip is money for somebody
  • #13
  • Mar 24, 2008 6:52am Mar 24, 2008 6:52am
Hi!

It's not so "noir" as it may seem. Forex is the best business in the world! It's not taxed, you get many, many good opportunities, a lot of trending pairs to be found, etc.

I've never traded stocks, only invested for the long term (1+ year). But if you think that stocks are easier to trade - I don't share that thought. You've got high slippage, commissions, industry analysis, sector analysis, balance sheets, management evaluation,... I mean, it's a tough game.


I've got a friend, who has a PhD in finance, and runs the whole investing/trading division in one of the largest banks in the country where I live in. He firmly believes, that trading stocks is a waste of time. He trades only forex and futures for his personal account, while the bank's traders must trade stocks, so they have something to do. And they always under perform the market. Buy & hold is the name of the stock investing business. I personally buy stocks ONLY in bull markets. They have to be priced between $50 and $60, they must trend nicely, I set a 45% stop-loss ( I do NOT recommend this) and then I wait. Even years, if I have to. But all good stocks will eventually hit $100. I do not worry, since I'm prepared to loose ALL my money that I have in stocks. But it's almost impossible.


Anyway, cheer up, this is a good world we live in!
  • #14
  • Edited 2:30pm Mar 26, 2008 2:18pm | Edited 2:30pm
Quoting hendrix
...while the bank's traders must trade stocks, so they have something to do. And they always under perform the market. Buy & hold is the name of the stock investing business.
Oh man, Totally! Reminds me of the days when I was part of an investment shop that later got bought up by one of the largest financial institutions in the world. It was a 90's heyday type of place. I wasn't a trader myself, but those guys were just chomping at the bit do do something, ANYTHING, to fill up their days. Hence all this analyst b/s in the Newswires. People got really excited if some fund had 23% YTD growth...and usually that was due to dumb luck or 2 single trades that ran well because the find manager got the early scoop on some M&A action.

Oh , and speaking of boredom at work: the testosterone in the trading pit. They always hired the hottest assistants straight out of business school. That was by far the best perk of working in investment firms... wide-eyed hotties impressed with the money and the power, constantly being chatted up by over-confident traders, drooling over them at lunchtime... oh, I do miss it.

One thing that really bums me though about Forex is that you always gotta think about whether the dealing desk is going to take issue with your position.
  • #15
  • Mar 26, 2008 2:20pm Mar 26, 2008 2:20pm
Quoting Moe
if you can't swim with the big dogs get out the water, best of luck ticker.
in case you refer to wall street movie quote, that would be:

"The key is capital reserves; without it you can't piss in the tall weeds with the big dogs"
  • #16
  • Mar 26, 2008 2:25pm Mar 26, 2008 2:25pm
Quoting hendrix
Forex is the best business in the world! It's not taxed, you get many, many good opportunities, a lot of trending pairs to be found, etc.
Really? It is in most parts of the world, actually. {If you choose to declare it that is.}
Carpe Divitiae
  • #17
  • Last Post: Mar 26, 2008 8:37pm Mar 26, 2008 8:37pm
I think it depends greatly on the time frame you trade. To me forex was not intended for scalpers, since it trends nicely over the long-term and pays out nice interest (depending on which side you are).

There are some misconceptions though when it comes to comparing stocks vs. forex. For instance, the uptick rule, which limited the shorting of stocks was eliminated last year (2007). Also, many paise the ability to highly leverage one's trades in the forex. This is actually a necessity not a gift. Without the ability to leverage, only the cash-only big boys would be able to profit and not even that greatly at that. The volitility of the stock market allow you to profit equally without leverage.

Forex -> less volitile, more leverage
Stocks -> more volitile, less leverage
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