When Forex trading goes wrong
Discussion
Horrible situation, but he basically declared he had extensive knowledge and experience. And he ignored all the "rules" everyone who does this type of trading knows.
At the risk of making myself look foolish, I now do quite a lot of options trading (not fx). I read a lot before starting and I set myself some hard trading rules. Rules designed to prevent me chasing losses, defining my risks etc etc.
When I started, it was all fine, it made money, and it was fun. Then one day, the market moved quickly against one of my put positions. I lost £10k in a few minutes. Then, going against all my pre-defined rules, I decided to chase my losses. And a £10k loss then turned into a margin-call and a resulting £35k loss. It all happened frighteningly quickly.
After I confessed to my wife what I plonker I was, I took a few days to calm down. I then re-read my trading rules. I thought I "knew" my rules, but re-reading them after that experience, they suddenly had a *lot* more impact.
This type of trading is like playing with nuclear power. Immensely powerful, but it can wipe you out. I also suspect everyone who does this type of trading has made all these kind of mistakes (being greedy by over-leveraging, using margin inappropriately, not properly defining risks, not sizing positions correctly, assuming you know more than the market etc etc).
At the risk of making myself look foolish, I now do quite a lot of options trading (not fx). I read a lot before starting and I set myself some hard trading rules. Rules designed to prevent me chasing losses, defining my risks etc etc.
When I started, it was all fine, it made money, and it was fun. Then one day, the market moved quickly against one of my put positions. I lost £10k in a few minutes. Then, going against all my pre-defined rules, I decided to chase my losses. And a £10k loss then turned into a margin-call and a resulting £35k loss. It all happened frighteningly quickly.
After I confessed to my wife what I plonker I was, I took a few days to calm down. I then re-read my trading rules. I thought I "knew" my rules, but re-reading them after that experience, they suddenly had a *lot* more impact.
This type of trading is like playing with nuclear power. Immensely powerful, but it can wipe you out. I also suspect everyone who does this type of trading has made all these kind of mistakes (being greedy by over-leveraging, using margin inappropriately, not properly defining risks, not sizing positions correctly, assuming you know more than the market etc etc).
Sheepshanks said:
Am I reading it right that he was up just under £200K on his first day?
Yeah, looks like he started with £39k. He used that as collateral to borrow money (via margin) from the broker. He then executed a trade using an insane amount of leverage and because of the currency movement it resulted in a £230k balance. Although I would add, sometimes those "NLVs" are not always accurate until the trade has fully settled, so that might not be actually real.Then the brokerage firm's risk department got very cold feet and thought they could be exposed to a huge loss, so they changed their margin rules (which has happened many times in many situations to many people before and is completely within their rules).
Then the £200k gain was lost, then he got a margin call for £30k. So actually he is "only" down £69k assuming there was nothing left after everything eventually was settled.
Sheepshanks said:
EddieSteadyGo said:
So actually he is "only" down £69k assuming there was nothing left after everything eventually was settled.
His "bets" must have been enormous. In which case he seems to have taken the loss (not nice, but I'm sure many have had worse) extremely badly.I don’t know the details but my partners brother has been using leveraged share positions for a long time.
Fairly wealthy.
About 6 months ago she got a text ( he lives abroad ) saying he had been wiped out and was one margin call from bankruptcy.
That seems to be where it stopped but he lost a large amount of money have been successful for a long time.
It is very very high risk
Fairly wealthy.
About 6 months ago she got a text ( he lives abroad ) saying he had been wiped out and was one margin call from bankruptcy.
That seems to be where it stopped but he lost a large amount of money have been successful for a long time.
It is very very high risk
I have been surprised to see, on trading platform internet adverts, a warning (roughly stating) '85% of our clients who have traded this product have lost money'.
Such a high percentage must surely deter people from getting involved, so I can only assume that the advertiser is required to publish that warning.
As Mr. Charlie Munger says, "Mix ignorance with leverage and you can expect an interesting outcome".
Jeremy-75qq8 said:
...
It is very very high risk
I'm being pedantic, but it doesn't have to be very high risk - plenty of people run low risk trading strategies, with defined risk and low leverage. But then any gains will be commensurately modest. But I agree there is certainly no way of getting high rewards without an associated level of risk.It is very very high risk
Jon39 said:
I have been surprised to see, on trading platform internet adverts, a warning (roughly stating) '85% of our clients who have traded this product have lost money'.
Such a high percentage must surely deter people from getting involved, so I can only assume that the advertiser is required to publish that warning.
As Mr. Charlie Munger says, "Mix ignorance with leverage and you can expect an interesting outcome".
The true risk with financial gambling is that punters dupe themselves into thinking it's not gambling but some kind of intellectual pursuit and as such believe their mega mind swings the odds in their favour. It does no such thing. They're really no different to the drunk who stumbles into Ladbrokes to piss the remainder of his benefits cheque away and they just move from trading system to trading system forever deluding themselves that the grifter flogging them the trade ideas is some kind of financial genius while refusing to accept the blatant reality that the geezer probably has less money than they do and hasn't a scooby about the markets.
Can you make money trading? Yes absolutely. Do most people? No. They rinse themselves out repeatedly and live in a sea of delusion until and adult gives them a slap.
Jon39 said:
I have been surprised to see, on trading platform internet adverts, a warning (roughly stating) '85% of our clients who have traded this product have lost money'.
Such a high percentage must surely deter people from getting involved, so I can only assume that the advertiser is required to publish that warning.
As Mr. Charlie Munger says, "Mix ignorance with leverage and you can expect an interesting outcome".
DonkeyApple said:
It's an FCA regulation. It's the percentage that have losses that month which is normally around 70% but the 30% that haven't lost that month will normally be in the 70% next month. The loss stats are no different to bookies and that's because pretty much all clients are just gambling not trading. Most clients are down by the time they stop. It's deep into the 90s as a wider percentage.
The true risk with financial gambling is that punters dupe themselves into thinking it's not gambling but some kind of intellectual pursuit and as such believe their mega mind swings the odds in their favour. It does no such thing. They're really no different to the drunk who stumbles into Ladbrokes to piss the remainder of his benefits cheque away and they just move from trading system to trading system forever deluding themselves that the grifter flogging them the trade ideas is some kind of financial genius while refusing to accept the blatant reality that the geezer probably has less money than they do and hasn't a scooby about the markets.
Can you make money trading? Yes absolutely. Do most people? No. They rinse themselves out repeatedly and live in a sea of delusion until and adult gives them a slap.
I don't want to appear rude, as I know this is your area of expertise, but I feel that is too simplistic. Yes, plenty of punters trade buying "lottos" hoping they are going to x100 their 'investment'. And they invariably fail. But if we take for example, selling puts and calls, usually to banks, who are acting on behalf of their more risk adverse clients, it is an equitable trade. The true risk with financial gambling is that punters dupe themselves into thinking it's not gambling but some kind of intellectual pursuit and as such believe their mega mind swings the odds in their favour. It does no such thing. They're really no different to the drunk who stumbles into Ladbrokes to piss the remainder of his benefits cheque away and they just move from trading system to trading system forever deluding themselves that the grifter flogging them the trade ideas is some kind of financial genius while refusing to accept the blatant reality that the geezer probably has less money than they do and hasn't a scooby about the markets.
Can you make money trading? Yes absolutely. Do most people? No. They rinse themselves out repeatedly and live in a sea of delusion until and adult gives them a slap.
They get protection against a market implosion. We get a decent return for taking the risky end of a s
tty stick. And if the net returns were worse than an index fund in something like the S&P500, no-one would sell an option.EddieSteadyGo said:
I don't want to appear rude, as I know this is your area of expertise, but I feel that is too simplistic. Yes, plenty of punters trade buying "lottos" hoping they are going to x100 their 'investment'. And they invariably fail. But if we take for example, selling puts and calls, usually to banks, who are acting on behalf of their more risk adverse clients, it is an equitable trade.
They get protection against a market implosion. We get a decent return for taking the risky end of a stty stick. And if the net returns were worse than an index fund in something like the S&P500, no-one would sell an option.
Is that trading or investing? They get protection against a market implosion. We get a decent return for taking the risky end of a s
tty stick. And if the net returns were worse than an index fund in something like the S&P500, no-one would sell an option.
Modern trading is using excessive leverage over an excessive number of trades which is actually just gambling.
Retail trading is incredibly simplistic in this regard, well over 90% lose because they aren't investing or trading but gambling. After 30 years of watching retail punter activity in leveraged instruments I'd say closer to 99% than 90%.
If you look at the monthly FCA loss reports the norm is a figure between 70-75%. It's incredibly consistent. But that isn't the percentage of people who lose with that broker but merely the percentage that month. The 30% who haven't lost that month are firstly mainly the new clients and clients but secondly not clients who are good traders just clients who haven't lost yet. Most of them will be in the 70% stat the following month or the month after.
Where that 70% is higher tends to highlight a broker who may be running wider spreads on fills, higher slippage or bringing in more clients via social media influencers. 80% would indicate a much higher burn out rate which would require a more more social media marketing than other firms.
mwstewart said:
Placing emotional control and a lack of experience to one side;with respect to trading "retail" are on an automatic losing streak due to information 'lag'.
While that's present I'd argue that it isn't actually that relevant. The reason retail punters lose is because they take on too much risk and do too many trades. You could sit them at the fastest execution and information scenario known to man and they will still lose because they will trade too big, too often and on things they've decided they want to know nothing about other than the key buzzwords to sound awesome on social media when they take a losing trade and post on social media how it was a winning trade. DonkeyApple said:
Is that trading or investing?
Modern trading is using excessive leverage over an excessive number of trades which is actually just gambling.
Retail trading is incredibly simplistic in this regard, well over 90% lose because they aren't investing or trading but gambling. After 30 years of watching retail punter activity in leveraged instruments I'd say closer to 99% than 90%.
If you look at the monthly FCA loss reports the norm is a figure between 70-75%. It's incredibly consistent. But that isn't the percentage of people who lose with that broker but merely the percentage that month. The 30% who haven't lost that month are firstly mainly the new clients and clients but secondly not clients who are good traders just clients who haven't lost yet. Most of them will be in the 70% stat the following month or the month after.
Where that 70% is higher tends to highlight a broker who may be running wider spreads on fills, higher slippage or bringing in more clients via social media influencers. 80% would indicate a much higher burn out rate which would require a more more social media marketing than other firms.
The other key point is that there is much focus on tech by funds/institutional traders, even to the extent of considering connection latency. Modern trading is using excessive leverage over an excessive number of trades which is actually just gambling.
Retail trading is incredibly simplistic in this regard, well over 90% lose because they aren't investing or trading but gambling. After 30 years of watching retail punter activity in leveraged instruments I'd say closer to 99% than 90%.
If you look at the monthly FCA loss reports the norm is a figure between 70-75%. It's incredibly consistent. But that isn't the percentage of people who lose with that broker but merely the percentage that month. The 30% who haven't lost that month are firstly mainly the new clients and clients but secondly not clients who are good traders just clients who haven't lost yet. Most of them will be in the 70% stat the following month or the month after.
Where that 70% is higher tends to highlight a broker who may be running wider spreads on fills, higher slippage or bringing in more clients via social media influencers. 80% would indicate a much higher burn out rate which would require a more more social media marketing than other firms.
Generally speaking, a retail trader thinking they’ve spotted an arb probably hasn’t…they’re just too far behind where the actual markets are and don’t have the reaction speed.
That the guy in the article self-certified a significant level of expertise combined with such a small number of annual trades tells you just how willing brokers are to take mugs in. In fact the guy effectively declared himself to be one…
Gassing Station | Finance | Top of Page | What's New | My Stuff