Second Part from Justin Leblanc and some words about mini accounts processed by Banks: 

Having said all of that, I’d like to make a few additional points about the Forex markets, execution, and our platform. In reality, the retail Forex world is made up largely of unsophisticated traders who have not traded anything before. You can usually recognize these people because they are looking to trade at higher margin levels and expect executions that the market cannot provide. 

The Forex markets are more highly leveraged than the futures market. We offer 100 to 1 leverage. Professionals rarely use 20 to 1 leverage. Retail traders with no experience are constantly looking for higher leverage, up to 400 to 1, which shows their lack of experience. Few of these traders last long in the Forex markets. 

In addition, there are many people who think that they are “entitled” to fills because they want to buy at certain prices. This happens most commonly on “news spikes” due to economic data. People try to place market orders on the news and then are surprised if their fills arrive within a split second, but 30 or 40 or 50 pips away from where the market was before the news. Few of these people actually understand what they are trading. 

Let’s consider a few points.

In exchange rate terms, $0.01 of movement between the Euro and USD is 100 pips. That means that if news comes out and the EURUSD moves 30 pips in a second, that’s $0.003. In other words, it is not measurable in real terms. However, a trader trading at 100 to 1 margin may expect that they should be filled at a price that existed before the news hit. 

When I ask traders if they would be willing to sell the EURUSD at the price it was trading at before news hit that caused a 30 pip spike, they say no. But they expect that banks will make those prices available. In other words, they aren’t willing to accept the consequences of a “market.” Trading on economic news in the Forex world is the most dangerous type of trading that one can do. Having said that, let’s consider what the various platforms offer to protect the trader.

Traditional deal desk platforms offer very little in this regard. The trader is either buying or selling or doing nothing. Orders are largely market and stop (market) orders. However, STP and ECN platforms (which are both NDD platforms, and EFX handles BOTH of these types of orders) execute any marketable orders instantaneously. That means if you are a buyer at the market and there is a seller at a price and no one has bought from him/her ahead of you, you are filled at that price. It is a true market. There is nothing that says that you deserved to get filled 20 pips back because that would have made you money.

The Forex market has come a long way in the last two years. Traders should look for platforms that offer the following:

1) Fraud protection in the form of Fidelity bonds.

2) Segregation of client money.

3) True executions.

4) Lots of liquidity.

5) A good variety of order types, which professional traders should use to control their risk. No one should EVER place a market order when they can limit themselves to fills 5 or 10 pips above the market.

On a true STP/ECN Forex platform, no trader that understands executions should ever have issues with getting extremely bad fills (slippage). Everything should be in-line.

I have spent a lot of time watching thousands of people trade the Forex markets. Forex is a very exciting market with massive liquidity. With platforms like EFX GROUP / MBTF, which offer true STP and ECN technology, it should be a true “trader’s market,” as long as that doesn’t suggest to traders that they are entitled to fills that don’t exist in fast markets or that reckless use of market orders should always be rewarded. 

When the exchange rate between the Euro and the US Dollar moves $0.01 in a day, that’s 100 pips. This is a microscopic move that is only remotely tradable because of the leverage used in the Forex markets. 

I think a lot of people have expectations that go well beyond reason when it comes to the Forex markets. 

To summarize:

I think that things are moving closer to a centralized market place with good regulation about the limits to which a seller or buyer can price themselves away from the market but still fill a retail client. 

I think within a year or two, platforms like EFX GROUP / MBTF will have completely altered the landscape of Forex just like ISLD and ARCA did in the US stock market back in 1995-7. In the meantime, stick to the platform that safeguards your money, gives you the most options, and provides you with direct, unhindered access to the liquidity that is out there. Make sure that your funds are secure from fraud and protected from co-mingling with your platform. Make sure that your funds are held on-shore, not off-shore. 

With all of that, it’s just about your trading skills.

Justin LeBlang

EFX Group

The (common) misperception here is that banks trading on the interbank system only deal in standard lots. This is, in fact, not necessarily the case. If a platform shows enough volume and acts in a consistently professional manner toward the banks, it is possible to get sub-standard lot liquidity from the banks. Not sure who keeps saying otherwise, but this is the case. Our system handles increments of $10,000 or higher (what you consider minis) in an STP (Straight Through Processing) manner directly to the banks. At no time is a mini or standard handled by a deal-desk in our system.

Justin Leblanc

EFX Group  

I wanted to help shed some insight, if possible, on the theory about banks trading mini’s or not trading mini’s. It used to be accurate to say the banks didn’t trade in less than 100k but that is no longer the case. They do indeed trade in size far less now than that of 100k. This is in part due to lower CLS fees. It also is in part of a firm’s overall relationship with the bank(s). 

I have a few banks that will actually trade as low as $1 but the point in this is that they do not have any minimum. MBT has successfully built an Equities, Options, Futures, and now Forex business of direct access technology. We have used the same methodologies that won us the #1 rated software based brokerage firm by Barrons to apply to direct access Forex. With our technology and relationships with a multitude of banks I think you will find that direct access is the way to go if you want a true type of market to trade Forex in for speed of execution and more importantly, quality of execution. 

I know this is a fairly simple response but it really is not necessarily a complicated issue to address. I hope it helps everyone in understanding.

Regards,

Steve

MBTrading

I found a great post from Justin Leblanc (EFX Group) explaining the differences between a NDD (non dealing desk) broker and DD brokers (retail brokers with a dealing desk). I will also add in Part 2 some answers in that Forum about how mini accounts can be processed by Banks. Here we go with the first part:

There are many keys to understanding the Forex markets, and there are many parallels between the Forex markets today and the stock market back in 1995 and 1996 when ECN technology like ISLD and ARCA were coming about. The non-deal-desk system is really the beginning step of the process of making the Forex markets a truly “transparent” market with “best pricing” available electronically straight to the customer. In order for there to ultimately be a true market for Forex (such as exists for stocks and futures); companies will need to take several steps to move away from the traditional (and rigged) deal desk systems. I’d like to discuss many of those steps now. 

I do want to say up front that I work for a non-deal-desk platform. I don’t want there to be any confusion about that. If someone thinks that any of my points are biased because I work for a NDD platform and not a traditional deal desk platform. 

These are the things that I think separate a true NDD platform, such as ours, from other platforms, and then I have some comments about the Forex market and the average Forex trader beyond that. 

1) Direct access to the biggest piece of the market possible. This is really the key to it all. A deal desk is basically a trader trading against a professional on a desk who can decide when and when not to sell to them. An NDD platform, before everything else, has no one working for the platform whose job and income are based on making money against the clients of the firm. When we execute a trade, it is executed purely electronically, without bias, without human intervention, and at the best price that our system could find at the time. I think this little fact is something that people overlook.

We are paid on the commission on the trade, just like in the stock, futures, and options markets. Our incentive is therefore to get the best price possible to keep the customers happy. Deal desk platforms operate in an entirely different manner. They only make money when the clients lose money. Playing with a deal desk is like gambling in Vegas. It always favors the house because of the spread. They control if and when you get executed. We have interest in the spreads being tight and the executions being the best that they can be. In fact, the better that we do for our clients, the better that we do overall. 

2) Execution should be no different whether you are closing or opening a trade. Many of the traditional deal desk platforms separate positions as “open” versus “closing,” which is what leads to something like “hedging.” The reason that they do this is because they believe that the average Forex client loses 6.7% per month in Forex (NOTE: that is the average based on their system, which means some people make and some people lose). Therefore, when someone is closing a position, they usually just accept the other side. When someone is entering a position, they might not. Why should this be the case? Why should someone who is long the EURUSD and selling it get a better fill than someone who is shorting the EURUSD at the same moment? They shouldn’t. I’ll talk about hedging in a moment. 

3) A related point here is therefore anonymity. The system should not care where the trade is coming from. It should not care whether that person is starting a new position or closing an existing one in the same direction. Try opening an account with a deal desk platform and trading for six months. If you are making money, then open a second account under a different name. Try to buy in both accounts at the same time. The new account will get filled, while the account that is making money might get slipped or requoted at the same moment.

Why is this the case? Because the platforms (all of them) profile their clients, trade against them, and make sure that the clients who are making money start to get worse fills. Remember that if you were the guy on the desk and you took the opposite side of every trade, you would want to slow down the people that were making money too because they are making money against you by default. A true NDD platform shouldn’t care who the trade is coming from when it executes. I can tell you right now that when it comes to the EFX GROUP / MBTF system, a sell order to close a long position and a short order that are put in simultaneously on the EURUSD will be filled at the prevailing market price together, period. 

4) No requoting. Deal desks mark certain accounts as “A list” clients. This means that the clients are good traders that are showing signs of being successful. “B list” clients are the rest of the client base. “B list” clients are set to auto-execute against the platform because they lose on average. “A list” clients are not. In fact, “A list” clients in a fast market are often shown pop-up windows that say “The price is no longer here, would you prefer to pay this price.” NDD platforms never requote. Either the order is marketable, or it isn’t. 

5) A non-dealing desk system lets you know everything that they are making off of you. Would I rather trade on a deal desk, where I spend 3 pips to buy the EURUSD, and then later, 3 pips to sell the EURUSD, or would I rather trade on a system that lets me get executed by the true market, which includes customers and banks, with the narrowest spreads possible, and get charged a fee. The answer is the latter. 

6) ECN vs. STP vs. Deal Desk. It needs to be made clear that there are really more than two types of platforms. A deal desk is a fixed spread platform where the desk makes their money in the spread trading against all of their customers. This rigs the market against the retail trader because they aren’t seeing true market quotes. The platform can move their quote wherever they need if they want to fill the client. STP (Straight Through Processing) platforms execute directly from the retail client to the banks. The more banks and liquidity in the system, the better the fills for the customer.

ECN (Electronic Communications Network) platforms let customer orders interact with other customer orders. Non-deal-desk (NDD) platforms are either the second or third type of platform. EFX GROUP / MBTF are both. We have over a dozen banks in our network which customers execute against directly (STP), but we now also allow customers to hit other customers (ECN) inside of the standard pip increments of the banks. We do not shave anything against customer executions.

As you know all mt4 (and other web based) platforms and retail brokers are only bucketshops, that doesn´t mean that you are going to be always scammed by them, there are some honest retail brokers out there. But you can not be sure or relaxed trading with them.

That´s why I am testing some ECN brokers during these past months. ECN brokers charge you a little comission for your opened trades and the spreads are very low,  it is very important to know that your trades are really entering in the Forex market, not in a software program inside the server (like retail brokers do).

I proved and liked very much efxgroup or mbtrading before (efxgroup is like mbtrading but more focussed to Forex only) but today I want to talk you about HotspotFX.

http://noponzi.com/hotspotfx.png 

I began yesterday in a demo account with them. The platform is very easy to use and very fast opening or closing your trades. The comission is lower than efxgroup or mbtrading and the spreads are very low. I proved the Customer Service and it´s great. They answer you very fast and they also offer to guide you by phone if you have some doubts.

The minimum deposit to trade in HotspotFx is 7500 USD or equivalent in EUR, GBP, AUD, CHF and JPY. The demo accounts are down everyday from 21:30 GMT till 22:30 GMT and live accounts at 22:00 for 20 minutes. During that time they run the end of the day processes and also they apply roll over and reval rates to all the accounts. 

What I saw when I began testing this platform yesterday is that the minimum lot is 0,1 (100K) and so if you deposit only 7500 USD the risk is very high. I contacted with the Customer Service and they fix this problem in the platform asking me for my account number. Now I see 10k, 100k… in the dashboard and so I can trade with 10K or 0,01 (1 pip is about $1, according to the pair).

It´s great because with a decent deposit you can trade with a good risk now and low comissions-spreads. Please do not trade with 100k and $7500. Think that if you want to risk only 2% of your funds in your opened trades then you can only risk about 15 pips!!, very bad. With 10K is about 150 pips: very good

It´s easy and very fast to enter or close your positions, to add or change your SL (stop loss) or TP (Target price), even a trailing stop with 3 options. And I also see how some retail brokers don´t show the real prices to us

You can also read in Trading Technologies website a good article about using HotspotFX:

Trading Technologies

“Connectivity to Hotspot FX provides X_TRADER users with direct access to the growing foreign exchange market. Now X_TRADER customers can use one screen to trade spot foreign exchange alongside contracts listed on the world’s major futures exchanges. There is strong demand among our customer base for forex products, and we expect many of our users will take advantage of this new connection,” said Harris Brumfield, TT’s CEO.” 

As you know HotspotFX also offers HotspotFXi to institutionals, but both of them (HotspotFXr or HotspotFXi)  offer the same transparency, anonimity and competitive multibank bid/offer spreads and liquidity. HotspotFx was founded in 2000 and they are a subsidiary of Knight Capital Group, Inc. They are also regulated by the FSA.

I will keep you updated about this great and reliable ECN Forex broker. 

The National Bureau of Investigation, Finland’s central criminal police, has started an investigation into the activities of the WinClub “investment club”. The NBI says that up to 10,000 people had made on-line investments in the club. The total value of the investments exceeds EUR 50 million. 

Individual investors may have lost thousands and even tens of thousands of euros in investments. The website of the on-line investment community was shut down at the beginning of this month. Only a few criminal complaints have been made so far. 

The “investment club” operated for several years, and at least a few of the investors actually made a profit.

The NBI says that it has reason to suspect that a number of crimes were committed in connection with WinClub, and its successor WinCapita. The aim of the ongoing investigation is to establish whether or not the activities constitute a pyramid scheme. 

The authorities are asking that people who feel that they have been the victim of a crime after investing in WinCapita to report their suspicions to the local police.

Some more information in this website

You can also read what wikipedia has posted about Wincapita:

Wincapita, previously Winclub, was an Internet based investment and multi-level marketing company that is alleged to be a Ponzi scheme. It operated on Finnish market. 

The company presented itself as an invitation-only investment club that required an initial investment of several thousand Euros, while promising up to 400% returns in investment initial. 

The investment company has been in operation since 2005. The web site of the company was abruptly closed in March 2008. 

According to Finnish National Bureau of Investigation, who began investigating the activities of the company in late March 2008, approximately 10.000 people lost their investment. The total amount of money lost is over 50 million Euros.  

In the early part of the operations, the returns were paid normally, in order to draw in more investors. The company itself was registered in Panama.

Mr. Darling, UK Chancellor of the Exchequer, has announced that the widely criticized new taxes for Non Doms (foreigners) living in the UK, would become effective in April 2008.

Many had hoped that the UK would consider more carefully the serious implications that such new taxes might present for the UK economy. Various groups and organizations had predicted a flight of companies and high net worth individuals to other countries, particular Switzerland.

John Riches, Deputy Chairman of STEP, stated that, “In the absence of such a postponement (of the tax proposal), we are still fearful that the flight of individuals and capital will continue”.

The principal tax matter is the imposition of a charge of GBP 30,000 per year for Non-Doms using the remittance system of taxes, who have been resident in the UK for 7 of the past 10 years.

The new provisions going into effect in April, 2008 confirm the above tax measure but suggest that the GBP charge should be deductible from foreign tax owed. The previous position of Revenue was that this was a matter for the various tax treaties and not of concern to Revenue. It remains to be seen however, as to whether this position has really changed.

The other concern is whether, now that the old Non-Dom regime has finally been breached, more tax changes may be in the offering for the next and following years. Fears abound; already, there are reports of major re-locations of Hedge Funds from London to Switzerland and more are following. These funds employ large numbers of foreign specialists who would be impacted seriously by the tax increases, and who knows whether these are the last.

According to the Financial Times, David Butler, a founding member of Kinetic, an investment management company, stated that up to two-thirds of his Hedge Fund clients have already moved their operations to Switzerland. And of course, readers may be aware of the recent Yahoo announcement that it intends to move its European operations from London to Switzerland.

While the investment community in London is reeling from the changes, it is still uncertain what impact this will have on the high net worth foreign community in London. Some may consider the GBP 30,000 charge of little significance but others less wealthy may begin to re-consider residency in London. After all, there are may other attractive locations in the world, particularly for the high net worth retiree. Of course, for the Middle Eastern wealthy, Dubai and other countries are spending very large sums of money on infrastructure, such as hotels and recreational/entertainment complexes, to attract just such wealthy Middle Eastern UK residents, as well as high end European and US nationals.

At the moment Switzerland is the country of choice for Non-Doms re-locating from London. It has a very attractive tax regime and the canton system makes it possible to negotiate a flat annual tax, providing stability in tax planning.

Offshore Trusts

In this area, Revenue has made some concessions. Income and gains by offshore trusts with assets in the UK will only be taxed if they are remitted to the UK.

Capital Gains

The new 18% flat tax on capital gains will come into effect in April 2008.

Offshore Income

Mr. Darling confirmed that the Government would “not seek to charge UK tax on offshore income or capital gains that is not brought into the UK.”

Source: Maritime International Ltd 

Few people knows how modern banking works and thanks to Bankaholic I discovered 5 great videos explaining all that you need to know about it.

Here are two of them: 

Follow the links below these videos to watch the other three, I know that you will find them very interesting. 

I want to bring your attention to a good post from my friend Mirjam in her Blog MeMyselfandI about how to improve your Blog avoiding some common mistakes, I know that I am making some of these ones too:

Since I am still looking to change my theme and improve my blog overall, I thought I should focus on mistakes to avoid, apart from just looking for a new theme.

So I started to look around for telltale signs that show a blogger is new to blogosphere. A lot of these mistakes can really work against all the efforts one puts in a blog without even realizing that that is why bounce rates go up and visitors just seem to ignore what you yourself believe is “the best blog on earth”.

Who the hell am I to come up with a list of newbie mistakes?

 I will be the first one to admit that I am guilty of making (or having made) the following mistakes. 

Read the rest of this original post here: MeMyselfandI 

This is an old post from Felix Homogratus but in my bad experience with some brokers regulated by NFA now I must agree with his opinion and bring this post again for you. Don´t be confused about what NFA really does and if it´s possible move on to an ECN forex broker:

A lot of forex traders place a lot of hope on the fact that their broker is NFA regulated. I hate to tell you this, but though NFA regulation is very good, that doesn’t mean as much as most people think it does. Before I start talking about this, I want to tell you that what I express below is a matter of my own opinion and research, and I may be wrong about my opinions and research. 

As far as I know, NFA stands for National Futures Association, and it’s a private company that collects fees from its members, and in exchange for the fees, they provide certain services to the members, like audits. The way NFA works is very similar to a Condominimum Association. Remember, it’s an association, not an organization. That means that members of that association can change their own rules. Like a board of members in a condo association consists of members that are usually tenants, they can vote on things, and decide how much every member of the association should pay, and what kind of duties the association will perform. 

If you live in a Condo association, you have to abide by their rules, but nothing prohibits you from selling your condo, and buying a condo in another association. Similar with NFA, the membership is voluntary, and if somebody doesn’t like the rules, they can leave, end of story. Of course if the NFA thinks that one of their members is doing something illegal, they report them to a government agency, and that government agency may take action, and shut down a company, but as far as I know, NFA has no power of doing it themselves. Similar to your condo association, if you do something illegal, they call the police and report you, and you pay the consequences. This distinction, is extremely crucial to understand.

People think that when a forex broker is NFA regulated, it conducts honest business, but one has nothing to do with another. Legal business and honest business are two completely different things. If a forex broker manipulates the prices and takes out stop/losses of their traders, that’s dishonest, but legal. If a forex broker changes your entry prices and decides to null your profits, that’s dishonest, but it’s legal.

Most rules in the NFA are set around how broker manages its customer funds account, and make sure there is no money laundering happening. NFA has rules, but those rules have nothing to do with what’s legal or illegal. If your condo association has a rule not to dry your clothes on the balcony, but you still do it, you are breaking their rules, but you are not doing anything illegal. What they can do against you is keep warning you not to do it, and eventually try to force you to leave the association by selling your property.

According to what I know, despite of the mostly non-important rules, set by the NFA, brokers break those rules all the time, and the NFA has to decide whether to kick them out of the association or not. No matter how much they may want this, but they can’t shut someone down for just breaking their rules. Their rules have very little to do with the law. 

There are now talks about the NFA raising minimum net capital requirement for the brokers. At first this seems like an action to protect traders from dishonest brokers, but nothing can be further from the truth. I think everybody knows that most forex brokers are bucketshops, so it should be obvious that most members in the NFA are probably people from big influential bucketshops. What is the biggest business threat for the big bucketshops? The biggest threat is the small bucketshops and ECN brokers, because small bucketshops and ECNs, take some of their clients, and create a lot of competition. How can this problem be resolved? Well, it’s very simple, raise the net capital requirement, which is nothing else but stale funds sitting in the customer funds checking account of a broker.

Now, if a broker has a lot of net capital sitting in their checking account, that means one thing, and one thing only. It means that the orders are not being executed in the real market. Because if you watch the video, if a broker was to execute the orders at the big banks, the money wouldn’t be sitting in the useless customer funds account, instead the money would be trading at the big banks’ trading accounts.

So what will this new rule will do? Some people think that it would drive a lot of brokers out of business, and I used to think that too, before I did more research. This has nothing to do with brokers going out of business, NFA has no such power. This would simply mean that small bucketshop brokers with not enough net capital requirement will simply be kicked out of the NFA, and wouldn’t be able to display their logo on their website. That’s all. The only thing this new rule would do is monopolize the NFA, and instead of having a lot of members, it would have only several big bucketshop members. And those big bucketshop members will use their position in the NFA as marketing tools to detract traders from smaller brokers that won’t be NFA regulated.

The bigger ECN brokers will have to make a choice whether the NFA badge is important to them. If it is, they’ll have to take 6 million out of their pocket, in order to meet that requirement, because remember, according to the video you should’ve watched, with their structure, they may have tens and even hundreds of millions of dollars, but they are not sitting in their customers funds checking account, instead the funds are sitting at trading accounts of major banks.

So if the minimum net cap requirement is initiated by the NFA, here is what would happen. A lot of smaller bucketshop brokers and possibly some ECN-type brokers will be kicked out of the NFA. They will still keep operating, and will probably not go anywhere. What this will do is the big brokers will be able to tell traders that they are NFA regulated, and traders should not trust the other brokers that are not NFA regulated. That will probably attract more clients to them, because the clients of smaller brokers will not be fully educated and will be scared by their broker being kicked out of the NFA.

So what benefits does this large minimum funds requirement do to the traders? Well…I think there is no benefits, but only harm. A lot of the smaller bucket shop brokers that will be kicked out of the NFA will probalby be able to operate more loosely, because they wouldn’t be audited by the NFA. Some honest brokers that actually pass their orders into the real market will probably leave the NFA, and confused traders will change their accounts to the big bucket shops that are the biggest manipulators in forex. And because NFA will consist of only few bucketshop members, a lot of new traders will choose them over all the other brokers, and will simply be victims of the same dishonest manipulations that every bucketshop customer has experienced.

So I think this whole thing with minimum cap requirement is nothing else but a political move from the large bucketshop operations, and they are already starting to use this rumor for their marketing purposes of attracting more clients.

Felix  

The SEC as well as the EU’s top market regulator have been exploring how to build a barrier-free transatlantic securities market that could ultimately give investors more choice.

“The steps we are announcing today are designed to better coordinate SEC regulation of the U.S. capital markets with our counterparts’ regulation in the larger global marketplace,” SEC Chairman Christopher Cox said in a statement.

The SEC’s plan includes exploring initial agreements with the agency’s foreign counterparts and potentially reforming rules to make it easier for U.S. investors to access foreign broker dealers. The Securities Industry and Financial Markets Association (SIFMA), a Wall Street trade group, urged the SEC to reform broker dealer rules immediately. “Firms are forced to meet Byzantine requirements written at a time when fax machines were the leading telecommunications tool,” the group said.

Rules need “to be rewritten to reflect the cross-border capabilities of the industry, and the global product demands of its customers,” it said.The concept of allowing foreign banks, brokers and exchanges to operate under their home country’s rules is also known as “mutual recognition”.”If regulators are able reach a “mutual recognition” agreement, it would mark a radical shift in how markets are overseen.

The SEC currently requires foreign trading firms to comply with its rules even though they are fully supervised in their home market. The plan includes adopting a formal process for discussing “mutual recognition” with other regulators. “By beginning to build a sturdy basis for cooperation among securities regulators who share the same concerns, we can greatly improve investor protection and market efficiency worldwide,” Cox added.

I am trading in the Forex market for more than 1 year and maybe my experience can help many people to trade. I must tell you that it´s not an easy way. You are looking for a new way to gain some extra money (forget to make you a millionaire trading Forex) and you have always read that this is the biggest financial market in the world and you can gain that money working at home once you have learnt how to trade.

Yes, it´s great!, but as I told you before it´s not an easy way. Firstly you begin reading a lot about forex in many websites, as for example babypips, to understand the basics to trade in this market, it takes some time and effort, maybe forex is not for you. You are surprised with all the indicators and strategies that many people use, and it seems that everybody is gaining money applying them (don´t believe them, most of them will never tell you that they are losing money).

Once you have learnt all that you think you need about forex you begin to trade in a demo account (someone told you: first trade in a demo account, don´t risk your money: good advise). You are surprised!, you made more than 20% in 1 month!, how easy is to trade Forex!. Many people has experienced the beginner luck.

Some months later and after learning more and more you have decided to trade with real money, you are going to gain a lot of money You learnt a lot about indicators, financial news, strategies and you begin testing one of these strategies in your real account (have you ever heard about money management?).

Maybe the first month you gain some good money (he he Forex is easy! I am a good trader! those traders out there only gaining 5% monthly don´t know what they do!), but in a short time you have lost all your money (ouch…).How is it possible?, I was gaining a lot in my demo account during some months and also in my first month with a real account…

Yes, you need to lose money to gain experience and humility, if you don´t learn from your mistakes you will not trade with success later. And the market is not always the same, those nice strategies work very well during some months and others not.

Some months later you have lost some good money and you don´t know how to trade, you even change your strategies from time to time and always losing (Forex is not as easy as I thought…). You discover that all you have learnt seems worthless. Many people even say goodbye and never trade again when they reach this level. Other people continue with his will and illusions, they want to be good traders!, they don´t surrender and they discover how important was a good money management (if I would have known about it before…).

Now you are trading again in a demo account but this time with a good money management and with few indicators (trend lines, channels…), as simple as possible. You gain more and more experience: patience, discipline, almost an intuition that tells you when and how to trade. You are gaining more and more confidence and your trades are doing very well. Here you are beginning to trade in a right way.

Now you know that you should only risk 1% or 2% of your entire funds in your opened trades. Now you understand that Forex is not as you thought and you understand those traders gaining a lower but safer profit every month.

Do you feel identified with this experience?.

Your comments are welcome.