Where better, easier and faster you can earn money? On the currency, stock or commodity markets? This is one of the most common questions among beginners.
There are many answers. All of them depend on personal taste and meets the inner motives.
When investors are burning like matches ...
Never forget that the personal welfare of employees of financial institutions depends on the amount of funds committed by investors and transactions. For employees of financial companies - this is a matter of life and death. Financial incentives can doubt the veracity of the information provided to potential investors employees of individual companies.
Some of these estimates even become a myth. Here are just a few examples:
• investors in the FOREX like a match lit, and the stock market situation is significantly better;
• have direct access to traders, individuals (retail) in the U.S. market;
• there are wonderful systems that safely and quickly become a millionaire.
Let's look at these three "conventional" views and estimate their validity. I could not find any more or less reliable statistics on the participants of currency, stock or commodity markets for the following:
1. The number of new investors studied, the percentage of remaining a year or two, three. Stability of their work.
2. Relationship original deposit with time finding investors in the market and the state of his accounts at the time of termination.
3. The influence of experience (duration of the financial markets) or the method of execution of transactions on the effectiveness of speculative operations.
In general, no, even implausible statistics. There are no figures. Only links - such as "existing opinion," "believe," "anticipate," "an estimated", etc.
The reasons for this situation in the industry understand the financial speculation and understandable - a trade secret. However, would argue that there is no significant difference between the life expectancy of the investor at any financial market (FOREX, stocks, futures, etc.) and the ability to earn or lose money. There can be! Naturally, provided that you are dealing with an honest company and not the "kitchen" dealing, establishing their own rules. There are no fundamental differences be easily explained. In financial markets you are trading risks and probabilities, rather than stocks, futures or currencies. The difference between the markets only in the rules of the game: the legal framework, methods of execution of transactions, margin collateral, the liquidity of the financial product.
What determines the success or failure?
Success or failure is determined by understanding the risks and regulations, the ability to use them. The risk of bankruptcy is always higher than the state. A much greater variety of external influences that may affect the value of shares. Accordingly, the risks of financial speculation in shares of companies is higher than in currency. Legal issues, however, worked better in the stock market. High volatility of currencies, for example, is not connected with the currency and terms of trade (leverage 1:100).
Success or failure is determined by financial speculation in the probabilistic risk assessment of certain financial instruments, trading conditions, performance trasaktsy and other operations and, of course, proper risk management during the reporting period. Mathematics, psychology and proper risk assessment determine the effectiveness of the trader, not a financial market in which it operates.
The main reasons for the "experts" from the stock market is not recommended to open an account on the FOREX, the following: the unreliability of keeping money in the account broker, broker quotes and the difference of the information system, a large spread (5-10 points), shoulder (1:100) and too small a number of financial instruments. These statements are quite controversial. The unreliability of keeping money in the account broker - more than a matter of dispute. Brokers operating in the U.S. stock and futures markets, hedge accounts of their clients. In the currency market - a similar situation. All major companies, Russian or Western, insure customers' accounts on its segregated account of the bankruptcy of any external causes. The only difference is who insures what insurance company? That she will get money.
From the risk of losing money as a result of financial transactions insures no ne. From bankruptcy is not insured by any clearing house or broker, working in various financial markets. Just as the problems with the payment of the insurance company - especially if it is somewhere very far away. Choosing a broker - is always a risk that must be considered when making decisions. For example, brokerage firms involved in proprietary-trading * bankrupt more often than others. The difference in the quotes of different information systems in the currency market appears quite often (the reason for the organizational structure of the market FOREX) and not more than a few points. There is no danger for you.
In all financial markets (currency, stock, futures) to increase its profits brokers use the delay in the execution of the order. That should be wary.
Next - the spread. What is important is not the spread, and its relation to the base. Let's calculate the spread on the Swiss franc at 5 points at the base value of 1.6873 percentage. Less than 0.003 per cent! For stock valued at $ 30 with a spread of 1 cent, this value is 10 times more. During strong motions increases the relative spread in all financial markets. It is difficult to assess where more. Do the math - and see for yourself. Margin requirements. Leverage 1:100. The higher the leverage, the greater the risk. It is an axiom. But only if you fail to comply with the rules of risk management. Violation is punishable by the same margin rules in all financial markets - the liquidation of positions. As for the number of financial instruments in the foreign exchange market, so it is not so little, given the exotic currencies and cross rates. Differ only by brokers: some are for these services, others do not. Operations in all financial markets can make money. The risks and potential rewards them comparable. Unless, of course, is not considered unlikely. Miracles, for example. Type: FOREX with the initial deposit of $ 1,000 or U.S. stock market - online or from $ 2,000 Day Trader with direct access to the $ 5,000-10,000. Or other, united by one idea - to make a penny out of a million. We, thus, gradually came to the next question.
Miracle System
There are wonderful systems that will safely and quickly become a millionaire. The fruit of labor or the labor collective genius, which - from noble motives, for a modest bribe, or even for free - you are willing to share. You believe that? I - no. Almost by Stanislavski - and I do not believe anything with can not do. The financial markets without a system is impossible. Therefore, all systems have the right to life, even the most improbable. No wonder only systems, universal money-making machines.
Any system under certain conditions and over time can bring you the money if it is based on mathematics, psychology and discipline. It does not matter on which it is based. On the old, time-tested, simple indicators, such as moving average, RSI, or some new indicators that show an unusually high number of regular points of entry or exit. The system can be established even in the office of weather reports or on the number encountered in the morning blondes or brunettes.
No action! Just wait ...
Let's create a system that will allow you to earn money. We need the statistics. Any - positive or negative - would be accurate. At least 300 observations for 3-5 months, depending on the financial market. The increase in the number of observations and duration of the test are welcome.
Define the first indicator, K1: the ratio of positive and negative transactions when using the system, for example, 0.4. This figure shows that four out of ten your prediction comes true. Not a very good result, but it is yours, and so you have to work with him. Fit any figure, only that it is accurate. Will it be 0.8 or 0.1 - now it does not matter.
Stop-loss is necessary, otherwise the losses may be irreversible. The choice of stop-loss will depend on how your trading (day-, swing or position trading) and the volatility of the financial instrument in the range of time. Stop-loss should not be too small, and is best expressed in monetary units. For example, $ 500. We add to this value, the average cost per trade (in terms of a transaction) fees, rent, equipment, etc. Now we have a second important factor - the loss factor K2. Suppose, in monetary terms, it is $ 550.
If you are trying to keep your operations on the financial markets were, at least, break even, then the profit, which should count when entering the market, can not be less than (550 x 0.6): 0.4 = $ 825.
A trading system is built. Check it out at the demo and if it works, go to the real score. Open positions and wait. Wait until executed stop-loss or profit. Or - or. No action! Just wait for order execution. On your side probability and expectation.
It must be remembered that conditions in financial markets are constantly changing, and any system can fail to give. Not scary. Must observe the following rule. Three failures in a row, and you come out of the market for at least 2-3 weeks to rest and review what happened. Repeated series of failures will require a new system. Experiment! In the financial markets is not easy to achieve stable results, but some are successful. When you create individual trading systems are very useful demos and demo accounts.
Attitude to foreign trade systems should be extremely cautious. In one company, which operates in the U.S. stock market, I saw a system based on fluctuations in volatility movements of the two stocks. The principle of the system was simple. Selected two stocks that have mutual influence on each other, and the graphic changes in prices within a certain range of time is the same (symmetric). With the help of the coefficient value of each share package equal. One sold, another is for sale.
It is used quite a lot of couples in which one and the same action in one case sold, and in another - for sale. It is easy to guess that by using such systems, many do not win and lose. If, of course, does not happen that something extraordinary - in fact you are operating a spread volatility.
The system is designed to generate transactions. The larger the transaction commits brokerage firm, the lower the cost of transactions and, consequently, higher profits by offering competitive commissions for retail traders. Market - it is the market What are these systems? And how it should relate to the investor?
Trading system - just a tool that can benefit and harm. In our case, it all depends on the origin of money. If they belong to the brokerage company, engaged in proprietary-trading, the company runs the risk of their own money, partly to reduce the fees of retail traders. The benefits of such activities is undeniable. We can only welcome the fact of the creation of such systems.
But things could be different. Simultaneous opening and closing of positions on the same stock can be solved in-house at a brokerage firm. Money may belong to the investor and management company referred to in the hope that they will work with professional traders appropriate license and expanded trade. Of course, no guarantees. Guarantees in the financial markets do not exist!
Imagine the expression of the investor who entrusted money to a company when he received a multimeter print perfect transaction, will not see expected returns and learns that his means of managing traders without a license. True, the big losses and profits will not.
Multimeter documented "hard work" a trader there, as well as assurances from the company that it has made everything possible. Everything is beautiful and decent, all rights reserved. Investor can not complain. Market - it is the market.
The company pleased: he borrowed other people's money. This leaves the investor - not a problem, there will be new. New in the search for Pinocchio in Wonderland never translated. As well as wishing to take advantage of their simplicity.
In considering any trading method, you must always remember what matters most - on the contrary interests. Investor interest - profit. Interest in the brokerage firm - the commission. Each side is trying to get better conditions, and is always a compromise. These are the rules of life, and so works all of the financial markets industry. Do not forget about it.
"Direct access to retail traders in the U.S. market - is a myth. I want you to have had no unpleasant surprises, and so you can make the right decisions "- these words belong to Don Bright (Don Bright), a professional trader, co-owner of Bright Trading (www.stocktrading.com) [1]. In the opinion of the authority's hard to disagree. He knows what he is talking. Retail investors do not have control over the execution of their orders. But there are many restrictions and prohibitions. The very fact that the differences in conditions and opportunities for trade between the professional (licensed) by traders and retail traders evidence in favor of this view.
'Conventional' opinions much more. It makes no sense to list them. More important to understand that financial markets can and should make money. You only need to make informed, thoughtful decisions. "Behold the root!". This classic phrase will help you choose the right solution on the market.
Footnotes: * Giving the private traders the means to increase firm's operations.
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