Currency Trading?

[HardDrive]

So we had dinner with friends tonight, and the guy is super excited about currency trading. His highly profitable consulting business pretty much evaporated during covid. So evidently he has taken up currency trading. He was very excited to show us his office setup, with lots of complex graphs.

I understand how currency trading works. What concerns me was his use of credit. It sounds like he is margin trading, and in a big way. Major currencies don't 'fail' the same way a company could, but aren't you still opening yourself up to huge losses if you leveraged up 50:1? He's day trading, so guess he is only incurring the risks of a single day at a time.

Are there individual investors out there making at currency traders?

[pwd72s]

I did have some swiss francs I'd forgotten about for 6 months or so...not a lot of money but was surprised to find out they were worth more dollars than I'd paid for them. This was back during the Jimmy Carter inflation era..

That said, sounds very much like something you could make a lot or lose a lot the way this guy is doing it. I'd never get into it.

[drcoastline]

Originally Posted by HardDrive

So we had dinner with friends tonight, and the guy is super excited about currency trading. His highly profitable consulting business pretty much evaporated during covid. So evidently he has taken up currency trading. He was very excited to show us his office setup, with lots of complex graphs.

I understand how currency trading works. What concerns me was his use of credit. It sounds like he is margin trading, and in a big way. Major currencies don't 'fail' the same way a company could, but aren't you still opening yourself up to huge losses if you leveraged up 50:1? He's day trading, so guess he is only incurring the risks of a single day at a time.

Are there individual investors out there making at currency traders?

Like any trade he can set up stops to limit losses.

[MRM]

He will eventually lose all his money, probably sooner rather than later. Currency trading is among the most complex trading classes possible. Even most huge multinational corporations who deal with currency from dozens of countries and have to repatriate it don’t hedge currencies and that’s safer than straight up trading. The people who do it professionally have super computers and have access to raw data the amateur investor can’t hope to replicate. If a guy in his basement running charts on his desktop PC can do it, Warren Buffett’s operation might possibly have a few extra resources that give them an edge. Charts are so intuitively powerful but they’re backward looking. They tell you nothing about the future and treating past trading ranges like a crystal ball into the future is a sure fire recipe for disaster.

He’s guessing, not investing. He’ll be right until he’s wrong. Eventually he’ll guess wrong and get wiped out.

[drcoastline]

Originally Posted by MRM

He will eventually lose all his money, probably sooner rather than later. Currency trading is among the most complex trading classes possible. Even most huge multinational corporations who deal with currency from dozens of countries and have to repatriate it don’t hedge currencies and that’s safer than straight up trading. The people who do it professionally have super computers and have access to raw data the amateur investor can’t hope to replicate. If a guy in his basement running charts on his desktop PC can do it, Warren Buffett’s operation might possibly have a few extra resources that give them an edge. Charts are so intuitively powerful but they’re backward looking. They tell you nothing about the future and treating past trading ranges like a crystal ball into the future is a sure fire recipe for disaster.

He’s guessing, not investing. He’ll be right until he’s wrong. Eventually he’ll guess wrong and get wiped out.

This is all true but even the professionals are guessing at the future. The main difference between the big guys and the little guys is. The big guys get the data some times 24hrs prior so the can set trades in advance. The little guy has to trade on the fly basically.

Also the big guys have the ability to move the market where they want it. Through the media and monetarily.

Buffett is a prime example he will enter a position then go on TV and say I just bought, sold, shorted what ever. Then all the rookies do what he did. He just moved the market to where he wanted it. He then gets out of the position.

This is a good video. Cramer on market manipulation. For those who don't know RIM is research in motion=Blackberry.

[masraum]

I think the best that he can hope for is to get lucky.

I also think that to really make money he'd need to be trading an enormous amount of money.

[tabs]

Originally Posted by drcoastline

This is all true but even the professionals are guessing at the future. The main difference between the big guys and the little guys is. The big guys get the data some times 24hrs prior so the can set trades in advance. The little guy has to trade on the fly basically.

Also the big guys have the ability to move the market where they want it. Through the media and monetarily.

Buffett is a prime example he will enter a position then go on TV and say I just bought, sold, shorted what ever. Then all the rookies do what he did. He just moved the market to where he wanted it. He then gets out of the position.

This is a good video. Cramer on market manipulation. For those who don't know RIM is research in motion=Blackberry.

The operative word is stealth..very quiet in..a bit at a time...and the same way out..

[speeder]

My esteemed colleague MRM beat me to it. The pros are the only ones who clean up in that game and everyone else is a hook. A sucker.

[speeder]

Almost forgot; making a little money at first is a necessary component to any financial hustle or trap door.

[tabs]

The fx guyz in Toronto like my stuff. Anybody who knows anything likes what i have to say. It is the ability to abstract systems and i.am better than good..i am "brilliant."

[Seahawk]

vvv The odds are with MRM's very excellent analysis.

There are, I kid you not, as many currency trading financial "models" as there are currency traders: Accurately predicting currency futures is the absolute Siren's Song in finance.

I had a professor in undergraduate school who worked for BofA in SF doing currency work. I helped him model some stuff in arbitrage efforts...nothing he or the bank used, he was just pushing my understanding.

He had a great line I'll paraphrase: "Looking backwards at currency performance and relationships is like relying on an insurance actuary: They can anticipate trends in the future but they cannot predict that you will not walk in front of a bus."

Best of luck to your friend. I sincerely hope, like any gambler with sense, that he is not using loans to gamble and that he has set a limit on how much he is willing to lose.

Originally Posted by MRM

He will eventually lose all his money, probably sooner rather than later. Currency trading is among the most complex trading classes possible. Even most huge multinational corporations who deal with currency from dozens of countries and have to repatriate it don’t hedge currencies and that’s safer than straight up trading. The people who do it professionally have super computers and have access to raw data the amateur investor can’t hope to replicate. If a guy in his basement running charts on his desktop PC can do it, Warren Buffett’s operation might possibly have a few extra resources that give them an edge. Charts are so intuitively powerful but they’re backward looking. They tell you nothing about the future and treating past trading ranges like a crystal ball into the future is a sure fire recipe for disaster.

He’s guessing, not investing. He’ll be right until he’s wrong. Eventually he’ll guess wrong and get wiped out.

[speeder]

Old Russian saying:

"The past is unpredictable."

[Bill Douglas]

Here's a spare shirt, just in case you lose yours.

[tabs]

An old Polish proverb..stick with what ya know.

If you are not willing to spend all day in front of the Blue Screen..well you are a rube. Better stick to your shoveling shye in Louisana..now that is something that you know..shyte.

[tabs]

Originally Posted by speeder

Old Russian saying:

"The past is unpredictable."

An old Polish saying..is that monkeys are smarter than Russians..and if it were nt for Vodka their whole economy would have collapsed long ago.

[Seahawk]

Originally Posted by speeder

Old Russian saying:

"The past is unpredictable."

This is how industries change: I had a essentially three degrees as an undergraduate: BS in Economics and Finance (really five extra classes in finance for the two'fer) and a BA in International Studies.

I wanted to be an in-country financial, economic and political/social analyst for banks. There used to be such a thing...financial boots on the ground so to speak. One of my best friends in HS and college way older brother was the Middle Eastern Lead for a large bank in NYC. He was the coolest guy I had ever met.

I was supposed to become an intel officer in the Navy then transition to civilian life with some street cred and go do my thing.

Everything changed...the past included.

Anyway.

To the OP. As many have said your friend needs to understand the immense resources and data mining he is up against. The lights dim in Brooklyn when Citibank turns on their computers.

With my background, still current in certain areas, there is no way I'd even approach this. You don't tell him, btw...Give him my email and I will.

This is like betting the late night Fresno State versus University of Sacramento basketball game to "get well".

[tabs]

an ole jyl is certainly a dedicated follower of the party dialetic..a true believer.

[Bill Douglas]

However...

Foreign currency investing is another matter. If you guys really do believe the USD (or economy) is going down the gurgler you could buy Euros or Yuans. Investing meaning holding for a year or two.

[HardDrive]

Not me friend, I would not touch this stuff with a 10 foot pole.

At least in Vegas the drinks are free.

Originally Posted by Bill Douglas

Here's a spare shirt, just in case you lose yours.

[drcoastline]

Originally Posted by Bill Douglas

However...

Foreign currency investing is another matter. If you guys really do believe the USD (or economy) is going down the gurgler you could buy Euros or Yuans. Investing meaning holding for a year or two.

Everything is measured against the US dollar, if the dollar goes down so do these.