Forex trading.

[jimholio]

Anyone into this at all and wouldnt mind to explain the very basics of how it works? Is it pure gambling or is there any way to have a foresight of value changes etc? Except obvious things like war, government changes etc.

Been curious about this for a while now.

[K2]

If your serious about learning about the FX markets go and buy 'Foreign Exchange Markets by H Riehl (Citibank) and R. Rodreguez (Harvard) Pub MCGraw-Hill' - its a bit old (1977) but nothing has changed much - except there are less currnecies to trade (since the Euro).

You will a LOT more than the basics to successfully make a living out of FX trading - mostly you would need to find a trading methodolgy that works for you. Most methodologies are technical (chart) based.

[LivinLOS]

I was in a long online chat with a fairly genuine sounding guy the other day who trades forex daily.. He was explaining his methodoligy and how he aims for certian pips upside and downside.. He sounded like he was able to grind out an ok living but that its a skill that you take a long time to learn.. Of course once learnt its supportable anywhere and any time so its one that I would like to have myself..

One of the problems is anyone you talk to online who explains how well they are doing is probably full of shit..

I think a nose for geopolitical implications and being a constant news junkie which I kind of am would be a big help..

One of my friends who trades has found a mentoring service that he swears by.. They are not chaep but you have access to thier ideas and positions and are able to talk through your own ideas and systems 1 on 1.. I considered it but it would need to be full time and I am not in a full time mindset..

[dizbuster]

I used to do it for a living. Great fun when you're using someone else's money i.e. I worked for an International Bank, but you have to be realistic and remember that you're playing for real and you could lose a hell of a lot of money. FX spot markets can move very fast and usually doi when news is out that affects one or other currency. The biggest downside is "paying away the spread" and is where most of the big players clean up as they just quote and get hit by other banks/companies all day long and therefore just make the spread.

For example GBP/USD is quoted at 1.7425-1.7430 you buy GBP at 1.7430 and sell GBP at 1.7425, whereas if other people "hit" your quotes, they BUY at 1.7430, i.e. you sell and they sell at 1.7425, i.e. you buy. If the amount is GBP1,000,000.00 and someone trades off your quotes, you have then sold GBP1,000,000.00 @ 1.7430 and received USD1,743,000.00, then on the other side you have bought GBP1,000,000.00 and sold USD1,742,500.00. This means that you have made 5 points profit on GBP1,000,000.00, i.e. USD500.00. Alternatively, you buy at GBP1,000,000.00 at 1.7430 and then sell at 1.7425, you lose USD500.00

Now if we put a 10 point market move into the equation...

You buy GBP1,000,000.00 at 1.7430 and then the market moves to 1.7435-1.7440. You now sell GBP1,000,000.00 at 1.7435 and you have ade USD500.00 profit. However, if the market moves down 10 points to 1.7415-1.7420 then you sell at 1.7415 and lose USD1,500.00

If you know nothing about FX, then my advice is steer well clear and leave it alone. If you have some money you can afford to lose and want to give it a go, then learn as much as you can first, read everything and keep up to date with the news in the countries/regions where the currencies are from. When you have an open position, i.e. you have bought or sold and have yet to close it out, you will be monitoring it 24 hours a day - do you really want that hassle ?

[LivinLOS]

Theres lots of sites now that let you paper trade to gain experience.. Perhaps set yourself a ficticious balance and play at it in your spare time to get a feel for the complexities.

[jimholio]

Thanks for the many replies. Any idea's what currency that moves the least? I mean you are supposed to store your winnings in a stable currency i suppose?

Originally Posted by LivinLOS

Theres lots of sites now that let you paper trade to gain experience.. Perhaps set yourself a ficticious balance and play at it in your spare time to get a feel for the complexities.

I suppose that would be a great way to learn, any adresses to PM me?

[Sirgezza]

Originally Posted by jimholio

Thanks for the many replies. Any idea's what currency that moves the least? I mean you are supposed to store your winnings in a stable currency i suppose?

I suppose that would be a great way to learn, any adresses to PM me?

I'd assume you would automatically ''store'' your winnings in your home currency?? This would not then be subject to any real movement.

[marc26]

Originally Posted by dizbuster

I used to do it for a living. Great fun when you're using someone else's money i.e. I worked for an International Bank, but you have to be realistic and remember that you're playing for real and you could lose a hell of a lot of money. FX spot markets can move very fast and usually doi when news is out that affects one or other currency. The biggest downside is "paying away the spread" and is where most of the big players clean up as they just quote and get hit by other banks/companies all day long and therefore just make the spread.

For example GBP/USD is quoted at 1.7425-1.7430 you buy GBP at 1.7430 and sell GBP at 1.7425, whereas if other people "hit" your quotes, they BUY at 1.7430, i.e. you sell and they sell at 1.7425, i.e. you buy. If the amount is GBP1,000,000.00 and someone trades off your quotes, you have then sold GBP1,000,000.00 @ 1.7430 and received USD1,743,000.00, then on the other side you have bought GBP1,000,000.00 and sold USD1,742,500.00. This means that you have made 5 points profit on GBP1,000,000.00, i.e. USD500.00. Alternatively, you buy at GBP1,000,000.00 at 1.7430 and then sell at 1.7425, you lose USD500.00

Now if we put a 10 point market move into the equation...

You buy GBP1,000,000.00 at 1.7430 and then the market moves to 1.7435-1.7440. You now sell GBP1,000,000.00 at 1.7435 and you have ade USD500.00 profit. However, if the market moves down 10 points to 1.7415-1.7420 then you sell at 1.7415 and lose USD1,500.00

If you know nothing about FX, then my advice is steer well clear and leave it alone. If you have some money you can afford to lose and want to give it a go, then learn as much as you can first, read everything and keep up to date with the news in the countries/regions where the currencies are from. When you have an open position, i.e. you have bought or sold and have yet to close it out, you will be monitoring it 24 hours a day - do you really want that hassle ?

you just explained a market maker

[dizbuster]

Originally Posted by marc26

you just explained a market maker

Yes, the reason being to highlight how difficult it is to try and make a profit, whereas market makers just get hit on both sides and make their money differently and with a lot less risk.

[marc26]

Originally Posted by dizbuster

Yes, the reason being to highlight how difficult it is to try and make a profit, whereas market makers just get hit on both sides and make their money differently and with a lot less risk.

thats not so true. thats really only on retail that you are going to make the spread, and here in the states it has gone against the MM's in favor of the customer. which i dont think is a bad thing

i dont know when you were trading, but things were like the wild wild west in the states only as late as 10 years ago. before manning was enforced.

as far as less risk. like i said, your really only going to make the spread on retail and half the times you ahve someone calling you to complete the order, so you have to go take the stock, only have a certain amount of tiem to sit there and wait to get hit. you could sell it to the customer and go short

the basis of being able to make the spread is that a MM provides liquidity and thus allowed to make the spread

and thats just the retail part. try having a major institution shoving a print down your throat

[dizbuster]

Originally Posted by marc26

thats not so true. thats really only on retail that you are going to make the spread, and here in the states it has gone against the MM's in favor of the customer. which i dont think is a bad thing

i dont know when you were trading, but things were like the wild wild west in the states only as late as 10 years ago. before manning was enforced.

as far as less risk. like i said, your really only going to make the spread on retail and half the times you ahve someone calling you to complete the order, so you have to go take the stock, only have a certain amount of tiem to sit there and wait to get hit. you could sell it to the customer and go short

the basis of being able to make the spread is that a MM provides liquidity and thus allowed to make the spread

and thats just the retail part. try having a major institution shoving a print down your throat

How can that be so ? Either you hit other people's prices, i.e. pay away the spread, or else other people hit your prices, i.e. you are a market maker. The latter is not really possible, so I can't understand how you are able to play the markets without paying away the spread, unless you are saying that nowadays there is no spread and therefore all prices are "choice" prices, i.e. one price and you can buy or sell

Tell me how it works without paying away a spread to a market maker as I would be fascinated to know how that can be done. Remember, this thread is about ordinary guys doing foreign echange and not people working for large companies.

[jimholio]

Originally Posted by K2

If your serious about learning about the FX markets go and buy 'Foreign Exchange Markets by H Riehl (Citibank) and R. Rodreguez (Harvard) Pub MCGraw-Hill' - its a bit old (1977) but nothing has changed much - except there are less currnecies to trade (since the Euro).

You will a LOT more than the basics to successfully make a living out of FX trading - mostly you would need to find a trading methodolgy that works for you. Most methodologies are technical (chart) based.

K2 i have been looking for that book for a long time now, not easy to find thats for sure. Any idea's where to get it? I tried Amazon they have a trillion different forex trading books but not this one. Im gonna ask in my local bookstore today because they import books on demand if they can find them.

[K2]

Originally Posted by jimholio

K2 i have been looking for that book for a long time now, not easy to find thats for sure. Any idea's where to get it? I tried Amazon they have a trillion different forex trading books but not this one. Im gonna ask in my local bookstore today because they import books on demand if they can find them.

http://www.amazon.com/gp/product/007...lance&n=283155

Took me all of 2 minutes to source it ..... 2nd Ed 1983.

[stevem]

What is it with people and searching, why do some folks have great difficulty in finding stuff.

Just a question, not an insult.

[Sirgezza]

Originally Posted by stevem

What is it with people and searching, why do some folks have great difficulty in finding stuff.

Just a question, not an insult.

Could be speling

I tried to find agogo pages once and then you said try gogo. The gogo found a lot more, so knowing the exact words does help.

[marc26]

Originally Posted by dizbuster

How can that be so ? Either you hit other people's prices, i.e. pay away the spread, or else other people hit your prices, i.e. you are a market maker. The latter is not really possible, so I can't understand how you are able to play the markets without paying away the spread, unless you are saying that nowadays there is no spread and therefore all prices are "choice" prices, i.e. one price and you can buy or sell

Tell me how it works without paying away a spread to a market maker as I would be fascinated to know how that can be done. Remember, this thread is about ordinary guys doing foreign echange and not people working for large companies.

im a little confused by what your asking and i may have confused you by speaking as a market maker, so giving you a MM's view

[K2]

FX MM died with EBS introduction in 1998, by 2000 even the serious corparates got it - shame was great using brokers - many were real real characters. Diz gives nice recollection of the good old days - was fun while it lasted!

Cant be long now before the LME and IPE gets into line (goes fully electronic) - any you guys looked into the way those guys trade - thats about the last bastion for the 'barrow boy' trader.

[jimholio]

Originally Posted by K2

http://www.amazon.com/gp/product/007...lance&n=283155

Took me all of 2 minutes to source it ..... 2nd Ed 1983.

I searched for the first title you gave me tho, "Foreign exchange markets" not *Foreign exchange and money markets*

Im ordering it tonight, thanks mate.

[marc26]

Originally Posted by K2

FX MM died with EBS introduction in 1998, by 2000 even the serious corparates got it - shame was great using brokers - many were real real characters. Diz gives nice recollection of the good old days - was fun while it lasted!

Cant be long now before the LME and IPE gets into line (goes fully electronic) - any you guys looked into the way those guys trade - thats about the last bastion for the 'barrow boy' trader.

thats teh thing about my job, have always worked with tons of characters. its just really hard to explain unless youve done it, just isnt like a real job

in the states decimals killed us

[sting]

Originally Posted by stevem

What is it with people and searching, why do some folks have great difficulty in finding stuff.

Just a question, not an insult.

[dizbuster]

"Mine is not to reason why, mine is just to sell and buy"

I know that was a quote by Delboy from Only Fools and Horses, but it was always used by Forex traders in th City during the 80s. Also nice, was the brokers lunches and some of the stories they told !!

I remember the infamous "Reknaw" story well....

A broking firm in the City of London, was having a good year at the height of the FX boom time (mid-late 80's) and took on some new staff, including guys who got the job more through who they knew, rather than what they knew.

Anyway, always on the look out for getting one over on a colleague, one such "newbie" was sat down next to some of the boys and after a few days started getting the hang of all the "sqwark boxes", the red lights that lit up when someone spoke over that box and the voices of the people at the other end. After a week, one newbie (let's call him Clive) asked if this was all there was too it and added that he thought "anyone with half a brain could do it". So, being ever on the lookout for a victim, the old lag (let's call him John) said that Clive could have one of his lines to start him off and he was sure others would follow. Sure enough the technicians were called and a Sqwark box was moved from in front of John, to Clive's new desk. There he sat, with his telephone and one box, with the tag "Reknaw" stuck to the top of it. All day, Clive was shouting out prices down the line to Reknaw but he couldn't get any business. After his first day "on the boxes", he went home tired and a little bemused, after all, he had been quoting decent prices all day long, but no business came his way.

At this point, you should already have realised that "Reknaw" has another meaning when read backwards !! Also, in order to keep the ruse going, John havd arranged with a good buddy of his, who was also one of his actual bank lines that he spoke to everyday, that he would take on the pretence of being a trader from Reknaw.

Day 2 on the boxes and Clive's in before anyone else and ready to go. The day starts in earnest, traders catch the end of the far east markets and start getting London's market off and running. The Dollar/Mark boys are quoting and trading like nobodies business, all except Clive !! He's quoting prices and today he has noticed that from time to time, he gets asked for a quote from Reknaw. Sure enough he gets a price, but evry time the client declines the prices and states he has traded better elsewhere. Clive goes home totally bemused and almost a broken man - what a change from the chap who was full of himself the week before

Wednesday starts and Reknaw again asks for prices, Clive is on the case all day long. Same again Thursday, but still no trades. The boys now feel that Clive has been "bloeeded" in traditional fashion and the joke has gone far enough. They take him out Thursday night and even get John's mate to make an appearance so that he will hopefully see the funny side of it and then they could all have a good laugh, loads to drink and get on with life, but no...... Clive just couldn't accept it was a wind-up, at least not until the next day when one of the telex operators lent her mirror to John and they showed Clive what Reknaw looked like backwards !!

Then again, there's the Christmas tale of the "white Rhino sh-it", but that's a story for another time methinks

[K2]

Nice one Diz .....

Nothing like getting a newbie female muppet shouting her head off to the whole dealing room to 'come in my box!' - 55555