Price gaps? After hours trading? JR, I've read enough of your posts on bullmarkertboard to know you're a sensible guy. You and I are probably on same page the vast majority of the time when it come to economics and U.S. politics. However, this might be a case where it would behoove a person to have the humility to say, "I don't know." I've been trading forex for several years and there is plenty I still don't know. I'm not here to pick your statements apart or educate you on a topic about which you haven't asked me. However, you're comments on this subject (forex) seem to be coming from a place of outside perception rather then first hand experience. Would I be right? To answer the original question from the beginning of the thread about the leverage accompanying forex trading, it is just like other (non-financial) leverage. You can accomplish things efficiently with the right leverage. You can also hurt yourself badly with leverage. The most important factor is the person wielding the tool. If you're new to construction and you attempt to drive a nail all the way in with one swing of the hammer, you're likely to hit your thumb instead of drive the nail. If you've been doing it for years, you might have a pretty good sense of when to do that and when it might be better to use several smaller taps of the hammer to accomplish your goal. Yes, there is risk. Also a person can do pretty well. Sound money management becomes absolutely critical. Most people blow up their accounts within 90 days & presumably regret their "investment". If you're thinking of it as a get rich quick scheme or you gravitate toward gambling, you're my mark in the market. Just write me a check for half of what you planned to put into your account and move on. You'll still have half your money & it'll save me the trouble of taking it from you a little bit at a time. If, on the other hand, you view it as part a long term strategy, then know it'll take quite a bit of work and LOTS of patience. Your goal in the first year should probably be to not lose money. Don't get sucked into the intraday charts too quickly, if at all. Trade the smallest contract sizes that will keep your interest. Use stop losses and price targets. Don't take trades unless they have at least a 3:1 return to risk ratio - because you're going to be wrong more than you think and you'll get cocky when you're right. At a certain point though, you'll get a sense of how to use the leverage and start to see some opportunities others miss. From my own experience, leverage is a tool. Forex is a tough business.
This is all anyone needs to know, and is one of my main points. Regardless of what you're trading, if you're preaching frequent transactions, borrowing heavily, going to 100% cash at the end of the day, etc - any savvy, experienced investor will be a skeptic. As I said in a previous post in this thread, I don't really fool with forex trading. I will occasionally swap USD for another currency and use that currency to make investments - gold, oil, etc. I have never done "forex trading" per se, and never said I did. I did do day trading exclusively for a brief period many years ago - mainly stocks. By day trading, I am referring to buying and selling the same securities in the same day, and generally exiting out of all positions and going to cash at the end of the day. And generally doing more than one transaction during the course of a day - usually a number of transactions in more than one security. I learned quickly that I was missing out on big gains those GAPS provided when I didn't at least hold most positions overnight. An obvious example I will use is Apple. I first bought into it when it was in the upper 80's back in early '07, when the first I-phone presentation was made by Steve Jobs. I've had at least a small long position on it ever since, and have owned more of it at some times than others. It eventually got up above $900 (pre-spit dollar amount) a few months ago. During this time, Apple has often opened up significantly higher or lower (mostly higher) than it was the day before, usually due to earnings that were released the previous evening after market hours, or perhaps early that same morning before the market open. Example: Apple opens at $112.50 on the day it is to report earnings after the bell, more or less at the same price it closed at the day before. Perhaps sentiment is slightly skewed in favor of Apple beating earnings reports and forecasts, or perhaps it is a bit pessimistic due to China concerns or whatever. Let's say it closed relatively flat... Let's say they do very well on reports and forecasts for the near future, and report this a half hour after the market closes. The stock may shoot up 5, 8, 10% or whatever... let's say it rockets up from $113 30 minutes after the bell to $121 briefly that evening in the AFTER HOURS trading. It will likely eventually cool off as the evening progresses, and let's say in this example that it perhaps settles at $119.50 or so by the time after hours trading stops late in the evening. It will again be quite active the next morning in pre-market, and may jump up again, but may well sell off a bit as some profits are taken and perhaps a bit of short selling occurs here and there, as likely occurred the prior evening. Let's say in this example that the stock may open at say $118 or so, up some 5% from the previous close... That 5% GAP upward would be missed by a novice trader who had sold Apple before the bell at $112.50 the previous day. He would now be taking a big risk buying at ~ $118 at the open... He would have been much better off holding the position overnight. In fact, he would have been much better off holding at least some long position in the stock over many years, as long as the fundamentals have remained strong. Before you can convince me or any other experienced, savvy investor to even consider trying your system with a few of my bucks, or especially recommending it to anyone else, I'd need to see many years of a verifiable track record of high performance through all sorts of market conditions. Otherwise, sorry, it's just another hustle. A fool and his money are soon parted, and despite what you may try to convince others here you may want to buy your system, I ain't no fool. Been doing this 21 years, have built up a very nice nestegg with mostly sound fundamental investing and a few trades here and there with a few bucks. Been managing money for others for 11 years (~$100 mil AUM), have numerous securities licenses, etc, etc. I am a skeptic of anything resembling anything I have learned through experience to be unlikely to work. Solid fundamental investing has a very high probability of longterm success. Day trading does not, as even a simple google search will show the inexperienced novice.
You've never heard of "gaps" or "after hours trading"? What about "direct access systems" that allow one to bypass the middleman (broker dealer)? You do know that normal trading for most markets begins and ends at a certain regular time each day? And that some software allows you to trade outside of these hours? Anyone who googles "forex trading failure rate" will be bombarded by the number "95%". Not very good odds for success. A fool and his money...
Another very obvious example of a "gap" occurs when there is big trouble in not-so-little China overnight, and the Dow GAPS down 500-600 points or so from say the mid 16,000's to the low 16,000's to upper 15,000's... Or when an important monthly economic indicator is announced an hour before the market opens, and the Dow moves 100-200 points or so up or down in PREMARKET, and GAPS up or down at the open from where it closed the previous afternoon. What am I saying here that is incorrect?
