A little hope for new Forex traders

N

nazsmith

I just wanted to write this to hopefully inspire some people to try their hands at Forex. There were a few posts that encouraged me to stay on track. I've read many posts that overwhelmingly emphasize the risk. I believe if you've traded stocks and/or options for awhile, you're aware of risk and leverage. I also believe you're aware that there's nothing easy about making money consistently.
I've read many threads that evolved into flame wars because the original poster was deemed too enthusiastic about the opportunities of FX. However, the forex market inherently provides greater chances of profitability using a sound strategy and discipline.
Math is a science that no one can deny. If you use a firm that allows you to buy/sell in 1 unit increments, you can watch your profits increase exponentially.
I've invested/traded stocks for a little over a decade. In terms of profit, predictability, and analysis (whether TA or FA), there is no comparison. A goal of 10% (or any percent) compounded each month is actually more feasible in FX than the stock market. Do the math: 10% compounded for 6 months is a great annual return.
Good luck to everyone.
 
What is "1 unit" -- same as lot, car, contract, or is it one dollar, one shekel, one shell? "Increment" implies that it is less than something else.

Quote from nazsmith:

. . . If you use a firm that allows you to buy/sell in 1 unit increments, you can watch your profits increase exponentially. . .
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Quote from Chood:

What is "1 unit" -- same as lot, car, contract, or is it one dollar, one shekel, one shell? "Increment" implies that it is less than something else.
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Yes. :D

Seriously, "unit" is, in fact, the correct, technical term in the context of the above post by nazsmith. A forex quote always shows how many units of the "quote", or "counter" currency (that's the 2nd one, after the / ) it takes to buy 1 unit of the "base" currency (that's the 1st one, before the / ).

If you bought 377,254 units of GBP/USD at 1.7874, you're long GBP 377,254 and short USD 674,304.

And yes, a 1-unit increment is less (way less) than 1 Mio, 1 lot, 1 mini-lot or 1 mini-mini-lot. From any applicable perspective -- compounding, position sizing / money management, risk management -- the advantages of unit trade sizing simply cannot be overestimated.
 
Thanks, I knew the ET rapid response team would clear this up pronto. I did, however, want to know if the "unit" is less than something else and, if so, how much less. Exponential profits interest me greatly.

Quote from late apex:

Yes.
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Sure thing. 1 Mio = 10 lots = 100 mini-lots = 1,000 mini-mini-lots = 1,000,000 units.

And 1 yard = 1,000 Mio. But let's stay down-to-earth for now, shall we?
 
Quote from nazsmith:

I just wanted to write this to hopefully inspire some people to try their hands at Forex. There were a few posts that encouraged me to stay on track. I've read many posts that overwhelmingly emphasize the risk. I believe if you've traded stocks and/or options for awhile, you're aware of risk and leverage. I also believe you're aware that there's nothing easy about making money consistently.
I've read many threads that evolved into flame wars because the original poster was deemed too enthusiastic about the opportunities of FX. However, the forex market inherently provides greater chances of profitability using a sound strategy and discipline.
Math is a science that no one can deny. If you use a firm that allows you to buy/sell in 1 unit increments, you can watch your profits increase exponentially.
I've invested/traded stocks for a little over a decade. In terms of profit, predictability, and analysis (whether TA or FA), there is no comparison. A goal of 10% (or any percent) compounded each month is actually more feasible in FX than the stock market. Do the math: 10% compounded for 6 months is a great annual return.
Good luck to everyone.
More...
Quote from nazsmith:

I'm a newb to forex. I've invested in stocks for several years, and have traded short-term for a few years (options as well). After seeing the alleged 90% failure rate printed many times (can anyone cite an actual study and its methods for deducing this number) I just wanted to ask: what is a realistic expected return (whether per year, month, whatever)?
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From "newb" to an authority in just three months? Wow!
 
Why do you need to trade is such small lot sizes, and how does the ability translate into increased profitability? I don't see any profitable stock traders touting 10-share lots, do you?

Ever heard of "timing"? :)
 
Cute. Ever hear of "compounding"?

It's not the ability "to trade in such small lot sizes" that matters for "increased profitability" in forex. It's the combined power of these 2 interrelated but distinct elements:

1. The ability to increment trade size by sufficiently small amounts... whether the trade size order of magnitude is in the neighborhood of $75 or $7,580,000.

2. The ratio of the account size to the minimum trade size (MTS).

1. --> Rule 1: The more frequently you can compound your short-term (positive) returns, the greater your long-term returns, ceteris paribus.

This rule is a mathematical certainty and fairly well known. The ideal, optimal case is to be able to compound after every closed winning trade, which is only possible with unit trade sizing. That gives you perfectly geometric (exponential) long-term returns.

On the opposite end of the spectrum is when you are forced into waiting until many closed winning trades -- typically over days, weeks or longer -- before compounding is possible, given almost any conceivable money management / position sizing method. Something most forex traders have to put up with. You've found an edge, yet still have to settle for lowly arithmetic (additive) long-term returns. Nice...

2. --> Rule 2: If your account size is less than 3 times -- preferably 4 times -- the MTS, then you're not taking advantage of the power of compounding to its fullest possible extent. Effectively, you're willingly throwing away already earned profits.

This rule is little known. Ignore it at your own financial peril, as most forex traders do. If you're trading mini-lots and you've got less than $30,000 - $40,000 in your account, you've fallen into that hidden trap. Nice... again.
 
Quote from nazsmith:

Math is a science that no one can deny. If you use a firm that allows you to buy/sell in 1 unit increments, you can watch your profits increase exponentially.
... A goal of 10% (or any percent) compounded each month is actually more feasible in FX than the stock market. Do the math: 10% compounded for 6 months is a great annual return.
Good luck to everyone.
More...

I used to have a fairly positive thinking very similar to yours above.

Anyway, many thanks for a little hope.
 
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