Explosive Growth… Easy Access… But Elusive Profits for all but Smart Money....
Recently, The Wall Street Journal reported “Banks like Morgan Stanley and Bank of America Merrill Lynch are ramping up their foreign exchange operations… to cash in on a boom in currency trading.”
BUT, are the above Smart Money as many claim and should you be following them? The straight answer is a resounding NO!!!
The FOREX market ranks as the largest and with certainty the fastest growing market in the world. According to the Bank for International Settlements, roughly $4 trillion changes hands every day. That represents a 20% increase in just three years. The FOREX market is also open 24 hours a day, five days a week, creating huge liquidity and opportunity. Access to the FOREX markets has become ubiquitous, thanks to the emergence of on-line FOREX brokers like FXCM (NYSE: FXCM) and GAIN Capital (NYSE: GCAP).
In fact, all it takes now is a credit card and as little as $200 to open a FOREX account. Such an “all are welcome” approach has led to a big boom in retail speculation. For almost a decade, retail FOREX trading activity has increased by an average of 37% per year since 2001, according to the industry sources. These FOREX retail traders now wager in excess of $250 billion in the FOREX market every day.
So WHO are the FOREX Retail Traders?
Contrary to popular opinion FOREX retail traders are not just Joe Public, but include large institutions, minor banks, hedge funds, mutual funds, pension funds and large corporates, as well as Joe Public. Yes, these aforementioned organisations like to call themselves Smart Money, they are NOT. Extensive studies for instance, show that 75% of mutual fund managers consider themselves to be “above average.” YET, 75% of those “above average” managers still fail to outperform the S&P 500 in any given year, which can hardly be considered smart.
So WHAT is FOREX Smart Money?
Smart Money as we at FOREX SM define it is limited to around 10 organisations, banks in fact, that move up to 80% of the daily FOREX market volumes and are able to operate in the FOREX market 24 hours over 5 days per week through their globally dispersed FOREX trading arms, thereby ACTUALLY controlling the FOREX markets. Since the 2008 crash you have seen the reports about corruption, market manipulation, fraud at the highest levels across the largest players in the banking sector, resulting in fines totalling billions of US Dollars across the western hemisphere. These fines are mere petty cash compared to the trillions of US Dollars they scoop out of the markets annually.
The FOREX industry is the biggest decentralised industry in the world, the 10 largest banks, being the worldwide largest financial institutions, would never let such a HUGE market simply dilly dally along driven by retail traders, only a naive FOREX newbie will believe that. The banks in question drive the price action day to day, week by week, in precisely the direction they want to drive it and precisely when the want to move the price.
But don't Governments, Central Banks, the Economies of the world drive the FOREX market?
Yes of course these have an impact upon the value of any currency compared to another. BUT, it is Smart Money that defines WHEN the price moves, HOW it moves and HOW FAR it moves at any given time.
But my FOREX Broker is Independent and Looks After my Interests?
Errrrrrrr, NO!!!. As a Joe Public FOREX retail trader your broker is simply your access to the market data. In most cases the brokers do not even submit your FOREX trades to the exchange, they KNOW that 95% of Joe Public FOREX traders, will lose their entire account within days, weeks or at best a few months. The FOREX brokers make most of their money from Joe Public by simply pocketing their losses.
Consider that the two largest retail FOREX brokers, FXCM and GAIN Capital rely almost entirely on retail investors to turn a profit. At the end of last year, they accounted for 88% of FXCM’s total revenue and 77.1% of GAIN’s trading volume. And sure enough, as three out of four investors lost money, FXCM’s income before taxes has increased an average of 43.5% per year since 2001. And GAIN Capital’s net income has increased by an average of 35.9% per year since 2005. Bottom line:
FOREX trading is growing by leaps and bounds. But the profits for Joe Public and other FOREX retail traders are not increasing in line with the growth experienced by Smart Money and the brokers.
But the FOREX Indicators, Trading Systems and Advisers will Help Me Beat the FOREX Market?
Again, NO!!!. There are thousands of Indicator Suppliers, Trading System Suppliers, FOREX Advisers & FOREX Trading Educators, that do nothing more than help you lose your account. The entire FOREX industry is designed to relieve Joe Public and other FOREX retail traders of their hard earned income. Why would a broker give you free access to a trading platform such as MT4 and other such software that costs millions to develop, maintain, licence and operate???? Why do they advise you to use this or that indicator, follow such and such adviser, all under the guise of portraying themselves as your trustworthy FOREX brokerage??? Simply to get access to your funds. They supply trading accounts, the tools, the expertise and education, all designed to relieve you of the funds in your account.
No matter how smart you think you are, the odds are stacked against you when it comes to trading currencies. In fact, the only bottom line guaranteed to get a boost from trading foreign currencies, unless you TRADE WITH THE SMART MONEY, is that of Smart Money and your broker’s.
Then I Should NOT even Consider Trading FOREX?
Yes you should, BUT not using the over hyped, useless indicators, expensive and worthless systems and certainly NOT by paying for advice.
Learn to TRADE WITH THE SMART MONEY, take advantage of the fact that the FOREX markets are manipulated day in day out by Smart Money and the fact that manipulation leaves a trace in the FOREX charts. The relatively small number of Joe Public FOREX retail traders that KNOW what to look for, are able to turn a healthy profit.
Follow FOREX SM, a Website Set Up by Genuine FOREX Retail Traders, to Help Retail Traders Trade with The SMART MONEY.
We are in the process of setting up a dedicated members area through which FOREX newbie traders will be able to access like minded individuals who have learnt the hard way that the odds of turning a profit trading FOREX are massively stacked against you UNLESS YOU HAVE AN EDGE.
Founder Forex SM