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The Foreign Exchange Market: How To Be Poor In 90% Of Cases In 5 Minutes?

«Rich by trading in the Forex birds techniques Get our patients. It is very simple and accessible to all, 24h / 24 from your living room!» With many trading platforms that have been developed in recent years, anyone can now become a real operator «like in the movies» in the foreign exchange market (Forex) and earn a lot of money very Hmm ... just smells scam all this a bit, right? Simply start with the development of other before.

The Foreign Exchange Market

The Foreign Exchange Market fotoForex or foreign exchange market is the market where currencies are exchanged, for example, the euro or the dollar. Becoming an «operator» of the currency, therefore, it is to «bet» or «speculate» on such an increase in the euro against the dollar. If the euro appreciates (against the dollar), you win; if the euro depreciates (against the dollar) is lost. Simple right? The value of this market is that it is open 24/24 and a significant multiplier effect, can be used. The effects of what? Leverage can multiply your winnings when the positive movement (for example, if the euro is to 1 EUR = $ 1.25 to 1 euro = $ 1.26 instead of earning $ 0.01, if you have a leverage of 10, you will earn $ 0.10, obviously, the leverage works up, but down. their profits and losses are multiplied by a constant equal to the lever.

The currency market is still a market random

But behind this apparent simplicity (which rises won, and won much influence) actually, lies one of the most complex markets expected. In the short term, the currency market is still a market random (Meese and Rogoff, «empirical models of exchange of the seventies? Do they fit out of sample»), meaning in scientific terms less «is unpredictable change in the price of a currency „or“ a random strategy brings the same results mean that the ultra-complex strategy ie some abnormal returns zero. » If ever you do not believe this, I still ask yourself some questions:

(1) whether there was a winning strategy really, how can continue over time knowing that everyone should use it thus eliminating the abnormality (efficiency market),

(2) whether there was a winning strategy, which is able to develop faster or more precisely than a large bank with a merchant army and algorithm negotiation, and

(3) if a winning strategy was, a site that proposes the strategy for 50 euros when you could earn millions by implementing its own?

It is important to understand that the forex market is a zero sum game

This means that when you bet on the euro’s rise against the dollar while facing another person betting on the opposite effect, ie, a rise in the dollar against the euro. And as strangely the euro can not fall and get up at the same time well when there is a winner there is a loser in the face. Knowing that we must also pay a fee and a spread (the difference between the selling price and the offer price, the famous spread) negative sum game, then becomes the Forex. Note, as in all games, even negative-sum, there will always be winners and losers. Surely you have the brother of his mother’s cousin who has won Euro 5000 last month betting on the currency. But behind the brother of his mother’s cousin, how many people have lost money in Forex? What is the average gains and losses in this market? Managing the positive bias inherent in the fact that a victory speaks to everyone in your beautiful story, while all losers will be silent?

Foreign Currency Exchange foto

Forex is like poker: A negative-sum game

In poker, when money is won, another loss, and the percentage of casino commission (equivalent to the finance committee spread +) than the sum total of winners is below the earnings Total number of losers profits. If you do not know much about poker, Are you going to join a tournament against the best players in the world (merchants bank Army) with access to technology (some negotiation) «slightly» more efficient 56K modem? Do not! Well, in this case, ditto, do not go to the currency.

«But Captain ‘, this is all theory, me my negotiating tactics work too well!». The AMF published in October 2014 a «study of the results of individual investors in trading CFDs and Forex in France,» based on a sample of 14,799 individual investors in CFD trading (derivative to speculate a bit of all market) and the currency in France for more than 4 years. And the conclusion of the AMF is clear: 9 of 10 individual investors lose out in these markets! Over 4 years, the average income was a loss of more than 10,000 euros per customer and the median income loss of 1843 euros. So yes, there have been winners: 14799 121 people earned more than 24,000 euros; but in the other direction, 722 guests had over 50,000 euros loss.

Another interesting finding in the study of the AMF’s an investor carries out transactions through their loss is high! This is quite logical, because the transaction fees / commissions / supply and demand and confirms the results of many academic studies of individual investors (overconfidence «ok this is a negative-sum game, but as I’m better than others, I will »- see the work of Barber & Odéon, for example) and the negative relationship between the turnover rate and the performance of the portfolio (read about the excellent" trade is dangerous to your wealth: common Investment Performance individual Investors "Barber & Odéon, again)

"Individual investors holding ordinary shares Directly pay a tremendous performance penalty for active trade. Of 66,465 households with accounts at a wide discount broker in 1991 and 1996, which trade more earn an annual return of 11.4 percent while the market returns 17.9 percent. the average household earns year annual return of 16.4 percent, leans towards investment in ICT towards common shares high beta, small stocks, value, and becomes more than 75 percent of the portfolio of ICT annually. overconfidence can explain the commercial levels high and the result and the underperformance of investors individual. Our message is that the center trading is hazardous to your wealth.

Conclusion:

The Captain ‘apologizes to break his dream of becoming a merchant golden boy, but no change is not a miracle solution to get rich quick. If you really want to do anything with your money, you can send your donations to the Captain ‘which will make a good use. Still not convinced? I let you watch the video of the AMF, about scams currency (after I can no longer do anything for you ...).