Did you know that on average 80% of retail traders lose money when trading Forex?
But, if you've been following my blog, you realized by now that I make my income from trading Forex, and to be specific from trading EURUSD only. This is the only product I trade and live from, which is quite counter intuitive, how is it possible to trade only one product with all it's ups and downs and live from it? In this post, I will explain exactly how I make a living from trading Forex and which traps to avoid.
Still, even that it worked for me and the setup is quite simple, there's no guarantee it will work for you the reader. We are all in a different situations in life, with more or less to risk, knowledge and so on. But still, I suggest to read this post to understand which traps are out there and which path you can follow to avoid losing your money.
But first, let's start with the typical pitfalls out there, unfortunately, in some of them I fell myself and lost money:
There are so many robots out there for sale. With insane back testing results and promises to for guaranteed returns of 100%+ per year. This is absolutely nonsense!!! No one with successful strategy which makes money will sell it to the public with retarded prices as done on the market. It is not realistic and you can forget about their ability to forecast what will come next and earn for you.
When I started trading 10 years ago, I fell into this trap and bought some robots from a merchant. I had no clue why the robot behaves as it behaves, how the risk management works and what are the trading triggers. The customer service was horrible, no matter how I tried reaching the team who sold the robot, I got no response and complete ignorance. As soon as they got the money, it wasn't possible to get a reply within a reasonable time, horrible support!
Eventually, I lost quite a sum on this expert adviser, at least 10 times more than it cost to be specific. From that point onward, I never bought expert advisers and did it all myself from the following reasons:
Did you ever see this sort of promises online?
Following on the previous paragraph, this is nonsense! No one will provide you signals for free, no one will educate you for free and no one will make you money without return. If you want to make money, you need to invest time and money to make it happen, there is no free lunch. These are mostly fraudsters with no clue on trading, I followed some of their accounts and saw how they gets blown away from over leverage, with effective leverage of more than 1:20...
Some of them wants to get your mobile, to harass you with commercials or just adding you to some database, some of them will sell you dreams for nothing. It is normally a post which promises for free insane returns, spelling mistakes, request for your private number and so on. Don't let greed to influence your decision and just ignore these type of messages.
Working with non Direct Market Access broker is one of the most critical mistakes you can do. It's basically trading with a broker who has interest in you're losing your money!!! DMA broker means a broker which simply forward your orders to the markets using liquidity providers and taking a commission for that.
There are hundreds of brokers out there, choosing the right one based on conditions, regulations and geography is almost impossible, but having a broker which doesn't trades against you is the right starting point. Normally it is stated clearly in the website which type of broker is it, read the fine printing, the terms and conditions, it will cost you if you won't...
If a broker gives you a bonus for depositing with him, be sure that you will lose this money to him. Again, there is no free lunch. If you get money for free, it means the spreads are massive, the execution is retarded or the trading house is opening positions against you. Don't be tempted to get his 50$ or whatever amount you're offered only to discover it is gone together with your initial deposit...
The regulation is here to protect us, the traders. A thumb rule is NEVER trading with a non regulated broker!
Together with that, as part of the regulation, brokers must state how much % of their traders losing money with them. You may see it normally at the bottom of the screen, a statement which looks like:
"Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. XX.XX% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money."
Normally, this number should be 70-80%, if it is higher than, run away as fast as you can. If the numbers are high, something is dodgy and you don't want to be there with your hard earned money.
Now that we understand what are the pitfalls / traps out there, it's time to find a solution to all of that issues. Having so many risks and challenges was the main reason it took me so much time to find the right setup for me.
Starting with the main thing, finding a winning strategy. I realized that the main problem new traders have is greed. They come up with 1000, take insane leverage and hope to make millions out of it, which will never ever works, only in a rare cases and after years of successful trades, it might be possible. Instead, I focused on finding a conservative strategy which makes 0-2% a month, mostly close to 1%. That's how I come up with the Day Trading Strategy. An algorithm which opens one order maximum per day, 0.1% lot size of the equity and trading today's movement. If it makes money, it closes the same day, if not, it continues until a fine closure is achieved.
Together with this strategy, I wrote the more aggressive strategy, so called Volatility Trading Strategy. Strategy which is driven, as the name suggests, from the product's volatility. It is much more aggressive with returns up to 8% a month.
I ran them both on EURUSD, thus ensuring liquidity with narrow spreads. I didn't want to use any exotics or bizarre products with weird behavior. Rather the most familiar with the most information and tick data out there.
With the right strategies in hand, it was time to find the right broker. This was super challenging task with all the brokers out there. But I started narrowing down all of them by the following criteria:
After this tedious process was over, I had a winner, a broker called Darwinex. A regulated, DMA broker with an amazing support team and cutting edge technology. They introduced the concept of DARWIN, an instrument which encapsulates trading strategies and open it up for investors. So not only I make money with my own equity, I also get performance fees from the interested investors.
On top of that, Darwinex offers for investors an investor account with up to 4 times leverage on their equity, so not only you get to invest in successful strategies if you choose right, you also get to quadruple your profits. For example, assuming you invest 10k in a certain DARWIN which makes 20% a year, you'll actually make 410k20%=8k, not bad, right?!
Connecting all the dots together, I basically run my own algorithms, hosting them on Darwinex and getting performance fees from the investors:
I aim to make 2% per month combined from both strategies, so after 3 years with 125k initial investment times 4 leverage, I will reach my first million:
500k * (1+2%)^36 = 1M+ $.
The broker is completely transparent, there is an insurance up to 500k $ so the funds are safe, these are my strategies running so I have 100% confidence about their behavior so I can sleep good at night. And that's exactly I make money from trading Forex.
We all have financial goals we want to achieve, but seems that 80% of us have unrealistic ones.
It doesn't have to be like that. In this post, I wrote transparently how Forex trading works for me. The main take away is that there is no free lunch. It is your money and you must make smart decisions with it. Don't get tempted by empty promises and look for the most reliable way to invest it.
If you continue falling in the traps mentioned above, then next year, you will be exactly in the same state, reading this article and thinking what went wrong.
But, if you've been following my blog, you realized by now that I make my income from trading Forex, and to be specific from trading EURUSD only. This is the only product I trade and live from, which is quite counter intuitive, how is it possible to trade only one product with all it's ups and downs and live from it? In this post, I will explain exactly how I make a living from trading Forex and which traps to avoid.
Still, even that it worked for me and the setup is quite simple, there's no guarantee it will work for you the reader. We are all in a different situations in life, with more or less to risk, knowledge and so on. But still, I suggest to read this post to understand which traps are out there and which path you can follow to avoid losing your money.
The Traps
But first, let's start with the typical pitfalls out there, unfortunately, in some of them I fell myself and lost money:
Buying Expert Advisers / Trading Robots
There are so many robots out there for sale. With insane back testing results and promises to for guaranteed returns of 100%+ per year. This is absolutely nonsense!!! No one with successful strategy which makes money will sell it to the public with retarded prices as done on the market. It is not realistic and you can forget about their ability to forecast what will come next and earn for you.
When I started trading 10 years ago, I fell into this trap and bought some robots from a merchant. I had no clue why the robot behaves as it behaves, how the risk management works and what are the trading triggers. The customer service was horrible, no matter how I tried reaching the team who sold the robot, I got no response and complete ignorance. As soon as they got the money, it wasn't possible to get a reply within a reasonable time, horrible support!
Eventually, I lost quite a sum on this expert adviser, at least 10 times more than it cost to be specific. From that point onward, I never bought expert advisers and did it all myself from the following reasons:
- I wanted to have full control on the risk management
- I wanted to know exactly what triggers an order
- I wanted to know exactly how the expert adviser behaves when an exception happens
- I wanted to understand exactly the expert adviser behavior
- I didn't want to rely on anyone else
Empty Promises
Did you ever see this sort of promises online?
- "GET XXX PIPS EVERY MONTH WITH FREE!!! FOREX SIGNALS IT 100% ASK ME HOW?"
- "Who's new in trading and looking for a MENTOR? I'll teach you for FREE. NO SIGNALS, JUST YOU and THE CHART"
- Looking for reliable FREE FOREX SIGNAL to recover your all loses! Reply 'YES' you will get the telegram link
- "Stop paying for Forex signal .. join our VIP channel and get free Forex signals on a daily base ...COMMENT "yes" to be added."
- "XXX pips sure shot strategy 100% guaranteed only in YYY$ anyone need can send me msg"
Following on the previous paragraph, this is nonsense! No one will provide you signals for free, no one will educate you for free and no one will make you money without return. If you want to make money, you need to invest time and money to make it happen, there is no free lunch. These are mostly fraudsters with no clue on trading, I followed some of their accounts and saw how they gets blown away from over leverage, with effective leverage of more than 1:20...
Some of them wants to get your mobile, to harass you with commercials or just adding you to some database, some of them will sell you dreams for nothing. It is normally a post which promises for free insane returns, spelling mistakes, request for your private number and so on. Don't let greed to influence your decision and just ignore these type of messages.
NON-DMA Broker
Working with non Direct Market Access broker is one of the most critical mistakes you can do. It's basically trading with a broker who has interest in you're losing your money!!! DMA broker means a broker which simply forward your orders to the markets using liquidity providers and taking a commission for that.
There are hundreds of brokers out there, choosing the right one based on conditions, regulations and geography is almost impossible, but having a broker which doesn't trades against you is the right starting point. Normally it is stated clearly in the website which type of broker is it, read the fine printing, the terms and conditions, it will cost you if you won't...
Bonus Upon Signing Up
If a broker gives you a bonus for depositing with him, be sure that you will lose this money to him. Again, there is no free lunch. If you get money for free, it means the spreads are massive, the execution is retarded or the trading house is opening positions against you. Don't be tempted to get his 50$ or whatever amount you're offered only to discover it is gone together with your initial deposit...
Non Regulated Broker
The regulation is here to protect us, the traders. A thumb rule is NEVER trading with a non regulated broker!
Together with that, as part of the regulation, brokers must state how much % of their traders losing money with them. You may see it normally at the bottom of the screen, a statement which looks like:
"Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. XX.XX% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money."
Normally, this number should be 70-80%, if it is higher than, run away as fast as you can. If the numbers are high, something is dodgy and you don't want to be there with your hard earned money.
My Way
Finding the right Strategies
Now that we understand what are the pitfalls / traps out there, it's time to find a solution to all of that issues. Having so many risks and challenges was the main reason it took me so much time to find the right setup for me.
Starting with the main thing, finding a winning strategy. I realized that the main problem new traders have is greed. They come up with 1000, take insane leverage and hope to make millions out of it, which will never ever works, only in a rare cases and after years of successful trades, it might be possible. Instead, I focused on finding a conservative strategy which makes 0-2% a month, mostly close to 1%. That's how I come up with the Day Trading Strategy. An algorithm which opens one order maximum per day, 0.1% lot size of the equity and trading today's movement. If it makes money, it closes the same day, if not, it continues until a fine closure is achieved.
Together with this strategy, I wrote the more aggressive strategy, so called Volatility Trading Strategy. Strategy which is driven, as the name suggests, from the product's volatility. It is much more aggressive with returns up to 8% a month.
I ran them both on EURUSD, thus ensuring liquidity with narrow spreads. I didn't want to use any exotics or bizarre products with weird behavior. Rather the most familiar with the most information and tick data out there.
Finding the right Broker
With the right strategies in hand, it was time to find the right broker. This was super challenging task with all the brokers out there. But I started narrowing down all of them by the following criteria:
- Regulation - I filtered out all the non-regulated brokers, specifically, those which are not regulated by some European known one such as ESMA, FINMA etc.
- DMA - As mentioned above, I filtered out all the non-DMA brokers, meaning, I looked for those with strong liquidity providers and direct market access.
- Social trading - As I am confident with my strategies, I wanted to have the possibility to open them up for investors and receive fee from those copying it.
- Customer service - I reached out to the different brokers left and checked who is the most approachable team, who is nice and has 24/5 opening hours.
After this tedious process was over, I had a winner, a broker called Darwinex. A regulated, DMA broker with an amazing support team and cutting edge technology. They introduced the concept of DARWIN, an instrument which encapsulates trading strategies and open it up for investors. So not only I make money with my own equity, I also get performance fees from the interested investors.
On top of that, Darwinex offers for investors an investor account with up to 4 times leverage on their equity, so not only you get to invest in successful strategies if you choose right, you also get to quadruple your profits. For example, assuming you invest 10k in a certain DARWIN which makes 20% a year, you'll actually make 410k20%=8k, not bad, right?!
Putting it all together
Connecting all the dots together, I basically run my own algorithms, hosting them on Darwinex and getting performance fees from the investors:
- Day trading strategy - https://www.darwinex.com/darwin/ZEB.4.8/
- Volatility trading strategy - https://www.darwinex.com/darwin/GFA.4.21
I aim to make 2% per month combined from both strategies, so after 3 years with 125k initial investment times 4 leverage, I will reach my first million:
500k * (1+2%)^36 = 1M+ $.
The broker is completely transparent, there is an insurance up to 500k $ so the funds are safe, these are my strategies running so I have 100% confidence about their behavior so I can sleep good at night. And that's exactly I make money from trading Forex.
Conclusions
We all have financial goals we want to achieve, but seems that 80% of us have unrealistic ones.
It doesn't have to be like that. In this post, I wrote transparently how Forex trading works for me. The main take away is that there is no free lunch. It is your money and you must make smart decisions with it. Don't get tempted by empty promises and look for the most reliable way to invest it.If you continue falling in the traps mentioned above, then next year, you will be exactly in the same state, reading this article and thinking what went wrong.
- As usual, if you have any questions please don’t hesitate to contact me over sales@ilantree.com or +41 76 236 59 58.
- Please note, that starting October I launched my free signal providing available via Twitter at https://twitter.com/IlanTree or Telegram at https://t.me/IlanTreeGroup. With these possibilities, you get the signals but with a certain delay, if you want to get the signals at real time, you’d have to register and pay here – https://www.mql5.com/en/signals/450569.
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