[I’m completely new to trading and to Forex, I’ve read around quite a bit in this forum, but information for newbies seems to be a bit spread out and not always easy to find. I though starting a new thread might be a good idea - and maybe those who know can pull in existing information by linking to other threads.]
1. I have understood (I think) what leverage is, but what I don’t understand is what’s in it for the broker? On FXCM I’m using a margin of 450$, and in 3 days have a P/L of 1000$ - how come the broker doesn’t take the 100:1 of that profit?
2. I am trying paper autotrading with Team Aphid Bird and Foreximo on FXCM - from a starting account of 5000$, I already have more than 6000, but my usable margin has increased in parallel. Is it possible to have a kind of <= rule, so that all the profit above the initial investment is trickled over into an account which is not used as margin? To put it differently, is it possible to keep a fixed margin? I figure that a bird in the hand is worth two in the bush, so if I’ve made 1000$ in 3 days, I’d rather like to keep them, and carry on just risking the 5000$.
3. Talking of risk, I have read that it is possible to lose more than the margin, and also to lose more than the account balance. This is what I have understood so far: if a stop loss can’t be met because there is nobody who wants to buy what I want to sell, then my loss can be greater than margin. I the autotrading system falls over, a stop loss order can simply disappear. If the drawdown is greater than my account balance, the broker will cut losses and leave me naked. Is this correct, and what are the other possible circumstances? I don’t mind risk as long as I understand it!
4. I track the orders in FXCM Trading station, is there any way to tell apart the orders that are coming from Team Aphid Bird and from Foreximo?
5. C2 recommends minimum 10,100$ on Trade Aphid Bid to avoid oscillation. Is oscillation a problem in forex - where I don’t pay commission per transaction?
6. In FXCM Trading Station, under Open Positions, I see that the orders have a ‘Stop’ column - does this imply that in FXCM it is possible to incorporate the stop loss directly into the buy or sell order? If so, wouldn’t this resolve the problem of stop loss orders getting ‘lost’ and leaving people high and dry?
7. I still don’t really understand what the Autotrade scaling percentage means, and how it relates to the amount of money in the FXCM account.
8. Given that the FXCM account is in dollars, if I see orders buying EUR/JPY, does this mean that I have to have bought EUR first? Or is there some kind of implicit exchange going on between EUR and USD?
9. Given that my ‘base’ currency is CHF (no, I’m not rich, I just live in Switzerland!), would I be better off signing up for a trading account with some Swiss institution? Or is Forex fundamentally dollar-centric?
10. I’ve read that Autotrading is not good because you have to ‘babysit’ it - but doesn’t manual trading also imply sitting in front of your screen all day too? (Unless you’re trading on long-term trends I guess)
11. As a programmer, I’m very interested in the technical challenge of automated systems. It seems to me that automated systems must be better in a sideways market - and given that most of the time that’s what we have, it should be worth investigating. I’ve downloaded NinjaTrader, I hope to have the time to do a bit of simulation. I’ve read that between simulated and real systems there can be a difference because of lack of discipline - but an automated system shouldn’t have that problem. What might be other problems that would cause a simulated system to perform badly in real life (assuming it has showed promise with several years worth of real data)?
Thanks for your time.
(Some context: I got interested in forex simply because I have some savings in EUR which I wanted to ‘turn into’ CHF. During the time it took the French savings account to free my euros, the exchange rate dropped more than the annual interest rate, effectively wiping out a year’s savings. - Any predictions on which way EURCHF is likely to go in the near future?!)
I’ll try to answer what I know, but keep in mind that I’m not an expert either.
1. They use a larger spread. E.g. they will give you a bid of 1.4511 instead of 1.4514. So their profit depends on the amount that you traded, not on your profit or loss. IB, on the other hand, deducts a separate commission.
2. I don’t know of an automized function, but in the autotrade setup you can simply adjust the available money and do as if you have only $5000 in your account. You have to do it manually though.
3. Yes, this can happen. The risk is larger when you use more margin. I believe the risk is smaller for major currencies. For example, when you have $20K and you buy 20K EURUSD at $1.50, then the risk that your account is wiped out is very small. Even in the extreme event that EURUSD falls back to $0.75, your account will still be $5K positive. Also, trading during important announcements involves more risk (brokers warn that stops are not guaranteed during such events).
7. If the system has $100K on C2, and you tell in the autotrade setup that you have $37K in your account, then the percentage is 37%. So if the system buys 200K of currency X, then you will buy 37% of 200K.
8. When you buy EUR/JPY, this means that you buy EUR and you get a loan in JPY at the same time. There is no need to change USD into EUR first.
9. I’m afraid this is not possible. Forex is not USD centered, but C2 - FXCM is probably USD centered. I am not sure of this.
10. Some systems give orders hours or days in advance, and then you can easily trade them manually. Even then it might be more convenient to autotrade, because the probability of a typo is smaller. For other systems it is better to autotrade. How good that works, depends on the system, your internet connection, the broker, etc. I don’t agree with the general claim that autotrading is not good. But there can be problems, and I recommend to watch it closely when you start trading a new system.
11. Too much to say. One reason is that history doesn’t repeat itself. For example, you may have a backtested system that seems to work fantastically because accidentally EURUSD was in an upward trend all the time. Then, when this market condition changes, your system may fail too. Other reasons are that stops and limits are not always filled in reality, that there is a delay between you sending the order and the actual excecution,
(banks are thieves)
Jules, Thanks very much for taking the time to answer.
(A note for other newbies - the answer to my question number 4 is the ‘Trade Status’ option in the AutoTrading menu)
"7. If the system has $100K on C2, and you tell in the autotrade setup that you have $37K in your account, then the percentage is 37%. So if the system buys 200K of currency X, then you will buy 37% of 200K. "
I’m afraid that doesn’t make things any clearer to me, Because 37% of 200K would be twice what I have in my account. Does this include leverage or not? And if I am trading several systems, would I tell each one 37K, or split it across the systems?
I ask because I currently have three sytems, with a total of $11K, but so far in trading they’ve never taken more than $500 of my margin.
"37% of 200K would be twice what I have in my account. "
Yes,and that is what is intended. The system buys twice what it has in its account, and then you should buy twice what you have in your account. If the system works with 1:2 leverage, you will have 1:2 leverage too. So all trades will be proportionally to your account.
If you have several trading systems, you should split the $37K across systems.
I don’t know why only $500 margin was used. Perhaps they just traded at different times. Perhaps these systems trade at low leverage.
For other newbies, found some nice clear information about forex here : http://www.cmsfx.com/en/forex-education/
I’ve found another answer to my question #10 (what’s wrong with autotrading). It is related to #4 (How do I tell which orders come from which signal?).
It is true that with the Trading Status menu in C2 it is possible to see which orders are placed by which trading system (though not always, I currently have 4 open orders in FXCM, but see in Trade Status). But this only applies to open orders - which effectively implies sitting in front of your computer to follow what’s going on.
Why is this important? Because I’ve had a week of losing orders, and I’d like to know which system is screwing up. Currently, once positions have closed, it is very difficult to reconcile them. Sometimes they can be traced back to the individual trading history sections on the system home pages, but not easily. What I’d really like to see (though maybe it’s not possible), is just one history page with all open and closed positions, with the system name next to each one.
Forex newbie came, saw and was conquered.
I guess I signed up at the worst time, but with three systems (Foreximo, Gizmo & Scalper) I saw my 5000 demo account go up past 6000 in a few days, before plummeting down to 2000 in two weeks. Very happy that it wasn’t real money.
I fully understand that in strange times, unexpected losses can occur. I wouldn’t have minded so much if the 4000 had been lost in one ‘unforeseen’ circumstance. But these systems (Foreximo and Gizmo at least) had repeated losses. I’m no expert on these things, but it seems to me that a system should be able to recognise the circumstances in which it is not performing well, and just stop, or at least pause. All due respect to Team Aphid Bird for their decision on that front.
I now better understand people’s reserves about AutoTrading. As mentioned above, I found it very hard to work out which trades came from which system, and discovered that not understanding a system’s strategy is really just flying blind.
I anticipate that I may be rubbished as a newbie who didn’t know what I was doing. And that is probably correct. But the question is, what is the target audience of C2? There are a lot of newbies like me who are interested in forex. If you don’t cater for them, then they will come in, get burned, and leave. They may leave forex for good, or just go somewhere else where help is easier to find. Either way, it’s lost revenue.
At the very least, a page with links to other sites where help is provided would be good.
Some interesting links I have found (this is not an endorsement):
http://www.forexpeacearmy.com - just for the forums and reviews
http://www.cmsfx.com/en/forex-education/online-forex-course/chapter-1-forex-basics/
http://learn-forex-online.com/
http://www.investorbrain.com/index.php/logicalblocks/day_trading_currencies_24_7/
http://www.squidoo.com/is-forex-for-you
http://www.investorbrain.com/index.php/logicalblocks/are_you_covered_if_your_broker_fails/
http://www.topforexreview.com
Am I disappointed with C2, with forex, or with myself? Difficult to say. Responses and corrections from MK were very rapid, so I can’t decently complain. I guess that C2 may just be more than I need at my current state of understanding.
I’m off to continue my learning experience doing manual trading with virtual money on fxgame (unlimited demo account). Back later, maybe?
I have been here a couple of years. I would observe that:
– “I saw my 5000 demo account go up past 6000 in a few days, before plummeting down to 2000 in two weeks.”
–> You are WAY overleveraged. The belief is that > 90% of newer traders lose all their money in the first year. When you use real money, your results are likely to even be worse, be cause then your emotions will enter in strongly and you will make errors.
–> If you are new, take your leveraging plans, and cut them at LEAST 80%. You have lot to learn, and I estimate you are at least a couple of years away from profitability. Don’t blow your wad now. There are no risk-free instant profits. You might take your money From $5000 to %50,000 in a year, but the reality is, you aer way far more likely to take your $5000 to $0 in a couple of months trying it.
– "I guess I signed up at the worst time, but with three systems… "
–> Probably had little to do with it. People who were trying this on FX-AUTO (on a forum I monitor) generally said the same thing
–> YOu cannot pick the best looking systems and start making money. Most “good systems” are only there due to luck. I believe there are > 400 systems ACTIVELY running here. That guarantees that 20 are in the top 5% due to pure chance. Most of those 20 will randomize over the NEXT few weeks after you discover them. One way to get rid of some of the garbage, is to discover them and THEN monitor them for at least another month. Systems that are not just lucky for a few months have a better chance to have value. And then (I agree), it is better to trade several, not just one. If you have one good system and two random, you still can make some money.
– “Some interesting links I have found (this is …”
–>You will not have any better luck there. And they are reveiws, you cannot see their trading stats/metrics. FURTHER, several of those sites (Felix) are considered at best tainted, and at worst, downright scams. The C2 owner is honest, straightforward, and runs a reasonably tight ship.
–“I now better understand people’s reserves about AutoTrading. …”
–> The problem is mainly you. You are a 4 year old with a loaded pistol, and you will be the first victim. You have a hell of a lot to learn about trading. Don’t put any money in, until you have spent a long time learning proper methods.
–>Anyone encouraging you to the CONTRARY is not doing you favors. Most systems/traders I have seen look like this when they are waxing profitable: yes. Yes. Yes! YES! YES!!! OH NO, I lost everything - it must be the fault of the (insert blamee: broker, software, autotrading setup, ISP, vendor, C2, moon, etc. etc.)
– "Am I disappointed with C2, with forex, or with myself? Difficult to say. "
–> It is DEFINITELY you. You are in over your head at this stage. But everyone is there at some point. The question is, are you willing to learn, or do you plan to thrash about, trying different things in different places until you wash ashore as a beached whale?
Well, I did come back, but just to complete my comments with further conclusions from the past months.
Very simply put, Forex trading is just a worldwide pyramid-style scam, predicated on bringing in as many newbies as possible: these are the people that more experienced traders can make easy money from.
Though it is probably totally unwitting, this is the source of the mixed messages here on C2. On the one hand it’s “here’s this amazing system which allows even newbies to get in on the money”. But once you start digging, it’s "Oh you poor thing, you lost you money, what were you thinking of anyway - easy money?"
Basically, it is in the experienced trader’s best interests that the newbie gives up AFTER losing his money, not before!
So, to sum up my previous argument, if you can’t just use a C2 signal to make money without first understanding what’s happening, how is C2 any use to a newbie, given that the signal provider’s reasoning is not available as a learning tool?
(PS. Since my last visit I’ve been manual trading on a modest demo account - quite happy to be up from 1000 to 1270 CHF since March, based on lots of little trades. I won’t be switching to real money before reaching 2000.)
There is plenty of information here on C2 available to newbies if they are prepared to look for it.
A really basic search on The Grid looking for systems that have survived 18 months (540 days) and are still profitable would show you that for stocks and futures there are 20-30, but for forex systems there are just 6, that alone should tell you something and even then for the 6 that are left the statistics are pretty bad when you look at max drawdown and APD.
I dare say if newbies performed such a search BEFORE deciding what market/asset class to invest in they may not end up choosing Forex at all, unfortunately however many with small accounts get lured by the leverage it affords them without truly understanding the risk they are taking and the first big trend change or increase in volatility will often take them out.
Good advice Jon. I hope some are reading what you stated, then reading it again just to make sure, with a book mark as well. 
Assessment of risk to ones account is paramount to success, as much or more important than reward if you want to be successful in the long run. This is a hard lesson to learn, but to be successful, it’s the most important of all the trading “rules” out there one could find or come up with on their own.
Why is this so important, and why must it be stressed never enough?
For the simple fact that market dynamics change over time. Markets have three directions, and these directions are always in flux - up, down, and directionless. What may or is working now, may (most assuredly) not work in the future.
Without being able to adapt to it, your account will suffer accordingly.
For an account that is over leverage when the good times are rolling - whichever way it happens to be correct at the moment, when the tide turns, they will likely be unprepared, and KaBAM there goes 30-50% or more of the trading account - wups.
For those that understand it and take heed to it, they will endure. For those that don’t will be wiped out time and time again until they come to this realization.
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The truth is that 90% of all traders do not succeed no matter what asset class they are trading. If it was easy to trade, everyone would be doing it. However, as for Forex, I have many happy long term subscribers who have been making money trading RT Forex North. You can also click on real account information from auto-traders and it will SHOW you for those systems that have auto-traders including mine, the real money balances that they have been making trading the system.
As for leverage, you should be setting your account to stay in sync with what the system is doing. For example, if the system is risking 2% on a trade, you should only be risking 2% of your money since all systems have losing trades and you don’t want to risk 50% of your account balance on a single trade.
{Please note that the above statements are not meant to be considered financial advice, I am not a CTA or financial planner. The above is only for entertainment purposes. All trading carries risk of losing money including your entire account balance. Any money lost trading is your own fault for being a loser, we can not help with psychological issues since we are not a doctor}
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"However, as for Forex, I have many happy long term subscribers who have been making money trading RT Forex North SO FAR"
That and a few bucks will get you a latte. Your APD, Sharpe and Profit Factor are all anemic, so it is more likely you are willing to Hold& Hope in favor of a goodlooking equity curve than talent.
C2 and other vendor systems have a habit of blowing up. And vendors restart them. Or they play with the statistics, as we have often seen on C2. You yourself have a few killed & failed systems.
The previous comments from Jon, Aspire and Sen are pretty much dead on.
I think the reason almost all traders lose their money is they dont have what it takes between the ears emotionally to make the right decisions. The market has a tendency to emphasize all of the wrong things. In our fear we tend to look at that which supports our fear. In our greed we tend to notice that which supports our greed. Consequently we lose money because we have been focusing on the wrong things.
I suspect almost everybody here knows the intellectual side of trading. We have all read mostly the same books and learned mostly the same material. Yet very few are successful. It takes an unusual personality type to understand trading and make money.
Rick Haines
I think the reason almost all traders lose their money is they dont have what it takes between the ears emotionally to make the right decisions. The market has a tendency to emphasize all of the wrong things. In our fear we tend to look at that which supports our fear. In our greed we tend to notice that which supports our greed. Consequently we lose money because we have been focusing on the wrong things.
I suspect almost everybody here knows the intellectual side of trading. We have all read mostly the same books and learned mostly the same material. Yet very few are successful. It takes an unusual personality type to understand trading and make money.
Rick Haines
Generally, correct.
I would also add, that emotionally, people jump at things like futures trading, because the marketing and rumours are that you can make a lot quickly. Marketing never bothers to mention that it can take many years of learning and discipline to make it WORK.
Very well said.
>> It takes an unusual personality type to understand trading and make money.
I second that. When people hear that I work at home, I have no boss, etc, they invariably go “hey! I wanna do that!”. Most of the times it just stays at that, but I’ve been approached more seriously by friends or family and I’ve often told them that I just don’t think they have what it takes. You have to be very cold and analytical, it’s usually a lonely job, lots of math and staring at a computer all day. I guess people think of stock trading and they imagine life on the fast lane, big bucks, suits and sunglasses, LOL. Anybody seen the movie “Boiler Room”? Or “that guy” from Futurama? It’s kinda like people thinking that being a hacker is anything like the movie “Hackers”.
