Margin in Forex trading: here’s what you need to know

What trader to use to trade Forex with zero leverage/ margin call in Australia?

submitted by fltershlista to AskReddit [link] [comments]

The comedy how I lost all my money in two hours

I'm trading for 11 months with pretty good success.
I never traded metals and forex before, just stocks. Today when gold started to consolidate at the last hour, I decided to scalp short it with a large amount, so I opened 100 lots. I haven't realised, in forex 100 (lots) doesn't mean "100 pcs", because I used to stocks and I went full retard without knowledge.
Seconds later, I realised it means 10 million dollars (1 lot = 100.000, and I had 500x leverage).
It moved up a bit and immediately I was down £4000. I scared as fuck and rather than closing the position quickly I hoped maybe I could close break even.
The market closed, and I waited for the Asian session. The gold popped like never before, and I lost all my life savings (£55000) in less than two hours. (including the 1-hour break between sessions).
If I count that I lost all my earnings as well, I lost around £85000.
Here is the margin call
https://imgur.com/a/XY5m4ZA
https://imgur.com/a/VSgmCSs
https://imgur.com/pRWl5g9
IC Markets closed my position partially in every 1-2 minutes until I shut it myself at £35.
You know the rest of the story. I'm depressed, crying and shouting with myself.
Yes, I know I was stupid, thanks. I just wanted to share this with you.



Edit: WOW THANK YOU, GUYS! I haven't expected this, but you help me.
Many of you asked the same questions, I answer it here:
- I live in Europe, and we usually trade CFD's, not futures.
- Currency in GBP.
- As you can see, this account made on IC Markets. They not just allowing you a 500x leverage, it's the default.
- You can ask me why I went against the market. Because gold is way oversold? Because I expected institutions would sell their shares before gold is hitting £2000, leaving retails hanging there. Also, as I said, I wanted to scalp, not riding the gold all the way down. If I had a loss of £100, I would close the position immediately. But when I saw the £4000, my heart is stopped, and my brain just freezes.
- I went for a revenge trade with my last £2k, and I don't have to say what happened. I uninstalled the app, and I give up trading for a while.
- Again, in the past months, I was cautious, I lost a significant sum in March, but I managed to recover. Made consistent gains, always with SL. This is just an example of how easy is to fuck up everything you did.
- I didn't come here for some shiny digital medals. I can't tell about my losses to anyone who I know in real life. I would make a fool of myself.
- Anyone who attacking me that it is a scam. Well, think what you want. I feel terrible and the last thing is to answer all the messages saying "You fucking karma whore". I don't give a shit about karma.

submitted by fail0verflowf9 to wallstreetbets [link] [comments]

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

Insuring margin account

Hi there,

My husband and I have been working on forex trading for a few years, and we are getting rather close to using trading to "retire" from traditional 9-5 jobs. Our concern, though, is that it looks like just about every US broker is uninsured and state that if the company becomes insolvent, they may liquidate all margin accounts. Oanda, for instance, states "In the event OANDA should become insolvent or file for protection under the bankruptcy laws, it is possible that you would lose the entire amount in your Margin Account. "
My question is if anybody here has found a way to "insure" the account to avoid this problem. The last thing we want is to pour our lives into it and rely on it, only to fall victim to a companies failure. I know, I know, its unlikely. But so was Lehman Brothers, and call me paranoid, but I am not one to want to rely on a corporation to put its customers first.
Thoughts?
submitted by FireflyFreak to Forex [link] [comments]

Too much margin?

So, I am learning the art of forex, and I am learning about the art of margin :)
  1. I have created the demo account with 10K in the account balance and the 200 margin.
  2. Then I bought a lot of lots. In particular, I bought 16 lots. Here's the pic - https://i.imgur.com/TAQsmTV.png
  3. But the position size calculator tells me that I want to open a position with the 70-pips SL and with the risk exposure of 1.5%, I should specify the 0.21 lot sizing. It's a deal I have recently opened.
  4. I googled and it's said that you should never take your margin to the vicinity of 100%. But it took me 16 lots to take my margin to that level! Thus, the 0.12 lot sizing equals to 1.25% of the 16 lots...
  5. Thus, it looks like I am utilizing only 1.25% of the margin made availlable by the broker, right?
  6. And, ofc, I should be basing my lot sizings based on the desired risk exposure and not based on the available margin because the second scenario is gambling.
  7. So, do I understand this correctly:
a. margin is well... it's for gamblers, uknow, the folks who wouldn't be able to follow the narrative in this post... who treat forex like slots... playing, not trading with a good trading strategy.
b. but I can create the deals with super-tight SLs and let them run. Thus, if I already have the deal that is well into the profits zone, i can then just move SL from the original level to BE. And then I can open another deal. If I open the second deal, the cumulative margin utilization would result at 2.5% from the available volume. And thus, if I have 20 such deals running for months, then my margin utilization would be 25%, right? I mean it's not bad and there would be risk of the margin call... I would need to open 80 thus-sized deals to get to the dangerous area.
Did I get it right?
submitted by dev_lurve to Forex [link] [comments]

THROW YOUR FD's in FDS

Factset: How You can Invest in Hedge Funds’ Biggest Investment
Tl;dr FactSet is the most undervalued widespread SaaS/IT solution stock that exists
If any of you have relevant experience or are friends with people in Investment Banking/other high finance, you know that Factset is the lifeblood of their financial analysis toolkit if and when it’s not Bloomberg, which isn’t even publicly traded. Factset has been around since 1978 and it’s considered a staple like Bloomberg in many wealth management firms, and it offers some of the easiest to access and understandable financial data so many newer firms focused less on trading are switching to Factset because it has a lot of the same data Bloomberg offers for half the cost. When it comes to modern financial data, Factset outcompetes Reuters and arguably Bloomberg as well due to their API services which makes Factset much more preferable for quantitative divisions of banks/hedge funds as API integration with Python/R is the most important factor for vast data lakes of financial data, this suggests Factset will be much more prepared for programming making its way into traditional finance fields. According to Factset, their mission for data delivery is to: “Integrate the data you need with your applications, web portals, and statistical packages. Whether you need market, company, or alternative data, FactSet flexible data delivery services give you normalized data through APIs and a direct delivery of local copies of standard data feeds. Our unique symbology links and aggregates a variety of content sources to ensure consistency, transparency, and data integrity across your business. Build financial models and power customized applications with FactSet APIs in our developer portal”. Their technical focus for their data delivery system alone should make it stand out compared to Bloomberg, whose UI is far more outdated and complex on top of not being as technically developed as Factset’s. Factset is the key provider of buy-side portfolio analysis for IBs, Hedge funds, and Private Equity firms, and it’s making its way into non-quantitative hedge funds as well because quantitative portfolio management makes automation of risk management and the application of portfolio theory so much easier, and to top it off, Factset’s scenario analysis and simulation is unique in its class. Factset also is able to automate trades based on individual manager risk tolerance and ML optimization for Forex trading as well. Not only does Factset provide solutions for financial companies, they are branching out to all corporations now and providing quantitative analytics for them in the areas of “corporate development, M&A, strategy, treasury, financial planning and analysis, and investor relations workflows”. Factset will eventually in my opinion reach out to Insurance Risk Management a lot more in the future as that’s a huge industry which has yet to see much automation of risk management yet, and with the field wide open, Factset will be the first to take advantage without a shadow of a doubt. So let’s dig into the company’s financials now:
Their latest 8k filing reported the following:
Revenue increased 2.6%, or $9.6 million, to $374.1 million compared with $364.5 million for the same period in fiscal 2019. The increase is primarily due to higher sales of analytics, content and technology solutions (CTS) and wealth management solutions.
Annual Subscription Value (ASV) plus professional services was $1.52 billion at May 31, 2020, compared with $1.45 billion at May 31, 2019. The organic growth rate, which excludes the effects of acquisitions, dispositions, and foreign currency movements, was 5.0%. The primary contributors to this growth rate were higher sales in FactSet's wealth and research workflow solutions and a price increase in the Company's international region
Adjusted operating margin improved to 35.5% compared with 34.0% in the prior year period primarily as a result of reduced employee-related operating expenses due to the coronavirus pandemic.
Diluted earnings per share (EPS) increased 11.0% to $2.63 compared with $2.37 for the same period in fiscal 2019.
Adjusted diluted EPS rose 9.2% to $2.86 compared with $2.62 in the prior year period primarily driven by an improvement in operating results.
The Company’s effective tax rate for the third quarter decreased to 15.0% compared with 18.6% a year ago, primarily due to an income tax expense in the prior year related to finalizing the Company's tax returns with no similar event for the three months ended May 31, 2020.
FactSet increased its quarterly dividend by $0.05 per share or 7% to $0.77 marking the fifteenth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to shareholders.
As you can see, there’s not much of a negative sign in sight here.
It makes sense considering how FactSet’s FCF has never slowed down:
https://preview.redd.it/frmtdk8e9hk51.png?width=276&format=png&auto=webp&s=1c0ff12539e0b2f9dbfda13d0565c5ce2b6f8f1a

https://preview.redd.it/6axdb6lh9hk51.png?width=593&format=png&auto=webp&s=9af1673272a5a2d8df28f60f4707e948a00e5ff1
FactSet’s annual subscriptions and professional services have made its way to foreign and developing markets, and many of them are opting for FactSet’s cheaper services to reduce costs and still get copious amounts of data and models to work with.
Here’s what FactSet had to say regarding its competitive position within the market of providing financial data in its last 10k: “Despite competing products and services, we enjoy high barriers to entry and believe it would be difficult for another vendor to quickly replicate the extensive databases we currently offer. Through our in-depth analytics and client service, we believe we can offer clients a more comprehensive solution with one of the broadest sets of functionalities, through a desktop or mobile user interface or through a standardized or bespoke data feed.” And FactSet is confident that their ML services cannot be replaced by anybody else in the industry either: “In addition, our applications, including our client support and service offerings, are entrenched in the workflow of many financial professionals given the downloading functions and portfolio analysis/screening capabilities offered. We are entrusted with significant amounts of our clients' own proprietary data, including portfolio holdings. As a result, our products have become central to our clients’ investment analysis and decision-making.” (https://last10k.com/sec-filings/fds#link_fullReport), if you read the full report and compare it to the most recent 8K, you’ll find that the real expenses this quarter were far lower than expected by the last 10k as there was a lower than expected tax rate and a 3% increase in expected operating margin from the expected figure as well. The company also reports a 90% customer retention rate over 15 years, so you know that they’re not lying when they say the clients need them for all sorts of financial data whether it’s for M&A or wealth management and Equity analysis:
https://www.investopedia.com/terms/f/factset.asp
https://preview.redd.it/yo71y6qj9hk51.png?width=355&format=png&auto=webp&s=a9414bdaa03c06114ca052304a26fae2773c3e45

FactSet also has remarkably good cash conversion considering it’s a subscription based company, a company structure which usually takes on too much leverage. Speaking of leverage, FDS had taken on a lot of leverage in 2015:

https://preview.redd.it/oxaa1wel9hk51.png?width=443&format=png&auto=webp&s=13d60d2518980360c403364f7150392ab83d07d7
So what’s that about? Why were FactSet’s long term debts at 0 and all of a sudden why’d the spike up? Well usually for a company that’s non-cyclical and has a well-established product (like FactSet) leverage can actually be good at amplifying returns, so FDS used this to their advantage and this was able to help the share’s price during 2015. Also, as you can see debt/ebitda is beginning a rapid decline anyway. This only adds to my theory that FactSet is trying to expand into new playing fields. FactSet obviously didn’t need the leverage to cover their normal costs, because they have always had consistently growing margins and revenue so the debt financing was only for the sake of financing growth. And this debt can be considered covered and paid off, considering the net income growth of 32% between 2018 and 2019 alone and the EPS growth of 33%
https://preview.redd.it/e4trju3p9hk51.png?width=387&format=png&auto=webp&s=6f6bee15f836c47e73121054ec60459f147d353e

EBITDA has virtually been exponential for FactSet for a while because of the bang-for-buck for their well-known product, but now as FactSet ventures into algorithmic trading and corporate development the scope for growth is broadly expanded.
https://preview.redd.it/yl7f58tr9hk51.png?width=489&format=png&auto=webp&s=68906b9ecbcf6d886393c4ff40f81bdecab9e9fd

P/E has declined in the past 2 years, making it a great time to buy.

https://preview.redd.it/4mqw3t4t9hk51.png?width=445&format=png&auto=webp&s=e8d719f4913883b044c4150f11b8732e14797b6d
Increasing ROE despite lowering of leverage post 2016
https://preview.redd.it/lt34avzu9hk51.png?width=441&format=png&auto=webp&s=f3742ed87cd1c2ccb7a3d3ee71ae8c7007313b2b

Mountains of cash have been piling up in the coffers increasing chances of increased dividends for shareholders (imo dividend is too low right now, but increasing it will tempt more investors into it), and on top of that in the last 10k a large buyback expansion program was implemented for $210m worth of shares, which shows how confident they are in the company itself.
https://preview.redd.it/fliirmpx9hk51.png?width=370&format=png&auto=webp&s=1216eddeadb4f84c8f4f48692a2f962ba2f1e848

SGA expense/Gross profit has been declining despite expansion of offices
I’m a bit concerned about the skin in the game leadership has in this company, since very few executives/board members have significant holdings in the company, but the CEO himself is a FactSet veteran, and knows his way around the company. On top of that, Bloomberg remains king for trading and the fixed income security market, and Reuters beats out FactSet here as well. If FactSet really wants to increase cash flow sources, the expansion into insurance and corp dev has to be successful.
Summary: FactSet has a lot of growth still left in its industry which is already fast-growing in and of itself, and it only has more potential at its current valuation. Earnings September 24th should be a massive beat due to investment banking demand and growth plus Hedge fund requirements for data and portfolio management hasn’t gone anywhere and has likely increased due to more market opportunities to buy-in.
Calls have shitty greeks, but if you're ballsy October 450s LOL, I'm holding shares
I’d say it’s a great long term investment, and it should at least be on your watchlist.
submitted by WannabeStonks69 to wallstreetbets [link] [comments]

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April
Alright you American autists, here's a gains post from the UK across the pond - listen up because it's pretty incredible, managed to screw over our broker to turn ~£8k into £98k / $128k USD by reading the small print, true u/fuzzyblankeet style.

https://preview.redd.it/9mlup18v0q951.png?width=343&format=png&auto=webp&s=aea1393d304d16063d62d54d30cc5be9b23d937a
Unfortunately, we don't have options trading, commission free robinhood which crashes, or any other US based degeneracy, but instead we British chaps can trade "CFDs" ie. 'contracts-for-difference', which are essentially naked long / short positions with a 10-20% margin (5-10x leveraged), a 'holding cost' and you could theoretically lose more than your initial margin - sounds like true wallstreetbets autism, right? Well grab a lite beer (or whatever you lite alcoholic chaps drink over there) and strap in for this stuff:
So, CMC Markets, a UK based CFD brokerage, wanted to create a West Texas Intermediate Crude Oil 'Spot' product, despite WTI contracts trading in specific monthly expirations which can thus have severe contango effects (as all of you $USO call holders who got screwed know) - this was just a product called "Crude Oil West Texas - Cash", and was pegged to the nearest front-month, but had no expiry date, only a specific holding cost -> already a degenerate idea from their part.
So in early April, just before when the WTI May-20 expiry contract 'rolled' at **negative** $-37, the "WTI Cash" was trading at $15 at the time, but the *next* month June-20 expiry was still $30+ we (I am co-running an account with an ex-Goldman colleague of mine) simultaneously entered into a long position on the "WTI - Cash" product, and went short on the "WTI Jun-20 expiry", a pure convergence play. Sure enough, the June-20 tanked the following week, and we made over £35k, realised profits. But meanwhile the May-20 also tanked, and we were down £28k. But rather than realise this loss, we figured we could just hold it until Oil prices recover, and profit on both legs of the trade.
However, CMC Markets suddenly realised they are going to lose a lot of money with negative oil prices (Interactive Brokers lost $104m, also retards), so they screwed everyone holding the "WTI - Cash" product trading at $8 at the time, and pegged it to the December 2020 expiry trading at $30, with a 'discount factor' to catch up between the two.
https://preview.redd.it/zjjzyahx0q951.png?width=517&format=png&auto=webp&s=9523bab878f06702133631f12c1109081f299f65
Now fellow autists, read the above email and try to figure out what the pure arbitrage is. CMC markets will charge us a 0.61% **per day** holding cost (calculated as the 10x levered value of whatever original margin you put up, so in our case £8k*10x=£80k*0.61% = £500 per day, £1.5k on weekends for extra fun) on our open positions, but also "increase" the position value by 0.61% per day vs. the **previous day's** WTI - Cash value. Got it yet? No? Still retarded? Here's where maths really helps you make tendies:-> If your 'cost' is fixed at 0.61% of your original levered position, but your 'gains' are 0.61% of the previous day's position, then your gains will be ever increasing, whereas your costs are fixed.
So we added some extra £££ (as much as we could justifiably put into a degenerate 10x levered CFD account) and tried to see if it works. Long story short, it does. At this point in July we were making **over £1k per day on a £8k initial position*\* regardless where the WTI Dec-20 fwd moved.
Unfortunately, eventually CMC markets realised what utter retards they were, and closed down the arbitrage loophole, applying the holding costs to the previous day's value. But not before we turned £8k into £98k, less holding costs.
https://preview.redd.it/uh0f8knz0q951.png?width=553&format=png&auto=webp&s=c7e629f72de5aeb4e837ccef44ecae708f058bee
Long story short, puts on $CMCX they're total retards, and given what a startup robinhood / other brokerages are, never assume that only they are the ones taking your tendies away, sometimes you can turn the tables on them!
submitted by mppecapital to wallstreetbets [link] [comments]

ATO Australian tax treatment for options trades 🇦🇺

I am posting this as I hope it will help other Australian options traders trading in US options with their tax treatment for ATO (Australian Tax Office) purposes. The ATO provides very little guidance on tax treatment for options trading and I had to do a lot of digging to get to this point. I welcome any feedback on this post.

The Deloitte Report from 2011

My initial research led me to this comprehensive Deloitte report from 2011 which is hosted on the ASX website. I've been through this document about 20 times and although it's a great report to understand how different scenarios apply, it's still really hard to find out what's changed since 2011.
I am mainly relating myself to the scenario of being an individual and non-sole trader (no business set up) for my trading. I think this will apply to many others here too. According to that document, there isn't much guidance on what happens when you're an options premium seller and close positions before they expire.
Note that the ATO sometimes uses the term "ETO" (Exchange Traded Option) to discuss what we're talking about here with options trading.
Also note: The ATO discusses the separate Capital Gains Tax ("CGT") events that occur in each scenario in some of their documents. A CGT event will then determine what tax treatment gets applied if you don't know much about capital gains in Australia.

ATO Request for Advice

Since the Deloitte report didn't answer my questions, I eventually ended up contacting the ATO with a request for advice and tried to explain my scenario: I'm an Australian resident for tax purposes, I'm trading with tastyworks in $USD, I'm primarily a premium seller and I don't have it set up with any business/company/trust etc. In effect, I have a rough idea that I'm looking at capital gains tax but I wanted to fully understand how it worked.
Initially the ATO respondent didn't understand what I was talking about when I said that I was selling a position first and buying it to close. According to the laws, there is no example of this given anywhere because it is always assumed in ATO examples that you buy a position and sell it. Why? I have no idea.
I sent a follow up request with even more detail to the ATO. I think (hope) they understood what I meant now after explaining what an options premium seller is!

Currency Gains/Losses

First, I have to consider translating my $USD to Australian dollars. How do we treat that?
FX Translation
If the premium from selling the options contract is received in $USD, do I convert it to $AUD on that day it is received?
ATO response:
Subsection 960-50(6), Item 5 of the Income Tax Assessment Act 1997 (ITAA 1997) states the amount should be translated at the time of the transaction or event for the purposes of the Capital Gains Tax provisions. For the purpose of granting an option to an entity, the time of the event is when you grant the option (subsection 104-20(2) ITAA 1997).
This is a very detailed response which even refers to the level of which section in the law it is coming from. I now know that I need to translate my trades from $USD to $AUD according to the RBA's translation rates for every single trade.
But what about gains or losses on translation?
There is one major rule that overrides FX gains and losses after digging deeper. The ATO has a "$250k balance election". This will probably apply to a lot of people trading in balances below $250k a lot of the FX rules don't apply. It states:
However, the $250,000 balance election broadly enables you to disregard certain foreign currency gains and losses on certain foreign currency denominated bank accounts and credit card accounts (called qualifying forex accounts) with balances below a specified limit.
Therefore, I'm all good disregarding FX gains and losses! I just need to ensure I translate my trades on the day they occurred. It's a bit of extra admin to do unfortunately, but it is what it is.

Credit Trades

This is the scenario where we SELL a position first, collect premium, and close the position by making an opposite BUY order. Selling a naked PUT, for example.
What happens when you open the position? ATO Response:
The option is grantedCGT event D2 happens when a taxpayer grants an option. The time of the event is when the option is granted. The capital gain or loss arising is the difference between the capital proceeds and the expenditure incurred to grant the option.
This seems straight forward. We collect premium and record a capital gain.
What happens when you close the position? ATO Response:
Closing out an optionThe establishment of an ETO contract is referred to as opening a position (ASX Explanatory Booklet 'Understanding Options Trading'). A person who writes (sells) a call or put option may close out their position by taking (buying) an identical call or put option in the same series. This is referred to as the close-out of an option or the closing-out of an opening position.
CGT event C2 happens when a taxpayer's ownership of an intangible CGT asset ends. Paragraph 104-25(1)(a) of the ITAA 1997 provides that ownership of an intangible CGT asset ends by cancellation, surrender, or release or similar means.
CGT event C2 therefore happens to a taxpayer when their position under an ETO is closed out where the close-out results in the cancellation, release or discharge of the ETO.
Under subsection 104-25(3) of the ITAA 1997 you make a capital gain from CGT event C2 if the capital proceeds from the ending are more than the assets cost base. You make a capital loss if those capital proceeds are less than the assets reduced cost base.
Both CGT events (being D2 upon granting the option and C2 upon adopting the close out position) must be accounted for if applicable to a situation.
My take on this is that the BUY position that cancels out your SELL position will most often simply realise a capital loss (the entire portion of your BUY position). In effect, it 'cancels out' your original premium sold, but it's not recorded that way, it's recorded as two separate CGT events - your capital gain from CGT event D2 (SELL position), then, your capital loss from CGT event C2 (BUY position) is also recorded. In effect, they net each other out, but you don't record them as a 'netted out' number - you record them separately.
From what I understand, if you were trading as a sole tradecompany then you would record them as a netted out capital gain or loss, because the trades would be classified as trading stock but not in our case here as an individual person trading options. The example I've written below should hopefully make that clearer.
EXAMPLE:
Trade on 1 July 2020: Open position
Trade on 15 July 2020: Close position
We can see from this simple example that even though you made a gain on those trades, you still have to record the transactions separately, as first a gain, then as a loss. Note that it is not just a matter of netting off the value of the net profit collected and converting the profit to $AUD because the exchange rate will be different on the date of the opening trade and on the date of the closing trade we have to record them separately.

What if you don't close the position and the options are exercised? ATO Response:
The option is granted and then the option is exercisedUnder subsection 104-40(5) of the Income Tax Assessment Act 1997 (ITAA 1997) the capital gain or loss from the CGT event D2 is disregarded if the option is exercised. Subsection 134-1(1), item 1, of the ITAA 1997 refers to the consequences for the grantor of the exercise of the option.
Where the option binds the grantor to dispose of a CGT asset section 116-65 of the ITAA 1997 applies to the transaction.
Subsection 116-65(2) of the ITAA 1997 provides that the capital proceeds from the grant or disposal of the shares (CGT asset) include any payment received for granting the option. The disposal of the shares is a CGT event A1 which occurs under subsection 104-10(3) of the ITAA 1997 when the contract for disposal is entered into.
You would still make a capital gain at the happening of the CGT event D2 in the year the event occurs (the time the option is granted). That capital gain is disregarded when the option is exercised. Where the option is exercised in the subsequent tax year, the CGT event D2 gain is disregarded at that point. An amendment may be necessary to remove the gain previously included in taxable income for the year in which the CGT event D2 occurred.
This scenario is pretty unlikely - for me personally I never hold positions to expiration, but it is nice to know what happens with the tax treatment if it ultimately does come to that.

Debit Trades

What about the scenario when you want to BUY some options first, then SELL that position and close it later? Buying a CALL, for example. This case is what the ATO originally thought my request was about before I clarified with them. They stated:
When you buy an ETO, you acquire an asset (the ETO) for the amount paid for it (that is, the premium) plus any additional costs such as brokerage fees and the Australian Clearing House (ACH) fee. These costs together form the cost base of the ETO (section 109-5 of the ITAA 1997). On the close out of the position, you make a capital gain or loss equal to the difference between the cost base of the ETO and the amount received on its expiry or termination (subsection 104-25(3) of the ITAA 1997). The capital gain or loss is calculated on each parcel of options.
So it seems it is far easier to record debit trades for tax purposes. It is easier for the tax office to see that you open a position by buying it, and close it by selling it. And in that case you net off the total after selling it. This is very similar to a trading shares and the CGT treatment is in effect very similar (the main difference is that it is not coming under CGT event A1 because there is no asset to dispose of, like in a shares or property trade).

Other ATO Info (FYI)

The ATO also referred me to the following documents. They relate to some 'decisions' that they made from super funds but the same principles apply to individuals they said.
The ATO’s Interpretative Decision in relation to the tax treatment of premiums payable and receivable for exchange traded options can be found on the links below. Please note that the interpretative decisions below are in relation to self-managed superannuation funds but the same principles would apply in your situation [as an individual taxpayer, not as a super fund].
Premiums Receivable: ATO ID 2009/110

Some tips

submitted by cheese-mate-chen-c to options [link] [comments]

Just some inspirations / reminders on strategy development

I just talk about really major pairs like EURUSD, USDJPY, etc.
Forget about catching a trend, if you wanna trade trends, commodities, stocks, index funds trend way better, a lot more opportunities than forex. Major currencies range at least 70% of the time, if not more. Learn how to make money from ranging markets and hold a trend once you catch it.
The biggest purpose of currency is for settling transactions, not for scalping profits. That's why it doesn't trend (aka remaining stable). Stability is why a currency being "major".
Therefore most indicators don't work well with these currencies because first they are not designed for forex, second most of them only tell trends or overbought/oversold. Unless you are Soros or central banks etc no major currency can be overbought or oversold.
Take advantage of "fakeout" (I still wonder if it's the right way to call it so, Trump's Tweets are one of the sources IMO). Accept the fact that it happens and think about how to profit from it. Market makers and big banks are also just market players, even though very much bigger, they are also profiting from each other. If you can't beat them, join them.
Choppy market is still better than a still market.
No market maker cares about support or resistance. Like no insider or institutional money (i mean human not machines) would spend hours and hours on charts drawing trend lines before they place an order. Why would you?
Planning how to react in different scenarios after a position is opened is much better than trying to act like a crystal ball by looking at history when you trade something that ranges most of the time. The moment you observe a trend, chances are the trend is (almost) over. Even if things are against you, most of the time you can turn it to break even without using lots of margin. (Most news are just as big as baby's cough.)
But still, very few news are really big (911, fukushima, brexit, covid, name it), don't ignore the news completely.
Money management is very important. Most traders (of course including many of those on reddit) just talk about how to make an entry but seldom talk about how to manage an already open position or how to close a trade. The latter is way more important than the former.
Besides japanese candlesticks, there are a lot more charting options out there.
Be creative and know what you are trading to the deepest !
submitted by cindyhont to Forex [link] [comments]

Am I being scammed by a financial broker

I got a called from a guy claimed to be a freelance financial broker a few months ago. He introduced me to a platform for forex trading, and tell me to make a new account on the site and he'll manage my account to trade forex using Metatrader 4. He will take 10% of the profit. He told me to think of this as a long term plan. He also said the platform gives my account some credits if I deposit, to kick start the investment. Something suspicious I found during this step, that his Skype account has a different name to his Skype name, like he's using sb else's account. I stupidly still make an account and deposit the money.
Slowly, he starts creating some pressure by holding some risky trades and ask me to deposit more money to increase the margin and keep the trade. He also told me to make a test withdrawal with a small amount of money to make sure that it didn't disrupt the current trades, and I did, and it went smoothly. So I keep depositing money until my friend realize he changed some number on some trades to turn a loss into a win trade. Then I started being very suspicious and looking for info. Turns out I can't contact the platform for anything without going through him. The support email doesn't exist, I can't change my password, the company running the platform only has 3 employees in the UK, with the same last name. I started being scared and tried to withdraw a large amount of the money.
At first some guy call me and said they're from the platform to help me withdraw the money, but he uses the same phone number. He told me I have to deposit 10% of the amount I withdraw, as commission, if I want to take it. I told him to get it from my profit, but he keep saying it doesn't work that way. I never heard from the support guy again. The broker resume contact with me after a while and I told him again I'll be withdrawing a large amount of money. He first say it's okay, but then later when I contact him to actually do it he again says I'll have to pay a fee because withdrawing big money means "closing" the account. He only allow me to withdraw another test withdrawal, and I did. This time the money hasn't come in for a while now. I'm quite certain I got scammed, but I still wants to hear some opinions out there, or at least give an example so others don't get caught in the same scam. Just be careful, don't take calls from stranger, especially if they call you and tell you to invest in sth. They can look and act normal at first, but they'll change their behavior.
Also sorry if there's some grammar errors, English is not my native language.
submitted by vudao to personalfinance [link] [comments]

The million dollar question – Why Consider Options Trading

With so many alternative ways of investing in markets, these days, working out which is right for you, can be more challenging than ever. While some areas, such as CFD’s have become fashionable, as we all know, fashion lasts just a season at best! Options, however, are now approaching their 40th Anniversary on the Australian Stock Market – they aren’t fashion, they are style, and real style never dates!

What are some of the key benefits of trading options?

More than any single investment vehicle, options provide flexibility. By that, I mean you can have the potential to profit from a whole range of market conditions – Up, Down, Sideways, Extremely Volatile, not volatile and frankly, no other investment vehicle can offer this kind of opportunity, period!
Options can be used to manage risk, or to protect and hedge, or to generate income, or to exploit market moves for leveraged capital gain, or to profit from no move in the market – again – no other investment vehicle is able to offer this!!
Perhaps most importantly, for many, they bring leverage to the table in what is a potentially far safer way than other instruments. Specifically, with instruments such as Forex, Margin Lending, CFDs or Futures, it is possible to lose more money than you put down. In other words you become the victim of a margin call. With a bought option this is simply not possible – you cannot lose more than you put in.

What about security?

Options are what is known as an Exchange Traded Instrument or ETO for short. This means that all trades are cleared out through a regulated exchange, be that the ASX in Australia, or in the US, the Nasdaq for example. By trading through an exchange there is an enormous safety net. That safety net is zero counterparty risk.
Because all trades are cleared through an exchange, a process called Novation means that if the other person or broking firm on the other side of the transaction is unable to settle, fails financial or has no money, your position is guaranteed by the Exchange themselves, who stand behind the trade. While you may not necessarily appreciate the significance of this, it is huge!
By contrast, trading on CFDs or Forex are Over The Counter or OTC products where, as an investor, you are not protected by the Exchange, to effectively guarantee the other side of the trade. In short, if the counterparty fails, you lose your money…
Trust me, in today’s market this is critically important and hence why we love Options.

Are there risks with Options trading?

Yes there are but in the majority of cases, these risks can be mitigated. Specifically there are strategies that are lower risk, and others that are higher.
As a result, learning which strategies best fit for you and your circumstances, is an important and often missed step.
For example, “Naked” or “Sold only” positions in the options market can be extremely risky, hence we encourage our clients to avoid these like the plague! That is of course, until they have built up a good level of expertise. Instead, we far prefer lower risk strategies that have the ability to more consistently offer a steady return.
submitted by andrew_baxter to u/andrew_baxter [link] [comments]

Not sure what action to take regarding Chinese Forex scam

Hi, I'm usually a lurker on Reddit but I created this throwaway account to ask for any advice and also warn people of this scam.
I'm 99% sure my uncle fell into what I think is very clearly a Forex scam. Now our family is in deep financial troubles. We will need to liquidate all of our assets (including our home, which we live together) to pay off our debts. How it happened:
About a year ago, my uncle is approached on LinkedIn by a women claiming to know the secrets to Forex trading. She claims to be from Hong Kong and sends him several screenshots of her very successful trade and claims she makes millions and also lives an incredibly lavish lifestyle. She tells my uncle to install a 3rd party version of MetaTrader4 to get started. Of course, this gets his attention and he downloads the app and starts taking her advice and plays with the paper money. He makes some really great gains on paper and eventually she pushes him to put in real money.
He then comes to me at the beginning to ask my opinion of this situation.
So I did some initial research and I could not find ANY information about this woman's company and her existence. She literally has less than 10 connections on LinkedIn. I also noted that it was sketchy to download a 3rd party version of this app when a version of it already exists in the App Store. I also reversed image searched her profile pictures but I wasn't able to get any concrete proof she was a scammer.
I tell him that this is most likely a scam based on what I found and his paper money gains on Forex are incredulous and that even pros don't make that much money (He and I have some retail experience trading equities, so we are familiar with the basics).
I don't want him feeling down so I let him know that if he wants to try it maybe he should put in money that he can afford to lose...
Come about half a year later, my uncle confesses that he has all of his savings and on MARGIN into this "forex broker" and that he has been unable to withdraw any money from his account. Each time he doubles his money through trading, he would make another wire transfer to add money to this trading account.
He also tells me each time he tried withdrawing money, the broker requires a lump sum wire transfer of 100k to ensure the right channels are "secured" for him to transfer the money without being targeted by something among the likes of a Hong Kong Security Law. Of course, he gets convinced to make the wire transfer thinking that the gains he makes from the trades offsets this loss...
I should mention that when he calls the "head trader" at this Hong Kong forex firm, it's a young man who speaks Mandarin..
Also I should mention each wire deposit goes to a different account.
Sorry if my writing and organization isn't the best... honestly I am still so shook from writing this... I've convinced my uncle that he should not expect to get any money back from these guys. Our current financial situation is pretty f**ked as I said earlier and we will lose our homes for this. Do you guys have any advice or paths forward we should take? I'm thinking of taking this to a higher authority in Hong Kong but also we don't want to scare the scammer away. We really don't have anything on this scammer as he communicates with us through WeChat. He never answers our calls, and only calls us when we try to withdraw the money.
I appreciate any advice you guys could give me, and I'll be able to answer any question as I may have missed a couple details..
submitted by throwaway920911 to Scams [link] [comments]

Not sure what action to take regarding Chinese Forex scam

Hi, I'm usually a lurker on Reddit but I created this throwaway account to ask for any advice and also warn people of this scam.
I'm 99% sure my uncle fell into what I think is very clearly a Forex scam. Now our family is in deep financial troubles. We will need to liquidate all of our assets (including our home, which we live together) to pay off our debts. How it happened:
About a year ago, my uncle is approached on LinkedIn by a women claiming to know the secrets to Forex trading. She claims to be from Hong Kong and sends him several screenshots of her very successful trade and claims she makes millions and also lives an incredibly lavish lifestyle. She tells my uncle to install a 3rd party version of MetaTrader4 to get started. Of course, this gets his attention and he downloads the app and starts taking her advice and plays with the paper money. He makes some really great gains on paper and eventually she pushes him to put in real money.
He then comes to me at the beginning to ask my opinion of this situation.
So I did some initial research and I could not find ANY information about this woman's company and her existence. She literally has less than 10 connections on LinkedIn. I also noted that it was sketchy to download a 3rd party version of this app when a version of it already exists in the App Store. I also reversed image searched her profile pictures but I wasn't able to get any concrete proof she was a scammer.
I tell him that this is most likely a scam based on what I found and his paper money gains on Forex are incredulous and that even pros don't make that much money (He and I have some retail experience trading equities, so we are familiar with the basics).
I don't want him feeling down so I let him know that if he wants to try it maybe he should put in money that he can afford to lose...
Come about half a year later, my uncle confesses that he has all of his savings and on MARGIN into this "forex broker" and that he has been unable to withdraw any money from his account. Each time he doubles his money through trading, he would make another wire transfer to add money to this trading account.
He also tells me each time he tried withdrawing money, the broker requires a lump sum wire transfer of 100k to ensure the right channels are "secured" for him to transfer the money without being targeted by something among the likes of a Hong Kong Security Law. Of course, he gets convinced to make the wire transfer thinking that the gains he makes from the trades offsets this loss...
I should mention that when he calls the "head trader" at this Hong Kong forex firm, it's a young man who speaks Mandarin..
Also I should mention each wire deposit goes to a different account.
Sorry if my writing and organization isn't the best... honestly I am still so shook from writing this... I've convinced my uncle that he should not expect to get any money back from these guys. Our current financial situation is pretty f**ked as I said earlier and we will lose our homes for this. Do you guys have any advice or paths forward we should take? I'm thinking of taking this to a higher authority in Hong Kong but also we don't want to scare the scammer away. We really don't have anything on this scammer as he communicates with us through WeChat. He never answers our calls, and only calls us when we try to withdraw the money.
I appreciate any advice you guys could give me, and I'll be able to answer any question as I may have missed a couple details..
submitted by throwaway920911 to personalfinance [link] [comments]

Former investment bank FX trader: news trading and second order thinking

Former investment bank FX trader: news trading and second order thinking
Thanks to everyone who responded to the previous pieces on risk management. We ended up with nearly 2,000 upvotes and I'm delighted so many of you found it useful.
This time we're going to focus on a new area: reacting to and trading around news and fundamental developments.
A lot of people get this totally wrong and the main reason is that they trade the news at face value, without considering what the market had already priced in. If you've ever seen what you consider to be "good" or "better than forecast" news come out and yet been confused as the pair did nothing or moved in the opposite direction to expected, read on...
We are going to do this in two parts.
Part I
  • Introduction
  • Why use an economic calendar
  • How to read the calendar
  • Knowing what's priced in
  • Surveys
  • Rates decisions
  • First order thinking vs second order thinking

Introduction

Knowing how to use and benefit from the economic calendar is key for all traders - not just news traders.
In this chapter we are going to take a practical look at how to use the economic calendar. We are also going to look at how to interpret news using second order thinking.
The key concept is learning what has already been ‘priced in’ by the market so we can estimate how the market price might react to the new information.

Why use an economic calendar

The economic calendar contains all the scheduled economic releases for that day and week. Even if you purely trade based on technical analysis, you still must know what is in store.

https://preview.redd.it/20xdiq6gq4k51.png?width=1200&format=png&auto=webp&s=6cd47186db1039be7df4d7ad6782de36da48f1db
Why? Three main reasons.
Firstly, releases can help provide direction. They create trends. For example if GBPUSD has been fluctuating aimlessly within a range and suddenly the Bank of England starts raising rates you better believe the British Pound will start to move. Big news events often start long-term trends which you can trade around.
Secondly, a lot of the volatility occurs around these events. This is because these events give the market new information. Prior to a big scheduled release like the US Non Farm Payrolls you might find no one wants to take a big position. After it is released the market may move violently and potentially not just in a single direction - often prices may overshoot and come back down. Even without a trend this volatility provides lots of trading opportunities for the day trader.

https://preview.redd.it/u17iwbhiq4k51.png?width=1200&format=png&auto=webp&s=98ea8ed154c9468cb62037668c38e7387f2435af
Finally, these releases can change trends. Going into a huge release because of a technical indicator makes little sense. Everything could reverse and stop you out in a moment. You need to be aware of which events are likely to influence the positions you have on so you can decide whether to keep the positions or flatten exposure before the binary event for which you have no edge.
Most traders will therefore ‘scan’ the calendar for the week ahead, noting what the big events are and when they will occur. Then you can focus on each day at a time.

Reading the economic calendar


Most calendars show events cut by trading day. Helpfully they adjust the time of each release to your own timezone. For example we can see that the Bank of Japan Interest Rate decision is happening at 4am local time for this particular London-based trader.

https://preview.redd.it/lmx0q9qoq4k51.jpg?width=1200&format=pjpg&auto=webp&s=c6e9e1533b1ba236e51296de8db3be55dfa78ba1

Note that some events do not happen at a specific time. Think of a Central Banker’s speech for example - this can go on for an hour. It is not like an economic statistic that gets released at a precise time. Clicking the finger emoji will open up additional information on each event.

Event importance

How do you define importance? Well, some events are always unimportant. With the greatest of respect to Italian farmers, nobody cares about mundane releases like Italian farm productivity figures.
Other events always seem to be important. That means, markets consistently react to them and prices move. Interest rate decisions are an example of consistently high importance events.
So the Medium and High can be thought of as guides to how much each event typically affects markets. They are not perfect guides, however, as different events are more or less important depending on the circumstances.
For example, imagine the UK economy was undergoing a consumer-led recovery. The Central Bank has said it would raise interest rates (making GBPUSD move higher) if they feel the consumer is confident.
Consumer confidence data would suddenly become an extremely important event. At other times, when the Central Bank has not said it is focused on the consumer, this release might be near irrelevant.

Knowing what's priced in

Next to each piece of economic data you can normally see three figures. Actual, Forecast, and Previous.
  • Actual refers to the number as it is released.
  • Forecast refers to the consensus estimate from analysts.
  • Previous is what it was last time.
We are going to look at this in a bit more detail later but what you care about is when numbers are better or worse than expected. Whether a number is ‘good’ or ‘bad’ really does not matter much. Yes, really.

Once you understand that markets move based on the news vs expectations, you will be less confused by price action around events

This is a common misunderstanding. Say everyone is expecting ‘great’ economic data and it comes out as ‘good’. Does the price go up?
You might think it should. After all, the economic data was good. However, everyone expected it to be great and it was just … good. The great release was ‘priced in’ by the market already. Most likely the price will be disappointed and go down.
By priced in we simply mean that the market expected it and already bought or sold. The information was already in the price before the announcement.
Incidentally the official forecasts can be pretty stale and might not accurately capture what active traders in the market expect. See the following example.

An example of pricing in

For example, let’s say the market is focused on the number of Tesla deliveries. Analysts think it’ll be 100,000 this quarter. But Elon Musk tweets something that hints he’s really, really, really looking forward to the analyst call. Tesla’s price ticks higher after the tweet as traders put on positions, reflecting the sentiment that Tesla is likely to massively beat the 100,000. (This example is not a real one - it just serves to illustrate the concept.)

Tesla deliveries are up hugely vs last quarter ... but they are disappointing vs market expectations ... what do you think will happen to the stock?

On the day it turns out Tesla hit 101,000. A better than the officially forecasted result - sure - but only marginally. Way below what readers of Musk's twitter account might have thought. Disappointed traders may sell their longs and close out the positions. The stock might go down on ‘good’ results because the market had priced in something even better. (This example is not a real one - it just serves to illustrate the concept.)

Surveys

It can be a little hard to know what the market really expects. Often the published forecasts are stale and do not reflect what actual traders and investors are looking for.
One of the most effective ways is a simple survey of investors. Something like a Twitter poll like this one from CNBC is freely available and not a bad barometer.
CNBC, Bloomberg and other business TV stations often have polls on their Twitter accounts that let you know what others are expecting

Interest rates decisions

We know that interest rates heavily affect currency prices.
For major interest rate decisions there’s a great tool on the CME’s website that you can use.

See the link for a demo

This gives you a % probability of each interest rate level, implied by traded prices in the bond futures market. For example, in the case above the market thinks there’s a 20% chance the Fed will cut rates to 75-100bp.
Obviously this is far more accurate than analyst estimates because it uses actual bond prices where market participants are directly taking risk and placing bets. It basically looks at what interest rate traders are willing to lend at just before/after the date of the central bank meeting to imply the odds that the market ascribes to a change on that date.
Always try to estimate what the market has priced in. That way you have some context for whether the release really was better or worse than expected.

Second order thinking

You have to know what the market expects to try and guess how it’ll react. This is referred to by Howard Marks of Oaktree as second-level thinking. His explanation is so clear I am going to quote extensively.
It really is hard to improve on this clarity of thought:
First-level thinking is simplistic and superficial, and just about everyone can do it (a bad sign for anything involving an attempt at superiority). All the first-level thinker needs is an opinion about the future, as in “The outlook for the company is favorable, meaning the stock will go up.” Second-level thinking is deep, complex and convoluted.
Howard Marks
He explains first-level thinking:
The first-level thinker simply looks for the highest quality company, the best product, the fastest earnings growth or the lowest p/e ratio. He’s ignorant of the very existence of a second level at which to think, and of the need to pursue it.
Howard Marks
The above describes the guy who sees a 101,000 result and buys Tesla stock because - hey, this beat expectations. Marks goes on to describe second-level thinking:
The second-level thinker goes through a much more complex process when thinking about buying an asset. Is it good? Do others think it’s as good as I think it is? Is it really as good as I think it is? Is it as good as others think it is? Is it as good as others think others think it is? How will it change? How do others think it will change? How is it priced given: its current condition; how do I think its conditions will change; how others think it will change; and how others think others think it will change? And that’s just the beginning. No, this isn’t easy.
Howard Marks
In this version of events you are always thinking about the market’s response to Tesla results.
What do you think they’ll announce? What has the market priced in? Is Musk reliable? Are the people who bought because of his tweet likely to hold on if he disappoints or exit immediately? If it goes up at which price will they take profit? How big a number is now considered ‘wow’ by the market?
As Marks says: not easy. However, you need to start getting into the habit of thinking like this if you want to beat the market. You can make gameplans in advance for various scenarios.
Here are some examples from Marks to illustrate the difference between first order and second order thinking.

Some further examples
Trying to react fast to headlines is impossible in today’s market of ultra fast computers. You will never win on speed. Therefore you have to out-think the average participant.

Coming up in part II

Now that we have a basic understanding of concepts such as expectations and what the market has priced in, we can look at some interesting trading techniques and tools.
Part II
  • Preparing for quantitative and qualitative releases
  • Data surprise index
  • Using recent events to predict future reactions
  • Buy the rumour, sell the fact
  • The trimming position effect
  • Reversals
  • Some key FX releases
Hope you enjoyed this note. As always, please reply with any questions/feedback - it is fun to hear from you.
***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

ASIC Regulation Thread - Regarding the proposed changes ( Australians effected the most )

I'm hopeless at formatting text, so if you think you can structure this post better take everything i write and put it into an easy to digest way. I'm just going to type out everything i know in text as fast as possible. I'm not a legal expert, I'm not somehow who understands every bit of information in the PDF's below, but i know I'm a retail trader that uses leverage to make profit which is why I'm posting this, in the hope that someone who can run a charge better than me, will.
Some of you are already aware of what might be happening, this is just a post to educate retail traders on changes that might be coming to certain brokers. This effects Australian Customers the most, but also effects those living in other countries that use Australian brokers, such as Pepperstone and others.
Last year in August 2019, ASIC ( Australian Securities and Investments Commission ) was concerned about retail traders going into Forex and Binary options without understanding these instruments properly and started sticking their noses in for tough regulation.
ASIC asked brokers and anyone with interest in the industry to write to them and explain what should and should not change from the changes they proposed, some of the proposed changes are very misguided and come from a lack of understanding exactly how OTC derivatives actually work.
I will provide the link to the paper further down so you can read it yourself and i will provide a link to all the submission made by all parties that sent submissions to ASIC, however the 2 main points of debate are:
1, To reduce the overall leverage available to retail traders to either 20:1 or 30:1. This means people who currently use leverage such as 100:1 to 500:1 and everything in between will be effected the most, even more so are those traders with relatively small accounts, meaning in order to get your foot in the door to trading you will need more capital for it to be viable.
^^ This point above is very important.
2, The removing of Binary options trading, which basically includes products like "Bet if gold will rise to this price in the next 30 seconds" This sort of stuff. So far from all the submissions from brokers and individuals nobody really cares if this changes as far as i know, though if you have concerns about this i would start voicing your disapproval. Though i would not waste your time here, all is pointing to this being eradicated completely with brokers also supporting the changes, I've never used such a product and know very little about them.
^^ This point above isn't very important and will probably be enforced in the future.
Still to this day i see retail traders not understanding leverage, they think of it as "dangerous and scary", it's not, position size is the real danger, not leverage. So ASIC is aiming to limit retail traders access to high leverage, they are claiming it is a way to protect traders who don't really understand what they are getting into by attacking leverage and not the real problem which is position size relative to your capital.
If it was truly about protecting retail traders from blowing up their accounts, they would look for ways to educate traders on "understanding position sizes and why it's important" rather than attacking leverage, but their goal is misguided or has an ulterior motive . I will give you a small example below.
EXAMPLE - We will use 2 demo accounts for demonstration purposes. If you don't understand my example, i suggest you try it for yourself. - Skip if not interested in examples.
Lets say we open 2 demo accounts with $1000 in both, one with 20:1 leverage and one with 500:1 leverage and we open an identical position on both accounts ( say a micro lot '0.01' on EURUSD ). You are safer on the 500:1 account as you don't need to put up as much margin as collateral as you would on the 20:1. If the trade we just opened goes against us and continues against us, the account with 20:1 leverage will run out of free margin a lot faster than the 500:1 account. In this simple example is shows you that leverage is not dangerous but safer and gives you a lot more breathing room. This trade was a small micro lot, so it would take hundreds of pips movements to get margin called and blow up that $1000 on each account. Lets now use a different position size to truly understand why retail traders blow up accounts and is the reason why trading can be dangerous.
This time instead of opening a micro lot of '0.01' on our $1000 dollar demo accounts, lets open a position size much larger, 5 lots. Remember we only have $1000 and we are about to open a position much larger relative to our capital ( which we should never do because we can't afford to do that ) the 20:1 probably wont even let you place that trade if you don't have enough margin as collateral or if you could open the position you would have a very tiny amount of free margin left over, meaning a small pip movement against you will instantly blow up your $1000 account. On the 500:1 account you wouldn't need to put up as much margin as collateral with more free margin if the trade goes bad, but again a small movement could blow up your account. In this example, both accounts were dangerous because the lack of understanding position sizes, opening a position you can't afford to open. This is what the true danger is, not the leverage.
Even in the second example, the higher leverage would "margin call" you out later. So i would go as far to say that lower leverage is more dangerous for you because it margin calls you out faster and just by having a lower leverage doesn't stop you from opening big positions that can blow you up in a 5 pip movement anymore, any leverage size is dangerous if you're opening positions you can't afford to open. This is also taking into consideration that no risk management is being used, with risk management higher leverage is even more powerful.
ASIC believes lowering leverage will stop people opening positions that they can't afford. When the reality is no matter how much capital you have $500, $1000, $5000, $50,000, $500,000, $5,000,000. You don't open position sizes that will blow that capital up completely with small movements. The same thing can happen on a 20:1 or 500:1 account.
Leverage is a tool, use it, if your on a lower leverage already such as 20:1, 30:1 it means your country has been regulated and you already have harder trading conditions. Just remember higher leverage allows you to open larger position sizes in total for the amount of money you own, but the issue is NOT that your using the higher leverage but because you are opening positions you can't afford, for what ever reason that is, the only fix for this is education and will not be fixed by simply lowing leverage, since you can just as easy blow up your account on low leverage just as fast or if not faster.
So what is going on?
There might ( get your tinfoil hats on ) be more that is involved here, deeper than you think, other agendas to try and stop small time retail traders from making money via OTC products, theories such as governments not wanting their citizens to be traders, rather would prefer you to get out there and work a 9 to 5 instead. Effective ways to do this would be making conditions harder with a much larger barrier of entry and the best way to increase the barrier of entry for retail traders is to limit leverage, lower leverage means you need to put up more money, less breathing room for trades, lower potential. They are limiting your upside potential and the downside stays the same, a blown account is a blow account.
Think of leverage as a weapon, a person wielding a butchers knife can probably destroy a person wielding a steak knife, but both knifes can prove fatal. They want to make sure your holding the butter knife then tell you to butcher a cow with it. 30:1 leverage is still workable and can still be profitable, but not as profitable as 500:1 accounts. This is why they are allowing professionals to use high leverage, this gives them another edge over successful retail traders who will still be trying to butcher a cow with a butter knife, while they are slaying limbs off the cow with machetes.
It's a way to hamstring you and keep you away rather than trying to "protect" you. The real danger is not leverage, they are barking up the wrong tree, how convenient to be barking up the very tree most retail traders don't fully understand ( leverage) , pass legislation to make trading conditions harder and at the same time push the narrative that trading is dangerous by making it even harder. A full circle strategy to make your trading conditions worse, so you don't succeed.
Listen carefully especially if you trade with any of the brokers that have provided their submissions to ASIC. Brokers want to seem like they are on your side and so far some of the submissions ( i haven't read them all ) have brokers willing to drop their leverage down to 30:1 because they know by dropping the leverage down it will start margin calling out their clients at a much faster rate, causing more blown up accounts / abandoned accounts with residual margin called funds, but they also know that if they make trading environments too hard less people will trade or even worse move their funds elsewhere offshore to unregulated brokers that offer higher leverage.
Right now it's all just a proposal, but as governments expand and continue to gain more control over it's citizens, it's just a matter of time till it's law, it's up to you to be vocal about it, let your broker know that if they drop their leverage, you're out, force them to fight for you.
If you have any more information related to this, or have anything to add, post below. I'm not an expert at this technical law talk, i know that i do well with 500:1 leverage and turn profits with it, it would be harder for me to do on a lower leverage, this is the reason for my post.
All related documents HERE
CP-322 ( Consultation paper 322 ) & Submissions from brokers and others.
https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-322-product-intervention-otc-binary-options-and-cfds/
submitted by southpaw_destroyer to Forex [link] [comments]

The comedy how I lost all my money in two hours

I'm trading for 11 months with pretty good success.
I never traded metals and forex before, just stocks.
Today when gold started to consolidate at the last hour I decided to scalp short it with a large amount, so i opened 100 lots. I haven't realised, in forex 100 (lots) doesn't mean "100 pcs", because I used to stocks and I went full retard without knowledge.
Seconds later I realized it means 10 million dollars (500x leverage).
It jumped up and immediately I was down 4000. I scared as fuck and rather than closing the position immediately I hoped maybe I can close break even.
The market closed and I waited for the asian session. The gold popped like never before and I lost all my life savings (£65000)
Here is the margin call
https://imgur.com/a/i2bpwZ6
You know the rest of the story. I'm depressed, crying and shouting with myself. Yes, I know I was stupid, thanks. I just wanted to share this with you.
submitted by fail0verflowf9 to Daytrading [link] [comments]

Theta gang ain't shit.

Now's a good time for to get a lesson in the greeks you fucking retards. This document outlines the relative risks and rewards of certain trading strategies and how to manage risks along with some basic math and econ. This should be basic for most of you.
Why do stocks go up?
Because capital growth has a diminishing returns to scale. In the long run capital is used to create more capital generating growth until it balances with capital depreciation which is linear. You can increase the equilibrium capital accumulation by increasing savings rates essentially trading off short run consumption for long run consumption. The implications of this are that less capital intensive economies grow at faster rates than developed because developed economies are very close to hitting the equilibrium point and have to rely on technological advancements for long run growth. Not every economy is equal though, all have differences in economic institutions, government effectiveness and political norms which will also affect their long run effectiveness. Long story short if the government engages in ineffective policies like protectionism, price manipulation, overly burdensome regulations, underregulation, or inefficient redistribution programs the short run micro/macro picture will be hurt and reflected in the long run picture. The US has had a thriving stock market despite having relatively low growth because it has taken the first mover advantage in many industries. Global Tech, higher education, finance, and pharma are all centered in the US because the US policies have made doing business in the US the optimal choice for these industries. For as long as the US is a capitalist nation you can be sure that the stock market will go up in the long run. This is not necessarily the case for commodities or forex as higher growth has typically led to investments in productive efficiency outweighing increased demand in raw materials and exchange rates do not have a long run trend. Fundamentally, the stock market is a good place to invest savings into in the long run.
Stocks and exponential returns.
Stocks go up so you want to capture the value of price increases. Stocks have a delta of one and a gamma of zero resulting in a linear return to movement of the stock price. Long run capital accumulation, although diminishing, is still exponential and in the long run will return an exponentially increasing return to investment on stock. Linear gains * exponential increase in underlying = exponential gains. But what if things go down? In the short run stocks decrease in value at exponential rates which is absolutely fantastic for investors because exponential declines are diminishing in scale. 10% of 100 is 10, 10% of 90 is 9, 10% of 81 is less and so on and so forth. You may get linear returns from movement but you receive increasing returns to scale gains on the upside and decreasing returns to scale losses on the downside.
Delta and Gamma
Long options have even better fundamentals than stocks because they amplify the exponentiality through gamma. As an option moves into the money its delta increases creating exponential gains in value. As an option moves out of the money delta decreases, lowering losses. Thus options while having more risk per dollar than stocks have far superior risk returns in the short run.
Theta and Vega
The opposite is true of selling a call and you're put into the position of wanting to sell when times are most dire and hold when times are good. In exchange you get benefit from theta decay but if you can reasonably predict the movement of the market that's pretty much nothing compared to the gains from delta you could get investing the same amount of money into long calls. Selling also requires way more money further reducing its risk to return. But what about vega? When markets crash, volatility skyrockets. Long calls gain and the opposite is true once again for selling them.
Mathematically, buying longs has the best return on risk of any option strategy but higher absolute losses when delta doesn't move in your favor. Selling longs or spreads has a way worse return to risk but you'll lose less money when delta moves against you and it's harder for any one position to lose all of its value.
Theta gang isn't more profitable than bullgang, it's less risky per dollar spent. The reason market makers don't play like WSB retards is because they play on margin and the 20-30% losses we typically take and make back buying longs would cause their investors to flee bankrupting them.
Strategy implications
Longs
Selling naked longs
Credit spreads
Debit spreads
Edit: For what to do with your cash position, you could put it into gold, bonds, bond etfs, non spy correlated stocks or whatever. Low risk theta gang strats are fine in bull markets but don't expect to make real money from them. I'm cash since volatility is high, u do u.
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10 Secrets The Trading Industry Doesn’t Want You To Know About

Today’s lesson goes to be somewhat controversial and should ruffle some feathers. I shall blow wide open and debunk tons of the knowledge you've got presumably been exposed to the present far in your trading journey.
The average trader is out there walking through a confusing and conflicting maze of data from a spread of sources including; blogs, forums, broker websites, books, e-books, courses and YouTube videos.
With of these learning resources available there's naturally getting to be some excellent and a few very bad information, but actually , there just isn’t how for many aspiring traders to understand what to concentrate to, who to concentrate to, or what information is useful and what information is non-beneficial.
I’m not getting to pretend that there's how for an aspiring trader to filter this giant sea of data composed by of these resources and mentors out there, because there simply isn’t. knowledgeable trader with 10,000 hours of experience might stand an opportunity of deciding the great from the bad and therefore the valid from the invalid. However, you, the beginner or intermediate trader simply won’t possess that filtering ability yet.
Becoming ‘Non-Average’
As traders, we concede to our instinctive feelings of social trustworthiness supported what we see and listen to , often to our extreme detriment. we frequently tend to require a leap of religion with our mentors and have a habit of taking things said to us at face value. we would like to hold close information that resonates with us and is sensible to us, especially if it’s delivered by a well-known source that we've come to understand and trust.
The ‘average trader’s brain’ is usually trying to find a shortcut due to the overwhelming desire to form money and be free. The brain wants to urge a winning result immediately with the smallest amount amount of effort possible. If you would like to ever make it as a professional trader or investor, I suggest you are doing everything you'll to avoid thinking with the ‘average trader’s brain‘ and begin being ‘non-average’. meaning becoming far more aware, thinking outside the box more and questioning and filtering the knowledge you read and watch. most significantly , slowing everything all down!
This now begs the apparent question…how does one even know what I’m close to write during this lesson is actually valid and factual? How are you able to really be sure? the reality is unless you've got followed me and my posts on this blog for an extended time and know me and know my work, then you can’t really make certain , and that i don’t expect you to easily believe it at face value. If you would like to return back and re-read this lesson during a few weeks, or a couple of months, or a couple of years, after you work out that i'm somebody worth taking note of about trading OR that i'm somebody not worth taking note of about trading, then so be it.
So with a degree of healthy skepticism, I ask you to think about the below list of eye-opening secrets that professional traders and therefore the trading industry, don’t want you to understand about or understand. I hope it helps…
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FOREX isn’t the sole market the Professionals trade
The FX market is large , with billions of dollars per day changing hands. It can cause you to great money if you recognize what you’re doing OR it can send you broke if you don’t. It’s a really popular market to trade globally, BUT it’s not the sole market the professional’s trade and it’s not always the simplest market to trade either.
A note on leverage:
The brokers and platform providers want you to trade FX on high leverage because the profit margins are very high for them. However, if you trade FX on lower leverage, the profit margins shrink dramatically for them. once you trade FX, start brooding about what can fail rather than just brooding about what can go right. I suggest avoiding stupidly high leverage like 400 to 1, as this will be very dangerous for you if the market moves quickly or experiences a price gap and your stop-loss orders aren’t executed at the worth you set. A more sensible leverage level would be 100 to 1 or 200 to 1, but any higher seems crazy. (Using an excessive amount of leverage is what wiped tons of traders out during Swiss Bank Crisis in 2015, The Brexit choose 2016 and therefore the Currency flash crash in early 2019).
Broaden your view:
Going forward, it'll serve you well in your trading career to start out watching a spread of worldwide markets including FX, Stock Indicies and Commodities. additionally to FX, I personally trade GOLD (XAUUSD), S&P500 Index USA, the SPI200 Index Australia, and therefore the Hang Seng Index Hong Kong , and sometimes individual stocks on various global exchanges. In short, there's more to the trading world than simply FX. I discuss the foremost popular markets I trade this lesson here.
Day trading isn’t what Pro trading really is
The internet is crammed with marketing trying to convince folks that the definition of a trader may be a one that spends all day actively trading in and out of the market on a brief term basis, all whilst living the life-style of a Wall St millionaire. there's a significant agenda within the industry to push this story to the masses, it's been relentless for many years .
I am yet to satisfy one successful day trader who is consistent over the future and that i have almost 25,000 students and 250,000 readers on this blog. i'm not saying there isn’t a couple of out there, but 99.9% of the people that do this sort of trading or attempt to live up to the standard day trader stereotype are getting to fail and perhaps even harm themselves financially or mentally. Watching a screen all day and searching for trades constantly is that the like a compulsive gambler playing roulette during a casino.
The successful traders i do know of (myself included) are watching higher time frames and longer time horizons (minimum 4-hour chart timeframes and predominantly daily chart time frames). they need no restriction on how long they're looking to carry a trade for and that they tend to let the trades find them. The professionals i do know , don't day trade, they are doing not watch screens all day, they are doing not search for trades constantly. they're going to typically fall under the category of a swing trader, trend trader or position trader.
The obvious paradox and conflicting reality within the ‘day trader story’ is blatantly obvious. How does a trader who is consistently watching a screen and constantly trading have time to enjoy his life and live the lifestyle? They chose to trade as a profession to possess a life, they didn’t choose it to observe a screen 24/5.
Here are some points to think about that employment against the so-called ‘ day trader’:
The shorter the time-frame the more noise and random price movement there's , thus increasing your chance of simply being stopped out of the trade.
Your ‘trading edge’ features a higher chance of yielding a result for you if you’re not trading within the intraday noise.
The same trading edge doesn't work or produce an equivalent results on a 5 min chart compared to a Daily chart.
Commissions and spreads churn your account, therefore the more you trade the more you lose in broker platform costs. (I will mention this below)
Risk-Reward ratios aren't relative on shorter and longer time frames. Statistical average volatility across different time periods also as natural market dynamics play an enormous role during this . there's much more weight behind higher time frames than lower timeframes.
Great trades take time because the market moves slower than most of the people ever anticipate. Trading from the upper timeframes and holding trades for extended time periods will provide you with greater opportunities to ascertain trades mature into big winners. However, shorter timeframes don’t provide you with this same opportunity fairly often .
submitted by LondonForex to u/LondonForex [link] [comments]

Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)

Hello, dummies
It's your old pal, Fuzzy.
As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great.
What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. I do my bit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post.
That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way.
We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps.
Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy.
TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle.
Ready? Let's get started.
1. The Tao of Risk: Hedging as a Way of Life
The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows:
Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself.
Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part.
You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus.
That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it.
Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets?
2. A Hedging Taxonomy
The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now.
(i) Swaps
A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one.
Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered.
The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game.
I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging.
There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested.
Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure).
(ii) Forwards
A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me.
Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways.
People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances.
These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them.
(iii) Collars
No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray!
To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts.
(3) All About ISDAs, CDS and Synthetic CDOs
You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years.
First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA.
Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire.
Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking?
Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama.
Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details.
I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here.
Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post.
*EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
submitted by fuzzyblankeet to wallstreetbets [link] [comments]

Forex Trading Basics Reddit - Forex Glossary Terms For Beginners

Forex Trading Basics Reddit - Forex Glossary Terms For Beginners

What is Forex - Terminology

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The FOREX market is the largest financial market in the world. On a daily basis, trillions of dollars are traded in different currencies around the world.
Being FOREX the basis for international capital transactions, its liquidity and volume are much greater than any other financial market. It is estimated that the average volume traded by the world's largest stock exchange, the New York Stock Exchange (NYSE) in a full month, is equal to the volume traded daily in the Forex currency market. In addition, it is estimated that this volume will increase by 25% annually.
80% of transactions are between the US dollar (USD), the euro (EUR), the yen (JPY), the British pound (GBP), the Swiss franc (CHF), and the Australian dollars (AUD) and Canadian (CAD).

What is traded in the Forex market?

We could just say that money. Trading in FOREX simultaneously involves buying one currency (for example euros) and selling another (for example US dollars). These simultaneous purchase and sale operations are carried out through online brokers. Operations are specified in pairs; for example the euro and the dollar (EUR / USD) or the pound sterling and the Yen (GBP / JPY).
These types of transactions can be somewhat confusing at first since nothing is being purchased physically. Basically, each currency is tied to the economy of its respective country and its value is a direct reflection of people's perception of that economy. For example, if there is a perception that the economy in Japan is going to weaken, the Yen is likely to be devalued against other currencies. In other words, people are going to sell Yen and they are going to buy currencies from countries where the economy is or will be better than Japan.
In general, the exchange of one currency for another reflects the condition of the health of the economy of that country with respect to the health of the economy of other countries.
Unlike other financial markets such as the stock market, the currency market does not have a fixed location like the largest exchanges in the world. These types of markets are known as OTC (Over The Counter). Transactions take place independently around the world, mainly over the Internet, and prices can vary from place to place.
Due to its decentralized nature, the foreign exchange market is operated 24 hours a day from Monday to Friday.
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Forex Trading Basics - Basic Forex Terminology

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As with any new skill that is learned, it is also necessary to learn its terminology. There are certain terms that you must know before you start trading Forex. Here are the main ones.

• Major and minor currencies

The 8 most widely used currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD) are known as “ major currencies ”. All other currencies are called " minor currencies ." You don't need to worry about minor currencies, as you probably won't start trading them for now. The USD, EUR, JPY, GBP, and CHF currencies are the most popular and most liquid currencies on the market.

• Base currency

The base currency is the first currency in any currency pair. It shows how much the base currency is worth against the second currency. For example, if the USD / CHF has a rate of 1.6350, it means that 1 USD is worth 1.6350 CHF. In the forex market, the US dollar is in many cases the base currency to make quotes, the quotes are expressed in units of $ 1 on the other currency of the pair.
In some other pairs, the base currency is the British pound, the euro, the Australian dollar, or the New Zealand dollar.

• Quoted currency

The quote currency is the second currency in the currency pair. This is often referred to as a "pip-currency" and any unrealized gains or losses are expressed in this currency.

• Pip

A pip is the smallest unit of the price of any currency. Almost all currencies consist of 5 significant digits and most pairs have the decimal point immediately after the first digit. For example EUR / USD = 1.2538, in this case, a pip is the smallest change in the fourth decimal space, which is, 0.0001.
A notable exception is the USD / JPY pair where the pip equals $ 0.01.

• Purchase price (bid)

The buying price (bid) is the price at which the market is ready to buy a specific currency in the Forex market. At this price, one can sell the base currency. The purchase price is displayed on the left side.
For example, in GBP / USD = 1.88112 / 15, the selling price is 1.8812. This means that you can sell a GPB for $ 1.8812.

• Sale Price (ask)

The asking price is the price at which the market is ready to sell a specific currency pair in the Forex market. At this price, you can buy the base currency. The sale price is displayed on the right-hand side.
For example, at EUR / USD = 1.2812 / 15, the selling price here is 1.2815. This means that you can buy one euro for $ 1.2815. The selling price is also called the bid price.

• Spread

All Forex quotes include two prices, the bid (offer) and the ask (demand).
The bid is the price at which the broker is willing to buy the base currency in exchange for the quoted currency. This means that the bid is the price at which you can sell.
The ask is the price at which the broker is willing to sell the base currency in exchange for the quoted currency. This means that the ask is the price at which you will buy. The difference between the bid and the ask is popularly known as the spread and is the consideration that the online broker receives for its services.

• Transaction costs

The transaction cost, which could be said to be the same as the Spread, is calculated as: Transaction Cost = Ask - Bid. It is the number of pips that are paid when opening a position. The final amount also depends on the size of the operation.
It is important to note that depending on the broker and the volatility, the difference between the ask and the bid can increase, making it more expensive to open a trade. This generally happens when there is a lot of volatility and little liquidity, as happens during the announcement of some relevant economic data.

• Cross currency

A cross-currency is any pair where one of the currencies is the US dollar (USD). These pairs show an erratic price behavior when the operator opens two operations in US dollars. For example, opening a long trade to buy EUR / GPB is equivalent to buying EUR / USD and selling GPB / USD. Cross-currency pairs generally carry a higher transaction cost.

• Margin

When you open a new account margin with a Forex broker, you must deposit a minimum amount of money to your broker. This minimum varies depending on each broker and can be as low as € / $ 100 at higher amounts.
Each time a new trade is executed a percentage of your account margin balance will be the initial margin required for a new trade based on the underlying currency pair, current price, and the number of units (or lots) of the trade. .
For example, let's say you open a mini account which gives you a leverage of 1: 200 or a margin of 0.5%. Mini accounts work with mini lots. Suppose a mini lot equals $ 10,000. If you are about to open a mini lot, instead of having to invest $ 10,000, you will only need $ 50 ($ 10,000 x 0.5% = $ 50).

• Leverage

Leverage is the ratio of the capital used in a transaction to the required deposit. It is the ability to control large amounts of dollars with relatively less capital. Leverage varies drastically depending on the broker, it can go from 1: 2 to even 1: 2000. The most common level of leverage in Forex can currently be around 1: 200.

• Margin + leverage = dangerous combination

Trading currencies on margin allows you to increase your buying power. This means that if you have $ 5,000 in account margin that allows you a 1: 100 leverage, you can then buy $ 500,000 in foreign exchange as you only have to invest a percentage of the purchase price. Another way of saying this is that you have $ 500,000 in purchasing power.
With more purchasing power you can greatly increase your potential profits without an outlay of cash. But be careful, working with a high margin increases your profits but also your losses if the trade does not progress in your favor.
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submitted by kayakero to makemoneyforexreddit [link] [comments]

How To Make Money Trading Reddit

How To Make Money Trading Reddit

MAKE MONEY WITH TRADING (Forex, Stocks, Binary Options)

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Trading consists of buying and selling assets, such as stocks, futures, currencies or derivatives, in a financial market. To trade, so that we obtain benefits, we will have to speculate with the movements in the price of the assets. This is the first step to making money from trading.
The word trading is usually associated with short-term investments, that is, short operations that seek benefits limited to a small time frame.
In other words, trading and investing are the same, only the time frame changes.
So if you hear terms like "stock trading" or "stock trading" it is the same thing, only they usually refer to different time frames.
The person who invests or trades is called a trader. A trader then is someone who invests in the financial markets.
Generally, the term trader is usually added to the asset that operates. For example, stock trader, futures trader, forex trader, in short, the asset that operates.
As you can see I am adding several concepts so that we all start from the same base.
So, trading is basically buying and selling assets, trying to buy at the lowest possible price and sell as high as possible. As simple as that.
I want you to understand something, the bases are 70% of your trading. It is amazing to see how advanced traders forget the basics before trading.
By advanced trader I mean someone who already knows how to trade but that doesn't necessarily make him a winning trader. In most cases they apply complicated strategies and forget something as simple as the bases.
How much can a trader earn? You put the roof on it, there is no limit. I recommend you measure your progress in percentages and not in nominals. It is best to verify your progress.
Is it necessary to be in a Trading Academy? Like everything, there are some who like to be social and others who prefer to work in a self-taught way. In trading, it is the same. If you need the constant support of people to not be demotivated, then a Trading Academy is a good option. Now, if you are an already motivated person who only needs to clear up doubts, then the best thing is a mentor, consulting professional, or a trading teacher who clears your doubts.
The foundations for making money trading have to be solid if we want to make profits consistently. So today I want to emphasize that, the foundations of being a successful trader. Let us begin!

How to Make Money Trading Reddit - Key Steps

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1) Buy Supports (and resistances)
Buying in supports is buying in a key area where the price exerts a certain friction preventing the price from continuing to advance, for whatever reason.
A support is nothing more than an area where the asset finds the confidence of investors, it is the level where they estimate that it is a good purchase price for them, and that is why they buy the asset in question, in such a way that the asset finds help in that level.
Most trading systems, at least the ones I know of which are a few, are based on this principle but what happens, they camouflage it with flourishes.
Instead of saying, to the purchase in supports, they add colored mirrors so that it does not look so simple.
I'm not saying that details are not good, but exaggeration of details can lead to confusion and later paralysis.
Systems must necessarily be simple.
Buying in stands not only improves your overall entry, but it drastically lowers your risks. The further we move away from a support, the more the risk increases.
Many times we end up buying halfway because the price "escaped" us and we think that we will not have another equal opportunity. The reality is that the market always provides opportunities for those who know how to wait.
There is a saying that the beginning trader has fun in the market, the professional trader gets bored.
This does not mean that the professional trader does things reluctantly, or that he does not like to invest. It means that the professional trader waits crouched, calm, for that opportunity that he is looking for appears, that entry into support that reduces his risk. While the novice trader enters and exits the market euphoric.
A professional trader can be in front of the screen all day and not make a single trade. The novice trader, on the other hand, if he spends more than 5 minutes without trading, he already feels bad, anxious and thinks that he is losing opportunities.
Without further ado, enter supports.
2) Execute stop loss
Holding losses is the biggest mistake of traders. Who in the beginning has not moved the stop loss because the operation moved against him?
It's a very common mistake. We enter the market, we put the stop, the operation turns against us and instead of executing the stop, we RUN IT!
We are camicaces.
The typical phrase "I'm waiting to recover" has burned entire wallets.
The market fell 40% and instead of leaving, they began to pray.
The great advantage of small portfolios, that is, investors with little capital, is flexibility and speed of reaction.
By running the stop loss you are losing the only advantage you have with respect to professionals and large investors. Because they sure have more capital and have wider margins.
Please don't take losses, don't run the stop loss.
If you miss the stop, distance yourself from the market and analyze why that happened to you for the next better place your stop.
3) Sell in resistonce
I want you to remember something. Until you sell, the profits are not yours.
Until you sell, you have no money.
Until you sell, you cannot say that the operation was successful.
Many traders are very good at finding entries. They perfectly see the supports and manage to enter at the best prices. But what happens to them, they don't sell.
It hits a key resistance, where price clearly can't break through and what they do, they hold out in case it breaks.
The worst, the price does not break or make an upthrust (which would be a kind of professional feint), it returns to support, it bounces, it goes back to resistance and what we do ... we wait again to see if it breaks, because now it is the correct.
And there is a worse case. It reaches resistance and we want to apply the phrase "let the profits run", so what do we do, we adjust the stop loss near the resistance in case the price breaks and continues.
The price tests the resistance, falls, touches our stop and we run it in case the price returns to the path. Instead of applying the phrase “let the profits run” we apply the phrase “let the losses run”.
An old master used to say, when the price reaches resistance, I collect my winnings and go on vacation.
It seems silly but it is a way of telling our brain, if you do things well you have a prize.
Sell ​​in resistance, the market always gives new opportunities.
4) The Trend is your friend
No better elaborated phrase. The trend is your friend. And as we all know, almost no one pays attention to their friends. We ask them for advice and if they don't say what we want to hear, we won't.
If the price goes up, where do you have to invest?
"It is not that the price was stretched too much and surely now a correction is coming, so I invest against it."
You are seeing that the trend is upward in an annual, monthly, weekly, daily, hourly and minute time frame, but just in case you invest against it.
Please, the trend is your friend, if it tells you that the price is going up, it is because it is going up.
I invested in favor of the trend. You do not want to beat the market because I assure you that it breaks your arm in a blink of an eye.
5) Statistical advantage
In the financial markets there are no certainties, only probabilities and whoever tells you otherwise is surely not winning in silver.
What we are looking for are windows of statistical opportunities. In other words, we try to turn the odds in our favor.
That is why it is always important to ask yourself the question, what is more likely, that the price will go up or down?
This is because many times we operate and do not realize that the odds are against us.
We can never be 100% certain, but just putting the odds in our favor by making concrete decisions based on logic and not on emotions can earn us a lot of money.
6) Consistency
You often see many traders showing one or two of their most successful trades and the occasional loss. This is good for teaching purposes, and it is useful for transmitting teachings.
But if you want to become a professional trader you need consistency. And consistency does not speak of an isolated operation, it speaks of sustained profits over time.
And when I say time I speak of years. Not a month, not a week, not a semester. 3 years, 5 years, 10 years, 20 years.
To give you an idea, ultra-professional traders fight to see who is more consistent.
In other words, the first question they ask themselves is how many years have you been winning?
A trader who every year earns a tight, modest percentage, reasonable to say the least, but consistently, is a much better professional than one who doubles the capital one year and the other is -90.
Consistency is highly treasured as it allows for simulations, strategizing, and even projections.
7) Trading plan
The number of traders who invest without having a trading plan is impressive. Something so important, so simple to make, so useful and very few use it.
A trading plan allows you to analyze your operations, see what you are doing, and then improve.
When we don't have a trading plan, what we did last week goes completely unnoticed because we can't internalize the teaching.
And when I speak of teachings, they can be gains or losses.
A loss allows us to adjust the plan but a success also.
In fact, when we have several successful operations, there is nothing better than taking their teachings and replicating them.
The trading plan is the only tool that allows us to do this, learn, improve and be the most objective possible, leaving aside emotions.

Forex trading Reddit

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When it comes to the currency market, one of the most popular trading markets is Forex. It represents the world's largest decentralized currency market. So we will answer how to make money from forex trading.
With only having a computer, tablet or mobile phone, and an excellent internet connection service, you will be able to operate from anywhere in the world in the Forex market. It has the great strength of being flexible and adaptable to all types of investors.
Select a prominent broker or intermediary agent, one that is recognized and very professional. Conduct negotiation trials with him, so that you get to know each other and do not put your capital at risk.
Develop together the work style that most identifies you and decide to earn money by trading, enriching yourself with all the possible knowledge and strategies.
Acquire strengths in detecting the ideal moment to carry out operations. You will achieve this by studying and understanding the graphs and trends of transactions, detecting that unique pattern that tells you when is the right time to proceed.
Do not hesitate, it is possible to earn a lot of money with trading! But, make sure, above all things, train yourself with a duly accredited professional, in guarantee of acquiring quality theoretical knowledge, imperative to understand the movement of the market.

How to Make Money Trading Reddit - Final Words

Trading is an “investment vehicle” that can serve your objectives of having financial peace of mind as long as it is part of a broad economic and financial planning in the short, medium and long term. If not, trading can become a fast track to lose your money, if you lack the necessary knowledge, experience and training. Follow the following formula to Make Money in Trading Consistently:

Profitability = (Knowledge + experience) x emotional and mental management

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Margin Calls Explained. A trading account can only grow if the trader follows specific money management rules, as it is not possible to win 100% of the time. There is no holy grail in Forex trading, and no magical recipe to make money. The only thing that Forex trading virtually guarantees is that with hard work and discipline, profiting from it is possible. Broker Min Deposit Bonus Rating ... Die Margin ist ein elementarer Bestandteil des Handels mit Hebelprodukten. Doch wie funktioniert Margin Trading & wie können Sie Margin Calls vermeiden? There are two simple ways for you to avoid Margin Call. You may follow any of this to stay on the safe side while trading forex. And moreover, don't get too much greedy at any point of time while trading. So the strategies you can take to avoid margin calls are: Strategy 1: Open a "cash only" account with your broker. Though it's little ... How to avoid margin calls ; Traders go to great lengths to avoid margin call in forex. Therefore, understanding how margin call arises is essential for successful trading. This article takes an in ... Margin calls are most often experienced by amateur buy-and-hold investors. By failing to get rid of a stock that rapidly falls after purchase, these amateur investors must essentially deposit more funds to maintain a losing position. Professional traders typically cut their losses and liquidate losing positions well before a margin call is required. Forex trading on margin accounts is the most common form of retail forex trading. This article explains what ‘margin’ is, shows a margin calculator or ‘formula’ and how to use this free margin safely. Understanding margin requirements, and how leverage levels affect it, is a key part of trading forex successfully. Margin Definition. In the trading world, a margin account involves ... Therefore, understanding a forex margin call and how it occurs, is essential for successful and profitable forex trading and to avoid a lot of potential disappointment and financial setbacks as a forex trader. However, to comprehend margin calls, it is absolutely necessary to firstly focus on the two interconnected concepts of margin and leverage. Margin in forex. Margin is one of the most ... Beispiel eines Margin Calls . Bei IG verwenden wir den Begriff „ Margin Call ”, um den Status Ihres Kontos zu beschreiben.Sie werden auf Margin Call gesetzt, wenn das Kapital auf Ihrem Konto unter 100 % Ihrer Halte-Margin fällt – zu diesem Zeitpunkt werden wir bemüht sein, Sie per E-Mail zu benachrichtigten. Margin is the amount of money that a trader needs to put forward in order to open a trade. When trading forex on margin, you only need to pay a percentage of the full value of the position to open a trade.. Margin is one of the most important concepts to understand when it comes to leveraged forex trading.Margin is not a transaction cost. Margin calls are mechanisms put in place by your Forex broker in order to keep your used margin secure. Remember, your used margin is allocated by your broker as the collateral for funds borrowed from your broker. A margin call happens when your free margin falls to zero, and all you have left in your trading account is your used, or required margin. When this happens, your broker will ...

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Margin Calls Explained - YouTube

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