The odds against us (retail traders)? what can you do? | Forex Factory

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The odds against us (retail traders)? what can you do?

  • #1
  • First Post: Aug 26, 2008 3:58pm Aug 26, 2008 3:58pm
Hi,

I would like to address some of the issues I've been thinking regarding what us (small) retail traders have to overcome so that we can be successful as retail traders.

So, we have to have developed mind, method and money management at first.

We have to have a consistant approach and realistic expectations. This is sometimes hard when you have a small account and you want to be "free" and "independent" as this is the dream we are being drawn to. If a big fund makes 12% a year, it is hailed as one of the best. If we make 12% this is regarded as small potatoes. We aim for much bigger returns which may not be achievable with proper money management and risk taking which can take a hard hit onto our equity.

Another issues: there is a gap between expectations and reality. If you have an account of less than EUR 5,000, it is hard to be able to trade for a living.

you want to, but you just can't.

Jobs: you cannot find a job as a trader (in any form, either as a trainee, as an internship, trading a small account, etc). From what I've looked there is demand mostly for programmers, systematic automated trading systems and you can mostly find jobs in sales.

I don't want a job in sales, I just want to trade but I can't. There is this whole aura of mystique regarding traders and the money they earn, but you just can't find any job as an FX trader.

The banks here don't trade their own account, they just meet the supply and demand and make their cash based on volumes and commissions.

Also, I am affected by this gap between reality and what I can realistically get.

So how do you cope with these issues mentioned above, am I the only one thinking like this?

So to sum it up, you can have the method, the mind and the money management but if you don't have the absolute cash amount, the determination to consider yourself good if you can average 10-15% / year each year and you can't find a job, what can you do?

Really expecting feedback on this!!!

all the best,
  • #2
  • Aug 26, 2008 5:26pm Aug 26, 2008 5:26pm
I'm honestly in the same position and am beginning to offer some people that I trust and that trust me the opportunity to get in on the return I am making. I 'could' trade full time if I had enough cash. I don't risk much and my returns put out far and away beyond 12% a year.

Just keep up your discipline and MM and keep moving forward. It's important to always grow your account and add to it whatever you can to make it toward you goal of trading full time.
  • #3
  • Aug 26, 2008 6:46pm Aug 26, 2008 6:46pm
The first thing you need to do is get a foot in the door so take the sales role.
That will allow you to network with the traders,clients etc.
Trading for a bank is completely different than trading for yourself.Most bank traders dont take large positions and are price makers.
They are given positions they dont want and scalp as much as they can.

Proprietory desk is what you should aim for.
You will need history behind you before being considered by them.

Good luck
  • #4
  • Aug 26, 2008 7:33pm Aug 26, 2008 7:33pm
this topic has been beaten to death here:

http://www.forexfactory.com/showthread.php?t=86622
  • #5
  • Aug 26, 2008 8:34pm Aug 26, 2008 8:34pm
even if MM only prolonged trading account life, it is still a good doctor.
  • #6
  • Aug 26, 2008 10:08pm Aug 26, 2008 10:08pm
Hi BGrigore,

Almost every success book I've ever read and many biographies either have the same mantra or the same moral to the story:

Long term vision and delayed gratification.

Albert Einstein called compound interest the 8th wonder of the world. Sure, we're trading teeny-tiny-itsy-bitsy-super-nano lots right now (what would that be anyway, like 1000th of a penny? ) but sooner or later you could be trading 100 lots with the click of a button

I'm in your same boat. I have huge dreams, and can't wait to reach them, but I have to keep reminding myself that if it were easy either everyone would do it or it would be some lottery-esque pipe dream.

I also plan on trading for family and friends soon, and maybe opening up shop sometime down the road, but in the meantime I'm happy to look at the bank's rate of returns (or even that majority of funds available) and smile knowing that I'm kicking the crap out of their returns.

We may not be millionnaires next year, or even able to be full time traders, but it's the best option available so far, and trading (to me) is all about "the art of the possible".

Keep your head up If we do the right things, the right results are all but guaranteed.

Hope this helps!



Seavo
  • #7
  • Aug 29, 2008 11:07am Aug 29, 2008 11:07am
Hi all and thanks for the replies!

For me I guess the greatest difficulties are still discipline, position sizing and also the need to be present in the market.

Discipline: Although I know the rules it's hard to obey them and even harder if you had a loss or a string of them and you feel that the next one should get all the losses back. When I lose, it is hard to disconnect and NOT TRADE for a while (a day, a week, etc) and even harder NOT TO INCREASE the size of the lot I am trading (this way hoping that a smaller move in the direction traded would get me back).

However, you still can find yourself having a difficult time and have several losses in a row. The psychological pressure gets harder exponential and it is harder to trade with a clear mind and clear rules. I get sucked up by the market and cannot think straight it seems.

I spite of trying to stick to bigger time frames, it seems that I want to catch all the market moves and then I get afraid, greedy or other. If I have an entry on a 4H chart and on the hourly it seems the move will reverse, then I have the urge to close the position (even though the signal is intact onto the 4H chart) and then try to get back in. This is dangerous as sometimes I am in effect chasing the market.

Having installed also the platform at work, it seems I have a difficult time concentrating on the day job that I currently have as I am always thinking about where the market is going. If I open the platform, it is likely to "see" a good opportunity (which may actually not be one) and then I will succesively open it again to see where it is going.

The promise of financial freedom and independence is so great that I want to achieve it instanly (cannot be done) and in the process I may get slaughtered by the market.

One wants to get there fast but how can you do that with a mini account. I may be thinking that there is no incentive to have proper MM and establish a track record and performance as it is most likely that you won't find any job as a trader nowhere. So in effect, although we may call it trading it resembles to gambling and to the need for adrenaline rush (worst things).

Also it is very hard to keep the gains and not give them back to the market. And when you know you shouldn't have traded and still you did as you were greedy, the pressure is on even harder. And then you want to get that back faster and end up most times losing.

How can one address these multiple issues which are not related to trading systems and get ahead, as now for me after 18 months of live trading with very good results until two months ago and I can say disastruous since that time I am left wondering chasing this FX dream that gets farther away and in the process affecting me very hard psychologically as I cannot think of other things than that I had a very good track record and blew that away. It seems that everyhing is spiraling out of control and I don't know what one can do.

Is this FX thing really worth it with a mini account or are we just gambling?

Prettly long post, I know but I had to get it out of my system

Well, if you like please post feedback!

All the best,

Bogdan
  • #8
  • Aug 29, 2008 11:27am Aug 29, 2008 11:27am
If you can't make a small account grow, then what would be the difference with a larger sized equity? Nothing. Trade small to minimize your losses at first while learning the ropes, then as your account grows, you'll be able to eventually trade full time. It takes time- everything that is worthwhile does.
I dream, therefore I become.
  • #9
  • Aug 29, 2008 2:19pm Aug 29, 2008 2:19pm
Quoting BGrigore
Hi,

I would like to address some of the issues I've been thinking regarding what us (small) retail traders have to overcome so that we can be successful as retail traders.

So, we have to have developed mind, method and money management at first.

We have to have a consistant approach and realistic expectations. This is sometimes hard when you have a small account and you want to be "free" and "independent" as this is the dream we are being drawn to. If a big fund makes 12% a year, it is hailed as one of the best. If we make 12% this is regarded as small potatoes. We aim for much bigger returns which may not be achievable with proper money management and risk taking which can take a hard hit onto our equity.

Another issues: there is a gap between expectations and reality. If you have an account of less than EUR 5,000, it is hard to be able to trade for a living.

you want to, but you just can't.

Jobs: you cannot find a job as a trader (in any form, either as a trainee, as an internship, trading a small account, etc). From what I've looked there is demand mostly for programmers, systematic automated trading systems and you can mostly find jobs in sales.

I don't want a job in sales, I just want to trade but I can't. There is this whole aura of mystique regarding traders and the money they earn, but you just can't find any job as an FX trader.

The banks here don't trade their own account, they just meet the supply and demand and make their cash based on volumes and commissions.

Also, I am affected by this gap between reality and what I can realistically get.

So how do you cope with these issues mentioned above, am I the only one thinking like this?

So to sum it up, you can have the method, the mind and the money management but if you don't have the absolute cash amount, the determination to consider yourself good if you can average 10-15% / year each year and you can't find a job, what can you do?

Really expecting feedback on this!!!

all the best,
lots of sense in what you are saying. A pity that many dont realise it. I personally sometimes ago had to stop live trading until i had to trade some large accounts for some individuals to be able to put up a reasonable capital for myself after realising that the little penny i have cannot have a long term track record. I could build it ? but i know i could always crash it since i will be gunning for higher profits, a situation where the litlle i normally should gun for will not be sufficient for my daily needs and hence exposing myself to higher risks.
know thy edge and abide by it ! 4 in it shall thou be successful !
  • #10
  • Sep 2, 2008 4:42am Sep 2, 2008 4:42am
Find it too diffiicult especially psychologically and the rewards are much less than the risks encountered when trading a micro/ mini account.

I found I became obsessed with FX to the point that it became an addiction and a gamble. I am convicend that a large part of FF also does not make any cash from this activity but rather wants to have something glamorous and thrilling in our lives.

FX provides that kick but it's just like a drug. I will try to open a classic busines with people rather than this ilusory dream we are all chasing that keeps drifting away.

Sooner or later the retail loses and this is so very true. I am retail and I am tired of countless hours spent, days, weeks pondering about the exchange rate and at the end of the year all of the effort translates in just a few hunderd dollars and lots of sleepless odd hours, stress in my life and less time spent with my family as I kept looking at these glittering and sparling charts that are just blinking inviting us to trade the next big move.

Also, as I said this experience does not help me in any way as there are no jobs as FX traders but we all want and dream to make it big trading.

Now, after 18 months of live trading I most likely am calling it quits and I don't think the effort is worth trading a small account.

Maybe we all should become brokers or teachers as I believe these activities are more lucrative and less stressful than trading FX.

Anyway I am really upset and kinda had it with all this hype about FX. I now believe that the odds are overwhelmingly agains us in this business and those making it are just exceptions and not the rules.

In classic business you have better success rates I believe.

Thanks and see you later,
  • #11
  • Sep 2, 2008 5:47am Sep 2, 2008 5:47am
May I suggest the following book. http://www.amazon.com/Shut-Stop-Whin.../dp/0471654655

Yes this is a tough business, even for those who treat it like one. This isn't some great big interactive internet game and now that you are starting to realize that you've taken step one.


Quote
Anyway I am really upset and kinda had it with all this hype about FX. I now believe that the odds are overwhelmingly agains us in this business and those making it are just exceptions and not the rules.
In trading, there is no bullshit. You either make money or you don't.
  • #12
  • Sep 2, 2008 7:16am Sep 2, 2008 7:16am
Quoting BGrigore
Find it too diffiicult especially psychologically and the rewards are much less than the risks encountered when trading a micro/ mini account.

I found I became obsessed with FX to the point that it became an addiction and a gamble. I am convicend that a large part of FF also does not make any cash from this activity but rather wants to have something glamorous and thrilling in our lives.

FX provides that kick but it's just like a drug. I will try to open a classic busines with people rather than this ilusory dream we are all chasing that keeps drifting away.

Sooner or later the retail loses and this is so very true. I am retail and I am tired of countless hours spent, days, weeks pondering about the exchange rate and at the end of the year all of the effort translates in just a few hunderd dollars and lots of sleepless odd hours, stress in my life and less time spent with my family as I kept looking at these glittering and sparling charts that are just blinking inviting us to trade the next big move.

Also, as I said this experience does not help me in any way as there are no jobs as FX traders but we all want and dream to make it big trading.

Now, after 18 months of live trading I most likely am calling it quits and I don't think the effort is worth trading a small account.

Maybe we all should become brokers or teachers as I believe these activities are more lucrative and less stressful than trading FX.

Anyway I am really upset and kinda had it with all this hype about FX. I now believe that the odds are overwhelmingly agains us in this business and those making it are just exceptions and not the rules.

In classic business you have better success rates I believe.

Thanks and see you later,

a classic business is no guarantee of success either. new businesses have about a 50% failure rate in the first five years. furthermore, just because a business has been around a long time is no guarantee either - can you can Enron, can you say dot com, can you say Countrywide?

I have found that any venture which has good rewards at the other end is a venture that will require at the very least:
- focused long term effort on the essentials (ask Michael Phelps about this)
- an sustained need for the product or service (from doctors to garbage collectors they will have plenty of business; forex will be around for a long time at least until we have a one world currency)
- a reliable method or vehicle to make it happen (in this computer age there has never been a greater time to do business of almost any kind)


a good read you might want to get: Thou Shalt Prosper by Daniel Lapin
  • #13
  • Sep 2, 2008 11:31am Sep 2, 2008 11:31am
Quoting mrgreen
This isn't some great big interactive internet game and now that you are starting to realize that you've taken step one.
I couldn't agree more. This isn't a sprint, it's a marathon.

My parents provided an excellent example to me of long term dedication and delayed gratification. They weren't "wealthy", my mom was a schoolteacher, and at least here in the US, what schoolteachers make is absolutely a crime (imho). Nonetheless, after 30 years of saving and investing in low risk (i.e. low return) investments they have amassed a very decent source of income for retirement.

If you expect to be rich overnight I can point you in the direction of hundreds of "make $400 per hour tomorrow... GUARANTEED" type schemes, but we're here (hopefully) to make money, not to get all hyped up following a pipe dream.

Quoting KudzuFX
a classic business is no guarantee of success either. new businesses have about a 50% failure rate in the first five years.
Not to mention, how about all the people who had a "secure" day job, only to be faced with layoffs, downsizing, or outsourcing? It's a rough world anywhere you are. It's our job to match our expectations to our situation, and to make sure that our situation matches our aspirations (Woot! I sound like Jesse Jackson ;-)).

Quoting BGrigore
I found I became obsessed with FX to the point that it became an addiction and a gamble. ...

FX provides that kick but it's just like a drug. ...

Also, as I said this experience does not help me in any way
I think this is the problem buddy. Although we get "kicks" from trading, we shouldn't trade for kicks ;-) If you're getting 15% a year, that's almost 2.5x higher than any CD I've seen a bank sign. That's 50% higher than a lot of mutual funds. That type of return is sought after by institutional investors all the time. You're kicking the crap out of anything else you could do with that same amount of money, it's just hard to deal with the roller coasters of our emotions.

Stress kills. If trading is keeping you from having a productive and happy life, then don't do it.

But imho, it's not the trading that's the problem, it's the fact that trading is not matching your expectations. I'd hate my job too if I was expecting to be CEO in the next five years.

Long story short, I think everyone deals with frustration. Not just with trading but with every aspect of our lives. If the problem is not worth the return, ditch it. Otherwise, it really is up to us to manage our emotions along with our money.

I hope this helps either way you decide to go. I hope it doesn't seem like I'm picking on you, I'm just trying to help buddy.

Good luck with your decision BGrigore!


Seavo
  • #14
  • Sep 2, 2008 11:58am Sep 2, 2008 11:58am
Thanks for the replies, again.

Made me think and I will try to hang on, learn more, be more disciplined and I think I will order the book mentioned by MrGreen it should be an interesting read.

Anyway, I needed to get all that out of my system so thanks for your feedback. Also I believe that to some degree maybe also you have already passed and thought to what I stated in my comments and it's helpful to get other "outside" opinions.

Seavo, I didn't consider that you picked on me, I found your comments useful!!!

I believe that I will be around some more, and maybe this is just a part of all the learing curve after all.

Anyway, I will concentrate to pass IFTA's CMT Level 1 exam in November and hopefully this will somehow count in the toolbox of knowledge.

well, all the best to you and to your trading!

Bogdan
  • #15
  • Sep 2, 2008 1:45pm Sep 2, 2008 1:45pm
Being under capitalized is a real challenge and most can blame this one reason to failure. Follow your dream and don't ever give up, even if you don't have enough money. There will never be enough with this mindset though.

There are solutions to all problems and most of the time it's because we're not thinking BIG enough.
  • #16
  • Sep 3, 2008 2:17am Sep 3, 2008 2:17am
BG,

I noticed you're in Romania and so I'm afraid a number of the paths you might take
in retail forex are limited by geography. Not that there aren't opportunities where you are,
because anywhere that there is a family of big banks there are FX opportunities.

Being in London or Frankfurt or New York, some of the biggest (and best capitalized) firms
have offices spread out all over the world in larger cities (usually downtown) and you could
work for one of them doing something (foot-in-the-door type thing) if you wanted to
"answer to someone else". Sorry, but that wouldn't be my cup of java.

I feel your intensity and desire to do this and be part of this business. It's part of my life too.
What's kind of screwed is that being out of the forex loop, in other words, not trading,
having other obligations/distractions, less-than-optimal funding to trade, whatever separates you
from the markets is sometimes a worse feeling that a major drawdown where you lose money !

There is something wrong with that line of thought and I am as guilty of it as are many.
The whole purpose of this abuse we take is to make money and not just a working wage.
The idea is to achieve higher than average income than if you had a regular 9 to 5
and considering the risks involved in forex trading it only serves to reason that you'd
want to make substantially more trading than if working a conventional job.

Okay, so what to do ? My friend, I really can't say what is right for you personally.
I can offer this (because it works for me): Ask yourself, "...Do I want to do this
thing (forex) more than I want to do anything else with my working life ?"
Would I be willing to suffer the sacrifice of something else I care about in order to trade ?
What would I be willing to do in order to preserve the opportunity for the freedom
being a trader allows and could I live with my choice if I had to do it ?
Would something (or somebody) I care about be worse off because I choose trading as a profession ?
or even, could I have to lose that something (or someone) because I want to trade more than
I want to do anything else ? Tough questions. No easy answers.

If you can address these areas of your personal life and can honestly answer some of these questions
with the truth that is only true for you (don't worry about what's true for the other guy)
then you'll probably know inside what you should do and how you should do it.

That's all I got. Hope it gets you closer.
  • #17
  • Last Post: Sep 3, 2008 4:23am Sep 3, 2008 4:23am
Has anyone noticed the recent (June 16, 2008) disclosure from Oanda:

Disclosure

Regulators require us to disclose how OANDA is compensated when you, as a client, trade on FXTrade. Here is how: OANDA charges no commissions, fees, or service charges from trading, and hence generates revenue from the spreads alone. If you open a trade and then immediately close it before the price moves, then you have effectively paid OANDA the spread on the currency pair for the round trip execution. Hence, in effect, you pay the equivalent of half the spread, on average, for each (opening or closing) trade you execute on FXTrade. This goes to pay for the costs of sales, including (1) the cost of hedging OANDA's excess exposure, where OANDA has to pay the spread and in some cases ticket fees to the liquidity providers OANDA uses --- the spreads OANDA has to pay can be higher or lower than the spreads OANDA offers its clients --- (2) the cost of OANDA's exposure to market movements before third party hedging occurs, and (3) interest and swap charges that OANDA incurs. The difference between the spreads obtained from the clients and the cost of sales results in OANDA's net revenue, from which the operational costs of running the business are paid, such as the cost of staff, facilities, bandwidth, regulatory costs, and various professional fees (legal, auditing, accounting, etc.)

THE FOREIGN CURRENCY TRADING YOU ARE ENTERING INTO IS NOT CONDUCTED ON AN EXCHANGE. OANDA IS ACTING AS A COUNTERPARTY IN THESE TRANSACTIONS AND, THEREFORE, ACTS AS THE BUYER WHEN YOU SELL AND THE SELLER WHEN YOU BUY. AS A RESULT, OANDA'S INTERESTS MAY BE IN CONFLICT WITH YOURS. UNLESS OTHERWISE SPECIFIED IN YOUR WRITTEN AGREEMENT OR OTHER WRITTEN DOCUMENTS OANDA ESTABLISHES THE PRICES AT WHICH IT OFFERS TO TRADE WITH YOU. THE PRICES OANDA OFFERS MIGHT NOT BE THE BEST PRICES AVAILABLE.
IF OANDA ELECTS NOT TO COVER ITS OWN TRADING EXPOSURE, THEN YOU SHOULD BE AWARE THAT OANDA MAY MAKE MORE MONEY IF THE MARKET GOES AGAINST YOU. ADDITIONALLY, SINCE OANDA ACTS AS THE BUYER OR SELLER IN THE TRANSACTION, YOU SHOULD CAREFULLY EVALUATE ANY TRADE RECOMMENDATIONS YOU RECEIVE FROM OANDA OR ANY OF ITS SOLICITORS.

If you win on trades, its highly likely that the broker will be paying you out of his pocket, and if his pocket is empty...

RISK WARNING

Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency.
Speculative trading in the foreign exchange market is a challenging prospect with above average risk. You must therefore carefully consider your investment objectives, level of experience and appetite for such risk prior to entering this market. Most importantly, do not invest money that you are not in a position to lose.
In addition, trading on a margin basis means that any market movement will have a proportionate effect on your deposited funds. This can work for you as well as against you. The possibility exists that you could sustain a total loss of initial margin funds. OANDA's trading system is designed to automatically liquidate all open positions if your margin deposit is in jeopardy so that you cannot lose more than the funds you have on deposit in your account. It is encouraged that you employ such risk-reducing strategies as 'stop-loss' or 'stop-limit' orders.
There are also risks associated with utilizing an Internet-based trade execution software application including, but not limited to, the failure of hardware and software. OANDA maintains back up systems and contingency plans to minimize the possibility of system failure.
"Your Margin Account with OANDA is not insured under any state or federal insurance program, or by any other entity. In the event OANDA should become insolvent or file for protection under the bankruptcy laws, it is possible that you would lose the entire amount in your Margin Account."

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