Many of us involved in the trading industry get invited to attend various trade shows. If you get the chance, if you're ever invited to an expo, then take a bit of time out as they're really worth attending, try not to turn the opportunity down.
Of particular interest is where the industry could be headed over the coming years; virtual reality trading headsets, AI, robots, intuitive trading platforms, some form of trading singularity, the development opportunities appear to be boundless and always right at the cutting edge of technology. The development of retail algorithmic trading, via picking up social media chatter and thereby making trading decisions based on a currency pair's direction due to global trader sentiment, was a development that caught this author's eye a few years back.
It wasn't that I'd suddenly been seduced by the technology, I simply experienced a moment of clarity, becoming aware of just how many of the best and brightest attached to our industry, were pushing back the boundaries of possibility. There's also an irony and paradox in trading FX; it's one of the industries that's enjoyed huge improvements through the technological advancement we've all enjoyed over the past decades. So many of the aspects of our personal life, which has embraced technological advancement, is directly used in trading. We need fibre optic broadband speeds, the ability to trade on the go through mobile devices, we can programme alerts to warn us (via SMS) of price levels, RSI island media keeps us constantly connected to our markets etc.
We trade using STP into ECNs, experience spreads as low as 0.1 pips, enjoy lightning fast fills, pay zero charges (other than small commissions). We can access experts (for free) on social media, we're delivered reports, blogs, updates, market snapshots, offered free coded strategies, experts will code your ideas to use on MetaTrader for relative buttons, I wondered if we'd reached the peak. How could we improve from here; spreads of 0.01 pips, fills measured in milliseconds as you've visualised the trade, some form of (legally) front-running the FX markets, through a form of universal consciousness?
Whilst at an expo, or if you ever get the chance, it's worth talking to those who've been involved in the trading sector of the finance industry for decades, specifically before the birth of what we now refer to as the "retail trading industry", pre-dating the mass appeal and universal access to the Internet.
As you discuss the recent past you'll get a fascinating aspect into just how the industry has evolved over the past decade, you also begin to wonder how it was possible to make any profit from the Forex market twenty - thirty years back. It's not just the fact that the "old timers" possess a deep well of information and experience and are a fountain of knowledge, they can often ground us, reminding us just how far the industry has travelled in a (relative) blink of an eye.
Imagine conducting all your business and orders over a landline phone, imagine paying a spread of 15 pips on cable (GBP/USD). Imagine paying horrendous commissions, substantial overnight costs, being (finally) advised by fax that your order had been filled, at what price and being put on hold when you wanted to finally close out the trade. It's fair to say that we all take many aspects of our trading life for granted, we often fail to see the huge opportunities presented to us, because they've become so familiar and so accessible to us.
For many of us, who've been around the financial trading sector for many years, we often raise an eyebrow when we hear of retail traders complaining over the odd random poor fill during the release of a high impact news event, or paying 0.5 spread on cable, or a tiny commission to execute a trade. Honestly, we've never had it so good as traders. There are tens of highly reputable, regulated FX brokers laying out a red carpet for you to trade, going that extra mile to offer you every conceivable comfort and opportunity to be successful.
So when you compare what we currently have, versus what some of us old timers and lifers had to contend with back in the day, if you're struggling to make a profit out of these markets at this time, then ask yourself why.
If you're not successful, it's not because of that one poor fill amongst the hundred trades you've taken this week. It's not because you're paying 0.4 as a spread on cable, versus 0.1 on the euro, it's not because your platform froze, these are incidental examples of the small price to do business in our business, the damage to your bottom line will be minimal as a consequence of some of the afore mentioned incidentals. No, if you're not profitable in an industry that's never been cheaper to trade in, never so accessible, never had so much help and technology driving it forward, then it's time to reflect on what's wrong with your strategy and seek out some methods to help you improve. Brokers, forums, fellow traders, there's a wealth of contacts out there who'll be glad to offer assistance.
Wednesday 27 February 2019
Thursday 14 February 2019
Your broker is not you enemy, you are the biggest barrier to your own potential success
"A person who blames others has not begun their lesson. A person who blames themselves has begun their lesson. A person who blames no one has finished their lesson."
Blame is a fascinating concept, it's best described as a feeling or a belief that someone, or something is responsible for a fault or wrong. There's a tendency when we're losing at trading, for us to quickly apportion blame, rather than introspectively analyse our trading plan and methods.
We'll blame the markets, perhaps insisting that "they're rigged". We'll blame the platform we use, "it's too slow, too clunky, the fills are inaccurate". We'll ultimately blame our broker, "the spreads are too wide, the commissions too high, the service is poor". Generally, at the very back of the blame queue, is any admission that our own poor performance is leading to avoidable mistakes. One of the first challenges we face, on the journey to becoming a fully developed trader, is taking control of our trading, by taking ownership of our mistakes and decisions.
Before we deal with the "everyone is against me" claims, it's worth applying some logic and percentages to the claims, by using some basic industry averages. The average spread being quoted, on a EUR/USD trade with an STP/ECN broker, is currently less than one pip. Slippage only occurs on a small percentage of trades and some slippage can be positive; you are just as likely to experience positive slippage as negative. Therefore, when measured over a significant sample of trades, slippage is neutralised. Moreover, if you employ a broker who uses straight through processing, into an electronic configured network, then you couldn't possibly find a more efficient and equitable method to trade the FX markets.
Taking all the afore mentioned factors into consideration, what reasonable assumption could we reach to determine the effects on our trading? Could the various inconsistencies and variables cause us a 2% annual reduction in our overall profitability? Is that an acceptable price of doing business in our FX trading business? If we do calculate that the reduction in our bottom line is limited to such a small figure, then we must be honest with ourselves; it's not enough of a dent in our profit margin to significantly alter the ambitions and objectives we originally set for ourselves. Further, with some diligence, investigation and application, we could reduce our 'profitability impact' to perhaps one percent, a statistically negligible sum.
The market is not rigged, no single body, or entity can possibly exercise control over the FX market, with its estimated turnover of circa $4.3 trillion each trading day. As for the other issues we've listed, there are some simple steps which individual traders can take, in order to ensure they're trading in the fairest, most transparent and ethical methods available.
Firstly, only trade FX through an STP/ECN broker. In that way you're trading in as professional a manner as a retail trader possibly could. You're accessing a liquid pool of live quotes delivered by institutional level participants. The trading is transparent and in effect anonymous. STP/ECN brokers are on your side, they charge an extremely small levy for each trade made. They don't trade against you, they want you to win. Their long term success is dependent on traders such as you, staying with them as loyal and successful clients.
Secondly, use a platform that's been thoroughly tested, through rigorous and testing market conditions over many years. Use a platform that you can adapt to your preferences, a platform on which you can set all your personal trading parameters. One where you can perhaps create an expert advisor, to automatically enter and exit the market on your behalf.
Applying these two conditions to your trading; STP/ECN whilst utilising a state of the art platform, ensures that blame, in terms of inefficiencies, is reduced to the statistically negligible issue previously mentioned. Once blame and suspicion is eradicated, we can concentrate on the real issues that may be holding our trading back and your broker will be only too delighted to speak to you on that very subject.
Blame is a fascinating concept, it's best described as a feeling or a belief that someone, or something is responsible for a fault or wrong. There's a tendency when we're losing at trading, for us to quickly apportion blame, rather than introspectively analyse our trading plan and methods.
We'll blame the markets, perhaps insisting that "they're rigged". We'll blame the platform we use, "it's too slow, too clunky, the fills are inaccurate". We'll ultimately blame our broker, "the spreads are too wide, the commissions too high, the service is poor". Generally, at the very back of the blame queue, is any admission that our own poor performance is leading to avoidable mistakes. One of the first challenges we face, on the journey to becoming a fully developed trader, is taking control of our trading, by taking ownership of our mistakes and decisions.
Before we deal with the "everyone is against me" claims, it's worth applying some logic and percentages to the claims, by using some basic industry averages. The average spread being quoted, on a EUR/USD trade with an STP/ECN broker, is currently less than one pip. Slippage only occurs on a small percentage of trades and some slippage can be positive; you are just as likely to experience positive slippage as negative. Therefore, when measured over a significant sample of trades, slippage is neutralised. Moreover, if you employ a broker who uses straight through processing, into an electronic configured network, then you couldn't possibly find a more efficient and equitable method to trade the FX markets.
Taking all the afore mentioned factors into consideration, what reasonable assumption could we reach to determine the effects on our trading? Could the various inconsistencies and variables cause us a 2% annual reduction in our overall profitability? Is that an acceptable price of doing business in our FX trading business? If we do calculate that the reduction in our bottom line is limited to such a small figure, then we must be honest with ourselves; it's not enough of a dent in our profit margin to significantly alter the ambitions and objectives we originally set for ourselves. Further, with some diligence, investigation and application, we could reduce our 'profitability impact' to perhaps one percent, a statistically negligible sum.
The market is not rigged, no single body, or entity can possibly exercise control over the FX market, with its estimated turnover of circa $4.3 trillion each trading day. As for the other issues we've listed, there are some simple steps which individual traders can take, in order to ensure they're trading in the fairest, most transparent and ethical methods available.
Firstly, only trade FX through an STP/ECN broker. In that way you're trading in as professional a manner as a retail trader possibly could. You're accessing a liquid pool of live quotes delivered by institutional level participants. The trading is transparent and in effect anonymous. STP/ECN brokers are on your side, they charge an extremely small levy for each trade made. They don't trade against you, they want you to win. Their long term success is dependent on traders such as you, staying with them as loyal and successful clients.
Secondly, use a platform that's been thoroughly tested, through rigorous and testing market conditions over many years. Use a platform that you can adapt to your preferences, a platform on which you can set all your personal trading parameters. One where you can perhaps create an expert advisor, to automatically enter and exit the market on your behalf.
Applying these two conditions to your trading; STP/ECN whilst utilising a state of the art platform, ensures that blame, in terms of inefficiencies, is reduced to the statistically negligible issue previously mentioned. Once blame and suspicion is eradicated, we can concentrate on the real issues that may be holding our trading back and your broker will be only too delighted to speak to you on that very subject.
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