theforexwriter’s Weblog

I’ve spent some time recently looking at forex trading schemes, those “systems” that are advertised online where you spend some outrageous amount of money for a set of DVDs, CDs, books, software, whatever. I’m not going to name names here (my one well-meant attempt at whistleblowing proved disastrous), but what I’ve seen infuriated me. Let’s go through some of these claims.

“Make insane profits!” Yes, it’s possible to make large amounts of profit through forex trading. But it’s not easy. Statistics show that more than 90% of novice forex traders lose all of their investment account within three to six months. These people generally decide the forex market is not for them, and they leave never to return. Of those remaining, about half (5% of the original number) do fairly well, 4% earn a decent living, and only 1% make it really big.

“It’s fully automated!” Forex trading is an art, not a science, and has more in common with a jury deciding a court case than a database analyst crunching numbers. The most successful forex traders examine all of the information available—technical indicators, fundamental announcements, experts’ forecasts, market expectations, and so on—and enter the market based upon their judgment of where the preponderance of the evidence seems to be pointing. Systems that look only at a set of technical indicators and enter a trade whenever its preferred set of variables has been met is no more scientific than a monkey flipping a coin. As an example, such a system would have been creamed today on EUR/USD and USD/CHF following the FOMC announcement.

“Over 90% winning trades!” Yes, it’s possible for a trader to call it right over 90% of the time—after some intensive study, enough paper-trading to feel comfortable with his or her system, and acquiring some knowledge as to what moves the market. None of that is going to happen overnight and claims of achieving success with ten minutes a day are preposterous.

Testimonials at any time are extremely suspect and online ones are the most questionable. I write freelance, and I’ve seen help-wanted ads looking for writers to compose testimonials—for pay. As my husband pointed out in the midst of my ranting, anyone can rent an expensive car, drive to a showy part of town, park the sucker, and take a photo. It means nothing. For the salesman, it’s an investment and can be written off on his or her taxes.

Yesterday I saw an example of the “live trades” profits earned by one forex trading system. While looking at this supposedly unbroken string of winning trades, I realized from the layout of the data that this system was based upon an excellent trading platform called MetaTrader 4; the layout was unmistakable, in particular the pink and green highlighting applied to some of the trades. Therein lay the problem—with MetaTrader, pink highlighting means a losing trade!

My blood boiled as I realized that some clever graphic artist had removed the negative signs from in front of those pink-highlighted figures and altered the total profit at the bottom of the column, to disguise the fact that half of those trades had lost money rather than earned it. This is lying, and no matter what potential that firm’s trading system otherwise holds, that one action moves their product to the scam category.

I personally use MetaTrader through the brokerage CompassFX. As I stated earlier, it’s an excellent charting service and trading platform, versatile, easy to use, and best of all, free for the downloading. It will not tell you when to place a trade (or not), and I believe it has no connection with the aforementioned scam other than being the software used to concoct it. That’s like using Open Office or Word Perfect to compose a fraudulent sales letter; it doesn’t harm the software used, only the reputation of the scam artist perpetuating the deceit.

Think of learning forex trading in the same way you’d consider learning any other career field. You wouldn’t expect to become a high-priced surgeon without undertaking some study, would you? Anyone who tells you that a) you don’t have to work hard, b) you don’t have to study, c) you can do it in minutes a day, d) you’ll never lose, well, they’re lying to you. Don’t give them your money; you worked too hard to get it to throw it away on such liars.

If you’re not serious about putting hard time and effort into forex trading, again, save your money. Don’t even open an account. You’ll be one of those 90% who are out on the street, violating the decency ordinances by strolling around without a shirt.

If you’re serious about learning forex and are willing to study and work, with the long-term goal of either supplementing your income or replacing your day job, here are a few suggestions.

Sign up for Dean Malone’s Synergy method. His basic program is free, it has a ton of potential, and he supplements his course materials with free videos where he discusses the ins and outs of the forex trading market.

This is the 5EMAs trading system. It’s not free and it’s not as easy as the sales materials claim, but it’s a balanced system and it’s honest. Note that, when you click on the link to see someone’s live trading balance sheet, it shows some negative figures along with the positive ones. That’s reality.

Remember:

• Have a strategy.
• Plan your trade.
• Trade your plan.
• There’s no such thing as always.

Happy and safe trades to you.