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 Is Forex a credible diversifier for a trader?

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Is Forex credible to you?
Yes
33%
 33% [ 1 ]
No
67%
 67% [ 2 ]
Total Votes : 3
 

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aaronchall



Posts : 13
Join date : 2008-09-16

PostSubject: Is Forex a credible diversifier for a trader?   Wed Sep 17, 2008 1:55 am

I've tried to integrate currency trading into my trading strategy to get higher uncorrelated returns. I know that large asset managers take foreign currency positions with 10 to 1 leverage. I haven't put real money at risk, because I can't make money with the practice accounts.

Honestly, I almost think most online forex brokers are scams run by hedge funds as online casinos.

They say they make the market, so they tell you they are the bank and they take the other side of the trade. So every bet you make has them making a bet against you. Doesn't that mean they profit when you lose money, and that they lose money when you profit? That's a zero sum game. Plus, they take the spread.

I've opened practice accounts, and tried to take pips here and there using basic technical indicators, but every trade is a losing trade. I've tried taking fundamental positions, and it goes against me every time. If I had real money there, I would swear that the broker knew where my stop losses were and was moving the quotes just to take them out and make every position lose money.

I've tried to do due diligence with the Forex brokers. Say I took a fundamental position that caught the dollar on a strengthening swing, and my position was 1 Million buying 100 M dollars. Say I profited 5M on the move. I have seen nothing that leads me to believe that they would be able to make good on the 5M. For all I know, they used my 1M to buy a couple of new Ferraris and cocaine.

I've asked for lower leverage, like 10 to 1, but the lowest I can get offered is 50 to 1. Again, this sort of thing makes me believe that the broker is trying to wipe out my position by moving their quotes against me.

I've asked their compliance people to answer these questions, and I haven't heard back from them.

It seems like every tutorial I've looked at only discusses technical trading. There's not much regarding economics and fundamentals.

So I'm obviously a Forex sceptic. I'm a pretty smart guy. I scored 730 on the GMAT (that's in the top 3% of people who take the test to get into graduate biz school). I'm not prone to believe in conspiracy theories. Name any, I don't believe them. I do believe that types of people are prone to certain strategies that give the appearance of collusion, but that doesn't mean that they are working together with a hidden stated purpose.

So make me a believer. Explain why I can't get the leverage I'm looking for. Explain how they would be able to cover a large gain. Explain a credible working trading strategy. I think if Buffett and Soros can do it, so can I, but I just can't make it work either on paper or in my head.

I know a lot about a lot, but I just can't figure this one out.

Aaron
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PostSubject: Re: Is Forex a credible diversifier for a trader?   Thu Sep 18, 2008 4:28 pm

I've traded forex and still do, the only problem I have is that forex is nowhere near as regulated as the stock market. Also those spreads are huge when you compare it to commissions on stock trades. Sometimes I do run some forex trades but I haven't really found it to be as useful compared to stocks and options unless you're trading around the clock.
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PostSubject: Re: Is Forex a credible diversifier for a trader?   Sat Sep 20, 2008 12:19 am

ive never really gotten into fx but ive heard a lot of good things about it, but then again having 10:1 leverage helps too. my father trades fx and basically tells me its the same thing but its the leverage that helps you. in that case id rather stick to my stocks and options. however, i have purchased some fx proshares and bric structured products but thats about it

now if only the market could trade 24 hours like fx...
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aaronchall



Posts : 13
Join date : 2008-09-16

PostSubject: Re: Is Forex a credible diversifier for a trader?   Mon Sep 22, 2008 3:51 pm

aaronchall wrote:
I've asked for lower leverage, like 10 to 1, but the lowest I can get offered is 50 to 1. Again, this sort of thing makes me believe that the broker is trying to wipe out my position by moving their quotes against me.

I've asked their compliance people to answer these questions, and I haven't heard back from them.
Aaron

I think there's a misunderstanding, so let me clarify. 10 to 1 WOULD help, but the lowest I can get is 50 to 1. Perhaps I should say it like this: They will only offer me 200:1, 100:1, and 50:1 leverage. 10:1 is not offered at all.

Yeah, their spreads are actually much higher commissions than say Scottrade's. Perhaps that's why they won't give me lower leverage, because 10:1 would mean 1/5 the profit per trade?

Anyways, although I know that there are individuals who claim to make a lot of money trading FX, even though I feel great trading most financial markets, I can't risk money in it.

Aaron
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