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How do I make millions trading Forex?

  • #61
  • Jul 21, 2011 5:04pm Jul 21, 2011 5:04pm
Quoting Custos
as I said, I hope you find a good way to make insane amounts of money (and teach me then), but till now I am happy with making my yearly percentage, cause I personally have not been able to achieve 1000% + a year yet.

cheers
i suspect your deal is simply that you have your way... it appears to work so far... so that's good enough.

cool. it's basically a supercharged savings account accruing better than average interest. being an EA it's on a degree of cruise-control.

BUT, and i've asked this before and don't think anyone has replied, how does someone who is wildly rich and is a trader get to that point? think back to the guys in the pits. did they all start out with wealth and then decided they wanted to be a pit trader for their profession? did they take out some hefty loan from a bank which they then used to scrape out a few percent gains a year, and then had to deal with repaying the loan as well?

or, did they have some seed capital money that they traded into bigger and bigger profits and became stinking rich and moved into dirty big mansions filled with crap they don't need but can afford?

it's one thing to be at a prop shop or hedge fund. the agenda can be entirely different in those circumstances. i'm talking purely about the guys who are trading their own money for their own living. similarly for anyone who trades from home. are none of them wildly profitable? did they all somehow begin their trading career as wealthy people who could afford to make small percent gains on their account (which equal large real world dollars), or did they have some seed capital that they turned into a monster amount?

i find it very hard to believe that traders who are currently wealthy began their trading career already full of wealth.
Congratulations ScalaFX for coming out of the closet!
  • #62
  • Jul 21, 2011 5:15pm Jul 21, 2011 5:15pm
Quoting nubcake
i suspect your deal is simply that you have your way... it appears to work so far... so that's good enough.

cool. it's basically a supercharged savings account accruing better than average interest. being an EA it's on a degree of cruise-control.

BUT, and i've asked this before and don't think anyone has replied, how does someone who is wildly rich and is a trader get to that point? think back to the guys in the pits. did they all start out with wealth and then decided they wanted to be a pit trader for their profession? did they take out...
Okay, one last reply, then I really go to bed.
I think trading in the pit was quite expensive. I read somewhere that a seat cost about 100,000 to 200,000 $. Maybe in the market wizard book. So, in a way yes, they started with some money. However, on the other hand you have richard dennis who started with 500$ and made massive amounts of money. Well, also don't forget before the age of the computer they had the speed advantage. If you look now at the documentary "floored", it seems that many floor traders can't make money anymore, cause they lost the speed advantage.
Anyways, since I've never been in the pit I can't answer you your question really, just tell you my belief: They probably already had some money to make enough to live on and to get their account going. Also don't forget that there are also traders who started trading for companies first and got some sort of wage until they had enough money.

What we should also not forget is that we don't know how long it took the pit traders to actually be able to sustain themselves and to become really rich. Maybe it was a couple of months or a couple of years. Who knows? Actually would really be interesting to see an average yearly return by those traders.

On the other hand you got marty schwartz who made a 1,000% on a year long trading competition, so he shows that it is possible.

Difficult topic really.
  • #63
  • Jul 21, 2011 5:17pm Jul 21, 2011 5:17pm
Quoting Custos
the hedge fund gods are mentioned cause they are the experts in trading the markets.
Personally, I always have an affinity to trust that experts in the field always have the highest ability in general for their specific field. Lawyers know law best, medical professionals know medicine best, engineers know how to construct machines the best and so on. Normally you wouldn't expect that amateurs would be better than those experts in their field.
experts... this is another area of question.

who says hedge funds are experts? don't they often creep along to the same rates of gains / losses per year as overall stock indexes, if not WORSE than the index? is it just a cliche, or is there truth behind the old joke about how hedge funds are glad when they don't LOSE as much as an index did in a year? that seems bananas to me... they are GLAD to have LOST, but just not as much as the overall market index.

or to put it bluntly, are they simply trading randomly and therefore receiving the same gains and losses as randomly trading the top N performing stocks? sometimes not being as bad as the overall index, and sometimes not being as good? sometimes being a little better, and sometimes being worse?

IF this is the case then someone might ask why anyone would invest in a hedge fund? obviously because it's easier to park your money with someone else and have them deal with the ins and outs of actually dealing with the market. plus, most people don't even know what a stock market is, so you can tell them anything and they won't know any better so you can advertise ABC hedge fund to them and they will think ABC hedge fund are market geniuses and a money well! most people don't know what a stock market is, so it's far too much to expect them to know the difference between a hedge fund that is performing well versus a hedge fund that is investing randomly or even poorly.

people expect hedge funds to be the experts.... but they are self-appointed and self-advertised experts.
Congratulations ScalaFX for coming out of the closet!
  • #64
  • Jul 21, 2011 5:23pm Jul 21, 2011 5:23pm
Quoting Custos
the hedge fund gods are mentioned cause they are the experts in trading the markets.
Personally, I always have an affinity to trust that experts in the field always have the highest ability in general for their specific field.
No, not necessarily experts in trading. They are experts in keeping their investors happy so they can take a 2% performance fee on millions if not billions of dollars. That has nothing whatsoever with being an expert in trading or even good at it.
  • #65
  • Jul 21, 2011 5:29pm Jul 21, 2011 5:29pm
Quoting nubcake
experts... this is another area of question.

who says hedge funds are experts? don't they often creep along to the same rates of gains / losses per year as overall stock indexes, if not WORSE than the index? is it just a cliche, or is there truth behind the old joke about how hedge funds are glad when they don't LOSE as much as an index did in a year? that seems bananas to me... they are GLAD to have LOST, but just not as much as the overall market index.

or to put it bluntly, are they simply trading randomly and therefore receiving the same...
can't argue with that.

Quoting ohammond
No, not necessarily experts in trading. They are experts in keeping their investors happy so they can take a 2% performance fee on millions if not billions of dollars. That has nothing whatsoever with being an expert in trading or even good at it.
true as well.
  • #66
  • Jul 21, 2011 5:36pm Jul 21, 2011 5:36pm
Quoting Custos
Okay, one last reply, then I really go to bed.
I think trading in the pit was quite expensive. I read somewhere that a seat cost about 100,000 to 200,000 $. Maybe in the market wizard book. So, in a way yes, they started with some money. However, on the other hand you have richard dennis who started with 500$ and made massive amounts of money. Well, also don't forget before the age of the computer they had the speed advantage. If you look now at the documentary "floored", it seems that many floor traders can't make money anymore, cause they lost...

my understanding is that different areas of the pits cost different amounts of fees. having a seat in the building is far different to being in the actual pit itself as an example. i own floored so i might watch it again to see if it is mentioned anywhere what the cost of getting in the pit is/was. it can't be extraordinary amounts if people like linda raschke can decide to up and leave their day jobs and jump straight into the pit and begin trading.

similarly to your examples you also have the legendary jesse livermore. he is a tricky example because he not only amassed large fortunes, but he did it a few times because he also bust himself out more than once. so, it's a 2-edged example. on one hand he was tape-reading and nickle and dimed bucket shops starting with next to no money to generate a nice amount of seed capital and get back to trading prop with a large capital base, but on the other hand he nuked himself over and over so in terms of drawdown his swings were as bad as it can get. from hero to zero, to hero, to zero...

to be fair, the pit traders might be a bad example also. being that they can scalp in the original sense they have that advantage where we never can with forex, at least not in retail forex. we pay the spread. we can't BE the spread.

my understanding of their issues moving out of the pit to pc trading is that some of them are out of touch with technology and simply can't understand the computer to begin with (like grandma trying to program the vcr and not realizing she's pressing buttons on the microwave). then you have the difference of no longer BEING the market. and also not having an understanding of what their edge was when in the pit and then transferring this to electronic trading. linda raschke seemed to transition quite fine, so it's not simply that pit traders had an advantage that being outside of the pit removes. maybe they did, but comments from her suggest possibly that it's not the case and it's all about adapting from being in the pit to not being in the pit.... either way the trading continues for her at least.
Congratulations ScalaFX for coming out of the closet!
  • #67
  • Jul 21, 2011 5:39pm Jul 21, 2011 5:39pm
Quoting ohammond
No, not necessarily experts in trading. They are experts in keeping their investors happy so they can take a 2% performance fee on millions if not billions of dollars. That has nothing whatsoever with being an expert in trading or even good at it.
i hate it when people perfectly say in 2 or 3 sentences what took me a paragraph or two.

grr. but, yes... you just described what i was trying to say.

to add to the hedge-fund example. we have to keep in mind that some of them can throw darts on a board to pick areas to invest their capital in, and they will profit. not through any skill or knowledge, but purely through randomness. they will believe they know what they are doing, but randomness simply favours them at this time. another cliche i'm unsure about is if hedge funds simply churn through whoever seems to be lucky at the current time (errr, i mean "performing well at the current time"), and as soon as someone begins to fail they are out the door and replaced with the next best fluke? randomness is a bitch. treating it as skill is fatal.
Congratulations ScalaFX for coming out of the closet!
  • #68
  • Jul 21, 2011 6:15pm Jul 21, 2011 6:15pm
Quoting ohammond
No, not necessarily experts in trading. They are experts in keeping their investors happy so they can take a 2% performance fee on millions if not billions of dollars. That has nothing whatsoever with being an expert in trading or even good at it.
You forgot just one thing: To keep the customer happy the hedge fund manager MUST deliver or else he is going to lose all his customer base in a heartbeat. So the hedge fund manager must be an expert and at least beat the S&P 500 (granted, not an easy task) if he wants to keep and grow his business .
  • #69
  • Jul 21, 2011 6:36pm Jul 21, 2011 6:36pm
I love threads/posts like these, they keep the knowledge bank growing from all the different point of views. Good reading!
Damn The Torpedoes, Full Speed Ahead!
  • #70
  • Jul 21, 2011 6:47pm Jul 21, 2011 6:47pm
Quoting Mr Breakout
You forgot just one thing: To keep the customer happy the hedge fund manager MUST deliver or else he is going to lose all his customer base in a heartbeat. So the hedge fund manager must be an expert and at least beat the S&P 500 (granted, not an easy task) if he wants to keep and grow his business .
No, I didn't forget, he needs to keep his customers happy by delivering a small percentage a year (because thats what the investor has been taught to expect) that doesn't make him a great trader.
  • #71
  • Jul 21, 2011 7:13pm Jul 21, 2011 7:13pm
Quoting ohammond
No, I didn't forget, he needs to keep his customers happy by delivering a small percentage a year (because thats what the investor has been taught to expect) that doesn't make him a great trader.
Well investors are not stupid either, with the internet they can now push a few buttons and shop around for the money managers who consistently generate the best return on investment, or alpha.

And if they discover that hedge fund X has been producing a documented 15% a year profit for the last 10 years and with less than 18% drawdown while hedge fund Y generated 6% a year in the same period with a 42% drawdown who do you think they are going to choose?
  • #72
  • Jul 21, 2011 7:42pm Jul 21, 2011 7:42pm
well there you go. watched floored again. greg riba mentions how when first starting what he first saw was how everyone had a rolex on their hand, and their rolex would cost more than he had in his trading account at the start. linda raschke mentions how when she first started in the pit her first trades were simply her trying to get off a 1 lot trade... keeping in mind 1 lot in this instance is different to forex and could mean anything from 10 units to 1000 units or whatever depending on the market.

so basically pretty damn small starting accounts.
Congratulations ScalaFX for coming out of the closet!
  • #73
  • Jul 21, 2011 7:50pm Jul 21, 2011 7:50pm
Quoting Mr Breakout
Well investors are not stupid either, with the internet they can now push a few buttons and shop around for the money managers who consistently generate the best return on investment, or alpha.

And if they discover that hedge fund X has been producing a documented 15% a year profit for the last 10 years and with less than 18% drawdown while hedge fund Y generated 6% a year in the same period with a 42% drawdown who do you think they are going to choose?
push a few buttons... lol. i think you give people too much credit.

did any of this alpha gamma pi sorority research indicate how much better or worse than the market index a fund has performed? wow, 10% ROI with hedge fund herpderp inc.... except if the index moved +15%

when the government decides that they will take some of your earnings, put it with a company who then invests the money on your behalf in the market, and then if you happen to live past a certain age they will give you back whatever is left... win or lose.... then it's a pretty good bet that hedge funds are simply profiteering from the government sticking their nose into other peoples business, wallet, and future.
Congratulations ScalaFX for coming out of the closet!
  • #74
  • Jul 21, 2011 8:14pm Jul 21, 2011 8:14pm
Quoting nubcake
did any of this alpha gamma pi sorority research indicate how much better or worse than the market index a fund has performed? wow, 10% ROI with hedge fund herpderp inc.... except if the index moved +15%
True.

Except that the S&P 500 (the benchmark of every serious fund manager on the planet) produced a compound annual grow rate (CAGR) of less than 9% during the last 23 years, hardly a stellar performance compared to some of the top fund managers.

Especially when you consider that this index experienced a dizzying... 60% drawdown after the year 2000 and beyond!
  • #75
  • Jul 21, 2011 10:28pm Jul 21, 2011 10:28pm
Quoting Mr Breakout
Well investors are not stupid either, with the internet they can now push a few buttons and shop around for the money managers who consistently generate the best return on investment, or alpha.

And if they discover that hedge fund X has been producing a documented 15% a year profit for the last 10 years and with less than 18% drawdown while hedge fund Y generated 6% a year in the same period with a 42% drawdown who do you think they are going to choose?
Hedge Funds typically far outpace Mutual Funds in % returns, as well they should. They do not fall under the same regulations as a Mutual Fund, and they have many more invesment options available to them. Hedge Funds are not normally compared to the S&P to determine how well they did, but people still use that benchmark because it is used for Mutual Funds.

Problem being, Joe Investor can not typically get into a Hedge Fund (non-investment companies), as they are limited to 100 investors and those are "qualified purchasers or "accredited investors", of which most people don't meet the requirements.

So even if you hear about "X" Hedge Fund making a killing over the past 10 years, it really won't matter. You will have to settle for a Mutual Fund or a Hedge Fund that has registered with the SEC and thus has more restrictions on it...which usually mean lower returns.
  • #76
  • Jul 21, 2011 10:52pm Jul 21, 2011 10:52pm
Quoting moneymaker2
Hedge Funds typically far outpace Mutual Funds in % returns, as well they should. They do not fall under the same regulations as a Mutual Fund, and they have many more invesment options available to them. Hedge Funds are not normally compared to the S&P to determine how well they did, but people still use that benchmark because it is used for Mutual Funds.

Problem being, Joe Investor can not typically get into a Hedge Fund (non-investment companies), as they are limited to 100 investors and those are "qualified purchasers or "accredited investors",...
Good post Moneymaker2, but please note that hedge funds are not the only game in town, far from it, a good managed Forex (or Futures) account could do wonders for the typical, average trader's portfolio as well.

But beware, some of these Managed Forex managers/websites claim a return of 5 to 15% a month, so traders are advised to investigate their track record carefully.
  • #77
  • Jul 22, 2011 12:03am Jul 22, 2011 12:03am
Quoting Mr Breakout
Good post Moneymaker2, but please note that hedge funds are not the only game in town, far from it, a good managed Forex (or Futures) account could do wonders for the typical, average trader's portfolio as well.

But beware, some of these Managed Forex managers/websites claim a return of 5 to 15% a month, so traders are advised to investigate their track record carefully.
That is very true. People just need to be careful, as not all are legitimate (see Jacko thread). Funny thing about investing: no matter how you do it, there is always some amount of risk.
  • #78
  • Jul 22, 2011 12:30am Jul 22, 2011 12:30am
millions in forex can be done, it just takes time, compounding, and skill....or you can be naturally gifted and do it right out of the gate (although that's not going to happen for 99.99% of traders)
  • #79
  • Jul 22, 2011 1:50am Jul 22, 2011 1:50am
Quoting 1zach4
millions in forex can be done, it just takes time, compounding, and skill....or you can be naturally gifted and do it right out of the gate (although that's not going to happen for 99.99% of traders)
1zach4, please reread the original question, here it is again : "Can it be done within a year ".

You wrote : "it just takes time...".

Sure, but just remember that in the long run we are all dead.
  • #80
  • Jul 22, 2011 1:57am Jul 22, 2011 1:57am
I understand the original question, and my answer to it is "yes, it can be done"

I was more so encouraging the OP to not rush things. I have seen millions made in a year trading forex with a normal-sized starting account, but that trader was taking high-risk trades...he was probably more lucky than talented, so encouraging someone to follow a strategy like that would probably end up in losses instead of millions.
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