Who has become rich trading forex?

I totaly agree with Mr. demark comment!

The risk takers become rich. Their admirers remain poor.

whoa now,,,, thats just a little too general a statement there.

Risk is always present, If someone is not managing & controlling it effectively they will not be around fx very long, unless they are just plain lucky (for a while).

Uncontrolled Risk Kills.

Well Tommy, firstly let me explicitly say I agree with you lest this turn into another ff shit storm

BUT

Trader7 is not entirely wrong.

Most people who go on to make big money historically have taken greater risks.

"Don't risk more than 2% of your account on any single trade" is a very old adage. Sure it will keep you in the game but do you have the patience to adhere to it year in and year out if you start out with a small account?

Its all fine and well if you're a rich successful middle aged businessman and can start out with 300k like say for instance Jacko. Even if you risked a very small percentage of your account and assuming you atleast have a 1:1 reward to risk ratio you'd make $300 dollars on average per trade.

Thats large enough to live on and more importantly psychologically gratifying, but most people don't have that kind of starting capital.

So the best thing would be to trade only when you're well capitalized, or else don't trade, but what if you're not and still want to trade?

A lot of very well known traders have risked far more than the written 2% rule ..... infact even some market wizards ...... you'd be surprised.

Everyone knows Jim Rogers and everyone knows during a 10 year period the portfolio gained 4200% while the S&P advanced about 47%.

But what everyone doesn't know is that he risked far more than "2%" which he himself advocates to achieve this stellar performance. Infact in his famous Gold trade when he was convinced gold was overvalued he went short at $600/- but it just went on going up, did he bail out at 2% ...... nope he held on all the way upto $820/- where it peaked until it finally went down. (I don't remember the exact figures)

He did make a good deal of money on the trade .... he actually averaged down or .... averaged up in this case which in my opinion is a very foolish thing to do but he did it, he had the courage of his convictions, it worked and now he's a legend. I am not for one second advocating averaging down all I'm saying is he took larger risks than what conventional wisdom dictates.


In his seminars Larry Williams has implied if he followed the 2% rule none of us would have even heard his name today.


I've been tracking the performance of a trader called neke over at the elite boards. He risks more than 10% per trade and has targets like 500% a year. When he started out a lot of traders told him he was insane, he'd go bust etc etc, you know the usual stuff. But guess what its been over two years now Neke posts his weekly performance every week & not only is he still in the game but has done very well. All the naysayers have since been silenced ..... there's a very old saying $$$ talk and bullshit walks ...... Neke's journal shows his $$ sure have talked.

On our own board there was this dude called mysticgenie who turned $1000 to $120k in one week! There was the usual ff shitstorm but at the end of the day $ did talk, he failed thrice but the fourth time he sure did succeeed, lose 3000 to gain 1k is definitely worth it. He also said he had turned $1000 to 56k a few weeks ago and he's probably done it again since. I'd prefer that any day of the week rather than spending years trying to parlay $1000 to 1k.

I can just rattle off so many more examples.

So there might be some truth in what trader7 says "The risk takers become rich. Their admirers remain poor."

I'm not saying there is I'm just saying there might be.

The 2% (which should be .05% if newbies had any sense) maxim is so that one can last long enough to learn to trade. The problem lies in that so many start to get greedy before they do know how and of course they blow their accounts, sometimes several times.
I will risk up to 10% of my acct on a trade on occasion - but it is not greed that dictates this - its the market. You owe it to yourself to take w/ both hands if the market is giving it to you. BUT you damn well better know what your doing.

Of course trader7 is not entirely wrong.
There are Always going to be exceptions, Always.

Yes there will always be examples of someone who bet against the odds and came up the winner.

However Las Vegas would not exist if beating the odds was a consistently winning hand.
When Martha from Kansas wins 500k on a slot they ring all the bells and flash the lights oh boy.. They don't tell you how many walked away that night losers.
Casinos probably employ a psychologist on their staff for the sole purpose of exploiting the customers psychological weaknesses. Playing every angle & the odds is their Business.

When someone hits a big lottery prize the whole world hears about the Winner. How many millions of the players were there that did not win anything? No one ever sees that list of names and we are talking literally Millions of players.

I agree with mrgreen, there can be a time and place to increase your risk factor, and as he said you had darn sure better know what you are doing when you do it.

For a struggling trader scrapping by to stay in the game all it would take is one or two hits and your done. (maybe for some that would be better than prolonging the pain)

I'm pretty sure Mr. Rogers or Mr. Williams understood the risk they undertook and would have survived to fight another day had they miscalculated.


I would say that trader7's statement "The risk takers become rich" Might need the following qualifier,

"A small percentage of those taking larger risk may become rich and the rest will probably lose their ass."

JMHO.

Hello Tommy

The difference between a gambler and a trader is this:

The gambler bets against the odds: The gambler walks into a casino knowing the odds he or she is going to lose are 51 to 49 but bets anyhow - praying all the while that luck will prevail. The casinos let the punter win 49% of the time. This means that punters look around and see lots and lots of people winning what seems to be lots and lots of money. The turnover is so great in casinos that the house will earn bags and bags of money when they win 51% of the time.

A trader is working with probabilities that are in his or her favour. My mentor (I'm new at this, remember) reminds me that he loses money on 50% of his trades. However, on the remaining 50% he profits and the ratio of winners to losers for him is 2.75:1. This means that for every $1.00 he loses, he wins $2.75. Over the long run this has made him very, very rich.

He is not gambling, he is trading: working the probabilities that he knows in the long run will make him money.

I have been trading since 3 November. To date 33% of my trades have been profitable. Right now, I have made a modest profit: I have brought my trading fund back up to just above where I started. This has not made me rich yet, but I am in profit with my trading. I am not gambling, I am trading. Each time I trade I am taking an affordable, calculated risk based on the size of my trading bank and the probability that I will, in the long run, win.

As I gain more experience and confidence with my trading I shall increase the size of the lots I trade (I'm currently trading Micros - $1,000 lots). When I can demonstrate consistency I shall move up to Minis - $10,000 then on to full lots.

Every time you drive down the street and pass through a green light without stopping and looking in both directions, you are taking a calculated risk that you will not be hit by a driver running a red light. You have examined the probability and you feel it is in your favour, so you drive on.

Probabilities are for the long term, not for one occurrence of an event. Patience and confidence - and a modicum of talent - win the day.

All the best with your trading.

Forever 40

I fully agree you are trading not gambling.

However, Once someone allows the risk to become such that a few losing trades can wipe out their account that is gambling not trading.
As you are winning %33 of your trades you know that without a risk management plan you would soon be out.

The statement that "Risk takers become Rich" is IMO misleading at best.
(of course any trade carries some risk so we are all risk takers but I'm not about splitting hairs)

I have read of people that have jumped out of airplanes @ 10,000 feet without a parachute and lived so there must be a chance to survive such a thing.

Whatever the odds are I think I'll pass.

Forever40 I wonder how do you or your teacher calculate the odds?

I believe typical speculator is watching trends with some fancy chart analysis tool and tries to ride the trends. If they turn into opposite direction it has stop loss rule and it must be disciplined to really follow his rule.

If you are one of those guys you will lose on the long run and you will make your broker happy because he will earn most of your money!

For those "traders" broker is casino!

Hello Alig

You don't sound like you're having much fun trading FX.

This is an almost zero sum game (not quite because the broker takes a little cut). The broker is not your enemy, and your total losses do not equate to the broker's winnings. The 95% of traders who lose money trading FX contribute most of their losses (minus brokers' commissions) to the 5% who win.

The enemy in this trading business is you, yourself. Once you understand this, you are on the road to understanding how to trade well and when you can trade well, you can make money.

There are myriad books out there on trading FX for fun and profit - some good and some not so good. Find one written by somebody who has demonstrated that he or she has earned significant money over the years trading FX. Have a good look around, find one and read it cover-to-cover about four times.

Then pick up your legal pad and write down the answers to three important questions:

1. Why, precisely, do you want to trade FX? - be specific.
2. How much risk money - money you can afford to lose - are you prepared to bank as your trading fund? - be specific.
3. What, precisely, is your trading plan? - be specific.

Then find a broker, open an account and go to work. Be prepared to lose on 50% of your trades (more at first, this is a learning process, remember).

That 2.75:1 ratio of profitable to unprofitable trades I quoted is based not on 'some fance chart analysis tool' but careful management of stop losses. Learning how to manage stop losses well takes some practise, hence the fact that I am only profitable on 33% of my trades; I am not yet up to my 50% target (part of my trading plan).

Keep in front of you Walt Kelly's declaration by his cartoon character Pogo from long ago: 'We has met the enemy and he is us.'

The FX market is huge and impersonal. When you finally realize you are trading against yourself and nobody else, you will have taken the first step on the road to success as an FX trader. I've done it and so can you.

Don't ever take losses in the market personally.

All the best with your trading.

Forever40

Hello Forever40

I don't trade forex. I am only curious about calculations behind investments in this market.

I do have a lot of knowledge about stock market.
I buy profitable companies (good profit for last 7 years, good dept to equity ration, growing equity...) for really low price (below 70% of fair price). Now that shares became cheaper you can get shares for 80% discount.

Buying cheap and good companies gives two reasons why it will grow on the long run (5-10 years).
1. reason: cheap valued stocks correct the price to became more fair priced.
2. reason: it is profitable company in profitable business and it reinvest the profits and over time the internal company value grows and the stock price follows this growth.

How I calculate the fair market price for a stock?
I approximately estimate year by year growth of a company profit/equity in % (ROE)
And the fair market price is when its P/E is equal to ROE
(P/E is price/earnings).
This calculation is only for fast growing companies with ROE >= 10% and when dept / equity is 1 or below. I have different calculation for ROE < 10

Example: if ROE is 15% than fair P/E is 15.
If current P/E for company is 7.5 and it has year by year growth is approximately 15% (ROE) then stock sells at 50% discount.
Of course this is just small part of analysis that I do when selecting the stock but it is the most crucial one!

In 5 to 10 years I will earn 100% to 1000% on investment without leverage.

I believe that for real investments into forex there must be some kind of calculation similar to the calculation I explained above for company shares.

Welcome to the REAL world of investments

I do believe that it is also possible to succesfully speculate on news but it is still speculation and not investment into forex.

Hello Alig

According to what I read and my understanding of the basics, there are two fundamental ways to approach successful FX trading:

1. You can study the world economy dilligently and make decisions on whether a particular currency will go up or down against another and buy or sell accordingly.
   
   This requires a great deal of continual study and hard work but some have demonstrated that a great deal of money can be made, or
2. You can analyze charts and look for patterns that are almost always followed by other patterns. You use these patterns to make decisions on whether to buy or sell a currency pair.
   
   This doesn't require quite as much hard work but you must be prepared - through the use of stop losses - to accept a certain number of losses - the 50% we spoke of. Other folks, among them my mentor, have demonstrated that a great deal of money can be made here, too (actualy, my mentor has used both systems over many years and he prefers #2 because he feels he can achieve his objective spending less time glued to a monitor).

Either will work, as has been shown, but the key, as in your business, is that you establish a methodology, then within this methodology you create trading plans according to your reading of the marketplace, either news or chart trends, and follow through on your plan.

You don't go off in a spate of emotion and buy a company simply because you like the logo, the product, the location of the head office or the length of the receptionist's skirt, you make your decision based on a hard-headed analysis of the numbers. You work within your established methodology, develop a plan and go for it. My guess is that sometimes it doesn't work for you, but your successful acquisitions far outweigh the ones that are not profitable so at the end of the day you make money.

FX trading is no different, it's simply the case that you need to spend enough time studying it to understand it at a level sufficient to enable you to make money with it.

I'm learning about it and enjoying the experience so far. Time will tell, but I fully expect to make some big bucks with this process. (By the way, you will hear a lot of stories about brokers that will rip you off. There are probably a few out there that do, but my guess is that most aren't interested in ripping you off to the tune of perhaps $20,000 when they can, over time, make much more by keeping you and lots of other folks trading with them. Brokers make their money on the spread; when you suffer a loss on a trade, there is somebody out there that made a profit at your expense - that is where your money has gone.)

Please come back with your comments. I'm coming to enjoy this thread.

All the best with your work.

Forever40

I don't believe that technical analysis alone can be profitable despite it might be more reliable in forex then in stock market!

Also if I buy shares and its value drops for 20% I buy even more shares because now they are 20% cheaper so this is 20% better investment. This is opposite to stop loss.

Anyway Forever40 I wish you good luck

Interesting thread to the demotivated.

This is why I love FF.

It is certainly possible to make money in FX, maybe many years ago when I was still trying to get where I am today I was in the same spot as many people reading this thread, thanks to threads like this I kept going and eventually with endless learning you will get there.

When I say learning, i dont mean strategies and systems, I am talking about the other elements that a lot of traders push to the back. I know its cliche' but in my opinion psychology will make or break you.

Anyway, I follow my own strategy, I have faith in it and trade it on a whole load of currencies. I average around 20% growth on my account each month, some months Ive had 50% others only 5%, but over the past couple of years Ive not had any negative months which I guess is great.

I also adapt my strategy as I see the markets changing, you can't sit still otherwise your edge will be lost.

SO, you can win in this game - keep at it, use microlots and take it slowly, the market will still be there next month or next year for you to take your profits.

wow if thats true its exceptional ...... no its superhuman ............ if its true.

Just trade around HIGH impact news statements. Its like taking money of children.

Hey Fugly, love the name

I don't know you guys from Adam, I am not here to sell you my strategy and have no reason to prove or lie about my record - its just that we have been invited to post some hope to other traders on this thread. I recall many years ago everything I was going through and to be given hope that it is possible would have meant a great deal to me, helping me to keep working at becoming a better trader.

Believe it or not, I get bored in the trading day and read the forums, rarely commenting - but this one struck a chord and I just want people to know that it is indeed possible.

If I can do it, then you can do it - I am no cleverer than the next guy or gal!

I am sure there are many traders out there that dont bother to post, just like me - but sometimes it makes you feel good to provide hope.

I personally know of a few traders that do considerably better than me - I am fairly humbled by those, but I methodically stick to what I do and am content with the results.

Good trading to you.

Hey Larry ... I've never seen that done before but then again I have limited experience in forex, thats why I'm so amazed thats all.

Its great to hear you've never had a losing month in years of trading, its an inspiration to me.

Congratulations on your success !

Thanks Fugly,

I find a lot of traders just get really down and eventually give up, keep at it and you will succeed. You don't need to be that intelligent to do this, you just need to keep at it and learn by your mistakes - infact, some of the most intelligent people I have come across have had even bigger problems, they tend to give up much quicker because life has taught them that they have always with a bit of study been able to do things and when they come up against failed attempts in things like trading they take it much harder than others.

If you ever go onto a trading floor, those guys can shout loud and everything appears a chambles - they are not the sharpest characters I have come across.

Keeping at it thats the key, watch the charts for hours a day for months on end and you will get it. I personally would advice all learning traders to remove their indicators, just look at price action. Ditch any new fangled stuff you've downloaded for your MT4 platform - they will only lead you down the wrong paths, you will grow to depend on things that WONT work into the future.

Very best of luck, don't give up.