Currency Trading

[mehuk]

First off let me say, I am out of my depth.... I know little and what I do know, is all I have read tonight.

Now that dosent mean this is a bad idea, but its something I want to test the waters with... that idea is to trade currency online, ive a small pot of cash available and although that pot will not all be ploughed in it means I can have some 'risk-free' fun (if you will).

So what id like to ask is:

1 - Are there any currency traders on here? Professional/Amateur.
2 - Would a pot of say £100 to start with be worth trading? I understand I wont turn into a billionaire overnight, but thats not what this is about.
3 - What are the downsides and upsides of doing this as a Amateur?

Any advice/tips would be good, ive done all the usual Online gambling gigs, matched, casino bagging, bingo bonuses... bla bla, but they burn out and are not sustainable. Currency trading is something id like to do casually/semi seriously for the long term, not to risk my family financial future but to have something to play around with and if a profit comes my way, then i can re-invest etc.

Ive waffled on a bit, but the general premise is there and im sure there are some good tips to get from here. I am also googling, reading and looking for book material at the same time, so im not being lazy expecting OCUKs finest to carry me, but just guide me

 

[clv101]

Bad idea in my opinion. Isn't the forex market just a zero-sum game? So anything one person gains, another loses, also transaction costs are subtracted from all traders so it's really a "negative-sum" game.

Do you have a better understanding of the market than the average trader? If not then you are likely to be on the wrong side of the zero-sum game.

 

[Kemik]

So what id like to ask is:

1 - Are there any currency traders on here? Professional/Amateur.
2 - Would a pot of say £100 to start with be worth trading? I understand I wont turn into a billionaire overnight, but thats not what this is about.
3 - What are the downsides and upsides of doing this as a Amateur?

I spreadbet the FTSE 250 so I'm not that knowledgeable about forex, however the general rule of thumb is that each bet should risk, at a max, 5% of your portfolio value. However, I'm not sure if this is the case with forex as there are less items to trade against.

Buy some decent books and read up. You'll need to invest in software too if you want decent data. £1,000 would be a much better basis to start on, even then you can't really get rid of much of the spread with those kind of bet sizes. Most trading companies have minimum stakes too (around 50p).

 

[Spit]

Mmm keep away IMO.

What is your edge? You mention gambling in your previous endeavours, the two don't mix. Are you disciplined?

I have been trading for 2 years and it's one of the hardest things you can do, even though it appears to be the easiest.

 

[dowie]

2 - Would a pot of say £100 to start with be worth trading? I understand I wont turn into a billionaire overnight, but thats not what this is about.

Probably not in terms of actually making any money - where's your edge?

The only places you can 'trade' with low amounts like that are essentially bucket shops* - you have to cross the spread in order to place an order, you're trading against your 'broker' who may well take action against you if you act in certain ways...

Have you though about how you're actually going to make money?

You can read all the books on funny chart patterns, risk management, psychology etc... its not much use if you've got no idea where you are going to make your money. What have you seen that you could exploit? What is your edge? etc...

If you're answer is 'I'm going to wait for this line to cross this line on my chart' because I read it somewhere in a book then you'll probably only make money by sheer luck and won't likely last in the long term....

*about 100 years ago people in America who weren't rich enough to deal with a proper broker could buy and sell shares via small brokerages known as 'bucket shops' - they'd place a buy order for x amount of shares but would only have to put down a portion of the money (the shops offered leverage) - only the orders were frequently never executed on the actual exchange - obv there was the possibility that a customer could make a large amount of money from very little outlay but what generally happened was that the slightest movement against the customer forces the position to close. Obviously most customers lost money. Retail FX and spread betting in the UK operates in a similar way, you don't need much cash to trade, they'll give you plenty of leverage, your orders aren't actually executed anywhere (rather you're trading against the house)...

 

[dowie]

You mention gambling in your previous endeavours, the two don't mix.

eh?

Of course they do, tis pretty much exactly the same skill set required to profit from either.

Whether you're trading or gambling you're essentially wagering money on an event with an uncertain outcome, you're taking on risk in return for profit. Its just different instruments/markets but the principle is still the same - find an edge and exploit it.