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07-03-2004, 10:25 PM
I signed up for a free virtual foreign currency trading account seeded with $100,000 virtual money. Spreads are about 2-3 PIPS (like basis points) on some of the majors and 5 PIPS on other majors with no commission (the same spread and zero commission this firm charges on real trades). Trade execution is virtually instantaneous on the web in real-time and transparent. Available leverage is as high as 50-1 on the major spreads.
I've always been interested in this kind of stuff and monkeyed around with it in a small way over a decade ago with disappointing real results. After that I decided to never bet, just to keep reading a little here and there over the years and try to figure out the commodity/futures/trading puzzle (to some extent).
Someone I know piqued my interest maybe 6 months ago when he told me that he has been daytrading stocks from home and that someone with my discipline could certainly make 3-4K/Wk. doing the same once I learned. He said commissions and spreads have come down so much that with Level II trading he only needs some minuscule movement (I forget the exact amount) in the stock price to break even on the trade. He has done this successfully for several years now. Also I am keenly interested because of the chance for a really HUGE score in these markets if you hit things just right;-)
Anyway I started web-surfing about it recently and found that the currency exchange market (FOREX) is not only the largest and most liquid of all markets but that it also has
the lowest transaction costs. So I set up this free FXGame trading account and messed with it for a few days part-time. Net result trading the EUR/USD, GBP/USD, USD/JPY over the last few days = down about 15K out of my 100K virtual account /images/graemlins/tongue.gif The interesting thing is that I am down WAY more than the cost of transactions (the spread: a 1.8 PIP spread on a 100K lot means paying $18 for a round-turn net everything). I was just trying to trend-follow a bit by the seat of my pants off the charts and maybe catch a reversal or two and just lost. Obviously I suck at this and would have no business doing it with real money right now/images/graemlins/grin.gif
After digesting Market Wizards and Market Wizards II some years ago, and reading Soros and Rogers and some others, I came away with the impression that the markets are NOT random nor are they all that efficient on a short-term basis. Money can be made by trading fundamentals or technicals although the styles are very different. Low transaction costs of course help a lot. Money can also be made by investing as opposed to trading and I am well aware that that is probably the best long-term approach. However what I am talking about here is pure trading not investing.
Ray Zee made a point in another thread--I forget the specifics--in which he asked someone just what info. they would have that others don't. That's a very valid question, especially for those trading on fundamentals. I'm a little more curious here though about trading on technical indicators as a means to discern trends to follow or likely reversal points. The theory here is that underlying forces are reflected by price actions even if we don't have full knowledge of what those forces are or how strong they might be. Thus the price actions in some ways tell us what we cannot otherwise know. Also as BadBoyBenny just said in another thread we don't necessarily need more information than others if we better analyze and act on the available information (sort of like poker that way;-)).
I do believe that this can be done successfully although the percentage of successful pure traders is probably quite small, perhaps something like the number of long-term professional poker players.
A couple questions I ask myself: why is this stuff so hard? Why the heck did I lose so easily, way beyond the transaction costs in my virtual account? The darn market just seemed to go the opposite of whichever way I bet most of the time;-) A couple times I set a stop which got hit and the trade would otherwise have profited--but I set the stop well out further than the recommended levels.
I have read that a trader need only be right perhaps 40% of the time to show a profit if one follows the principle of cutting losses and letting profits run. George Soros said that it's not how many times you lose but how much you make when you are right.
Any insights or comments are most welcome.
I've always been interested in this kind of stuff and monkeyed around with it in a small way over a decade ago with disappointing real results. After that I decided to never bet, just to keep reading a little here and there over the years and try to figure out the commodity/futures/trading puzzle (to some extent).
Someone I know piqued my interest maybe 6 months ago when he told me that he has been daytrading stocks from home and that someone with my discipline could certainly make 3-4K/Wk. doing the same once I learned. He said commissions and spreads have come down so much that with Level II trading he only needs some minuscule movement (I forget the exact amount) in the stock price to break even on the trade. He has done this successfully for several years now. Also I am keenly interested because of the chance for a really HUGE score in these markets if you hit things just right;-)
Anyway I started web-surfing about it recently and found that the currency exchange market (FOREX) is not only the largest and most liquid of all markets but that it also has
the lowest transaction costs. So I set up this free FXGame trading account and messed with it for a few days part-time. Net result trading the EUR/USD, GBP/USD, USD/JPY over the last few days = down about 15K out of my 100K virtual account /images/graemlins/tongue.gif The interesting thing is that I am down WAY more than the cost of transactions (the spread: a 1.8 PIP spread on a 100K lot means paying $18 for a round-turn net everything). I was just trying to trend-follow a bit by the seat of my pants off the charts and maybe catch a reversal or two and just lost. Obviously I suck at this and would have no business doing it with real money right now/images/graemlins/grin.gif
After digesting Market Wizards and Market Wizards II some years ago, and reading Soros and Rogers and some others, I came away with the impression that the markets are NOT random nor are they all that efficient on a short-term basis. Money can be made by trading fundamentals or technicals although the styles are very different. Low transaction costs of course help a lot. Money can also be made by investing as opposed to trading and I am well aware that that is probably the best long-term approach. However what I am talking about here is pure trading not investing.
Ray Zee made a point in another thread--I forget the specifics--in which he asked someone just what info. they would have that others don't. That's a very valid question, especially for those trading on fundamentals. I'm a little more curious here though about trading on technical indicators as a means to discern trends to follow or likely reversal points. The theory here is that underlying forces are reflected by price actions even if we don't have full knowledge of what those forces are or how strong they might be. Thus the price actions in some ways tell us what we cannot otherwise know. Also as BadBoyBenny just said in another thread we don't necessarily need more information than others if we better analyze and act on the available information (sort of like poker that way;-)).
I do believe that this can be done successfully although the percentage of successful pure traders is probably quite small, perhaps something like the number of long-term professional poker players.
A couple questions I ask myself: why is this stuff so hard? Why the heck did I lose so easily, way beyond the transaction costs in my virtual account? The darn market just seemed to go the opposite of whichever way I bet most of the time;-) A couple times I set a stop which got hit and the trade would otherwise have profited--but I set the stop well out further than the recommended levels.
I have read that a trader need only be right perhaps 40% of the time to show a profit if one follows the principle of cutting losses and letting profits run. George Soros said that it's not how many times you lose but how much you make when you are right.
Any insights or comments are most welcome.