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An Introduction to Forex Daytrading

Hey guys, Kyle here. You may remember a site a few years ago called “The Proper Villains”–a project that ultimately failed, which I was a part of. This upcoming series of posts was a series on daytrading—and no, I am not the author. Personally, I think trading is a very high risk deal. After seeing a few people stumble at it the last few years, I’m more hesitant than ever to try and would highly encourage you to not put all your eggs in that basket. With that being said, this series is excellent as far as the TECHNICAL aspect of trading, so I’m going to see how it goes. There are 11 pieces of content for this series, two of which are merged below. Depending on the response to this and the upcoming pieces will determine if all 11 are posted.

A man should always be the master of his own fate, and avoid at all costs having to be dependent on anyone else to put the bread on the table, or the loot in the safe.

In today’s corporate world, too many find themselves as office drones, shackled to their cubicle, emasculating themselves to draconian HR policies, incompetent bosses, and ungodly working hours. All that potential going to waste, your best productive efforts merely serving to enrich some faceless CEO at the top of the ladder.

When considering a means to gain one’s financial independence, the following factors need to be considered:

  • Size of revenue able to be generated
  • Ability to work independent of location
  • Ability to set one’s own working hours
  • Cost/barrier of entry
  • Amount of work required to sustain revenue

There are a wide variety of means to secure your financial independence. But in this villain’s humble opinion, none can hold a candle to spot trading the Forex markets in terms of satisfying the above criteria.

  • Size of revenue able to be generated: potentially unlimited. Easily well into the $10s of millions before serious complications with order execution may occur
  • Ability to work independent of location: all that is required is an internet connection
  • Ability to set one’s own working hours: between the 4 trading centres of London, New York, Tokyo and Sydney, the Forex markets operate 24 hours a day, 5 days a week. You can work as much or as little as you want
  • Cost/barrier of entry: you can practise on a demo account with virtual cash for as long as you like, and when you decide to risk your real dough, you can get started with as little as a couple of hundred bucks.

There is one caveat though – you’re going to need to dedicate a lot of time to studying, and be prepared to put 1000s of hours of chart time in. Nothing this potentially rewarding is going to come easy
– amount of work required to sustain revenue: once you’ve got through the initial pain barrier of becoming competent, very little. You can get up, put on a single trade which adds 20% to your account in 30 minutes, and then take the rest of the day off

In upcoming articles, I will attempt to break down how best to get into Forex trading, why I consider it to be the a better alternative than stocks, which type of trading is most profitable, money management strategies, and hopefully how to take several years off your learning curve by passing on some of the knowledge I’ve accumulated over the last 12 months.

Remember – this won’t be easy. Over 95% of those who try, lose their money and give up. But the rewards are vast. Adding 10% to your account daily can compound $1000 into $2mil in the space of 80 days.

WHY FOREX?

there are many ways one can trade. You can buy and sell shares, trade options, speculate on indexes and commodities, and engage in spot trading on the foreign exchange markets, to name a few.

This criminal mastermind strongly considers the most optimal method to be spot trading on the foreign exchange markets, or Forex as they more commonly known.

Why?

First of all, there are two main methods of analysis when it comes to trading, namely fundamental and technical.

Fundamental analysis involves looking at and attempting to weigh up underlying economic data – revenues, profits, debt and the suchlike – before trying to come to an “informed” decision as to whether you think something will rise of fall. Technical analysis on the other hand ignores all of this, and focuses decision making squarely on the analysis of patterns on a chart. Forex trading strongly lends itself to technical analysis.

Why should you prefer technical analysis? It’s massively less time consuming for one. With experience, you can look at a chart and make a snap decision in seconds about what direction you think something is headed, and where it might turn from, without having to sit down and spend hours poring over tedious balance sheets.

Secondly, in these days of algorithmic trading and millisecond execution times, it’s flat out impossible to analyse and react to an economic announcement after it has happened. There was once a time, before the mass computerisation of trading, that you could get a copy of a country’s GDP report as it was released, read and assimilate it, and then place a trade and ride the move up or down. That time is gone. Now, price can spike up or down enormously less than a thousandth of a second after the news comes out. And more often than not, these news reports are leaked in advance to the insider crowd, and the move has already been “priced in” to the market, leaving you wondering why the price suddenly shot off in entirely the opposite direction than the data would indicate.

Trying to predict the future in the markets is a mugs game. The smart money lies with analysing a chart, finding possible turning points in advance, and then watching and waiting before making an informed decision on a trade.

I started off trading stocks before finding his way over to the Forex markets, and learned the hard way that there are a hell of a lot of different factors entirely out of your control that can wipe out your perfectly good trade in those arenas. Another company in the same sector as yours posts bad results, even though the company you went long on is doing fine? Adios profits. Midway through your trading day, some buffoon in a cheap suit at Goldman Sachs decides that your company is overvalued, and releases a “broker downgrade”? Say hello to Mr Loss.

Forex by way of comparison is almost sedate. The only things which really cause strong surges in price are economic announcements (GDP figures, jobless data, consumer price index to name a few), and there are numerous online calendars available telling you when all of these events are set to occur, meaning you can stay clear well. Or if you’re feeling particularly brave or foolhardy, take up a speculative position in advance.

In addition, Forex trading requires almost no capital in order to get started. A few hundred bucks is all you need. As opposed to buying and selling stocks where you’re directly purchasing the underlying share and therefore require a decent sum of cash in order to realise significant profits, in Forex trading through a concept known as leverage, you’re able to massively magnify the purchasing power of your cash, and gain access to profits that would normally requires hundreds of times more capital than you have. “And losses too, presumably?” I hear you say. Yes indeed, but that’s why we use sensible money management strategies to protect our hard-earned, ill-gotten gains, which I will come to in a later article.

As a final plus point, with many Forex brokers there are almost no overheads to placing your trade, apart from a small commission fee. Spreads (the difference between the price you can buy at and the price you can sell at) are as small as 0.0 on some types of broker.

But that’s enough for today. We’ll cover all this in more detail in an upcoming article.

What do you think of the concepts of daytrading? Is it possible to win without losing it all? Let me know what you think in the concepts below.

-Kyle

PS: Personally…I think a better option is to build websites, but I’ll admit—that’s nowhere near as sexy.

  • January 14, 2017
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