The new regulations the CFTC is looking to impose on the Forex industry in the US has been the center of attention in many Forex-related publications lately especially the leverage restriction which is in my mind the least of the issues this bill suggests and draws the attention to the wrong items.
So before I get to the main issues I want to say one thing about the leverage issue – I talk to a lot of traders and the professionals rarely leverage themselves more than 10:1 I have talked to a few very successful traders that use no leverage at all and still make very good money so this restriction will not prevent people from making money and it may help some traders that unknowingly over leverage themselves – this is just my personal opinion and I appreciate the fact that there are plenty of traders that do look for higher leverage when they trade. If I can appreciate the desire for different levels of leverage by different traders, why can’t the CFTC?
So what are the more critical issues?
When I read the proposed regulations there is a major difference from the regulations that are in place on the Futures industry, which is also regulated by the CFTC, and the spot Forex industry – here are some examples:
1) Leverage – I know I said that 10:1 is not that bad but why the Futures industry that is way less liquid than spot Forex can offer almost 50:1 leverage?
2) Hedging – it’s allowed to hedge in a Future contracts but not allowed on spot Forex – the regulators opinion is that because spot Forex has daily rollovers you can find yourself having a fully hedged position but still lose money every day not being aware of the rollover – Seriously – wouldn’t it be just simper to control rollover?
3) FIFO rules – as you can probably guess you can open and close positions in any order in the Futures or even the Equities space – so why restrict it in Forex? The regulators view is that money managers keep losing positions for a long time and thus hiding their losses and showing only their profits to prospective customers – wouldn’t it just be easier to mandate a comprehensive way for presenting historical performance – the CFTC should take a look at what the SEC has enforced on Mutual Funds disclosure restrictions if they can’t figure out the math on their own.
4) Introducing Brokers – Introducing brokers are individuals or companies like Currensee that offer a free service to traders and fund it by a commission that is being paid by the brokers for the introduction of new business – the proposed regulation would restrict IBs to only work with one broker a restriction that would significantly restrict that business – as you probably have guessed Introducing Brokers in the Futures industry are permitted to work with multiple brokers.
So why is it that the one regulatory body chose to regulate one industry in a completely different way than the other? Especially since instead of trading spot FX I can trade FX future with none of these silly restrictions – can this be because the CFTC, which was originally selected to regulate the Futures industry, is trying to relieve the pains that the Futures industry suffered from the introduction of spot Forex?
How will this end – In my opinion this is highly depends on the brokers – if they can unite and have enough money they will probably start lobbying or even open a legal procedure against the CFTC in a similar manner that the Hedge Fund industry has managed to push regulators off their lawn. If they don’t I would guess that they would probably start offering FX Futures in the US, which are BTW more expensive to trade, and offer spot FX outside the US.
As for the retail traders – they will be forced to do business outside the US which at the end of the day makes them more vulnerable to fraud so by overprotecting the traders the CFTC is actually exposing them even more.
We are working with our legal team to draft a response to the CFTC, if you are an IB or a broker and would like to participate in our response please email us at opposeCFTCregulation@gmail.com to get involved – it’s more likely that the CFTC would listen to us if we unite together.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
In response to demand of traders we’ve just implemented connectivity between Currensee and Twitter allowing traders to automatically Tweet their positions. The way the service works is that once you link your Twitter account you can chose which one of your brokers accounts you’d like to Tweet and we are automatically Tweeting on your behalf whenever you open or close a position. Since Currensee is the only platform that is connected in real time to more than 50 brokers the moment you execute the order we would Tweet on your behalf in real time. For those who are running business via Twitter we’ve also added the ability to Tweet only when positions are closed and thus attract customers.
One great service that can be along side with Currensee’s functionality is StockTwits and since we see the great value for our traders delivering the transparency we strive to into StockTwits we’ve implemented our Tweets using the same format that will be picked by StockTwits allowing traders for the first time to really Tweet what they do in their live accounts.
Currensee members who link their Twitter account are also going to be awarded 5 Currensee Bucks.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
A big trend right now in the industry is automated Forex trading of signal providers. Most of the Forex brokers today offer their own proprietary solutions and there are various independent providers like Zulutrade, collective2 and others that offer the ability to automatically execute signals.
I’ve spent some time over the past few months looking at these automated trading solutions and, as a trader I have to tell you, I don’t see how anyone will be able to make money with these platforms, as the lack of transparency and accountability is astonishing. I’ve looked at a few leading signal providers and they trade without stops, keep losing positions open forever and hide poor performing months under different names. Also, the lack of properly presented performance information makes it impossible for the educated investor to reach an informed conclusion that will make him money.
The main problems these platforms have, are that they 1) rely on trading signals that are executed in demo accounts and 2) don’t rely on a specific trader that manages real money. In these scenarios, replicating a signal lacks the most important components of trading, which are money and risk management and trading on a demo account versus a real account. This simulated trading style relieves the trader from worrying about his losing positions as it’s not real money anyway and the market will eventually turn around.
We see a change in this market of traders following with the launch of Covestor’s and Kaching’s new services. Here at Currensee, we’re working on an innovative way to give our members the ability to follow real trades made by real people with real names and real performance using a real Forex trading account. We call it full transparency and are seeding this change and will be the first company to offer such capabilities in the Forex space.
If you are a consistently good trader and you are interested in learning more about how you might participate in this new service, we’d love to hear from you!
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
The people that thought it should move in a certain direction realized that they were wrong.
If everyone were right all the time the market would never move. That would be very boring indeed.
Support and resistance points are the points are the battlefield points in this market, if you’ve seen any movies like “Braveheart” or “Gladiator” you probably remember the military battlefields where the British fought the Scottish or the Romans fought the rest of the world. I have to say that it has always fascinated me – how do you get so many people from opposite sides to show up at the same location in the same time thousands of year before Twitter?? But getting to the point these ancient battlefields are the perfect example of support and resistance. These points have no significance other than the decision of many traders that something should happen there.
How are traders communicating between themselves on these battlefields? Well, they don’t actually communicate, all they do is rely on similar analysis. For example one of the most common way to draw support and resistance points is based on pivot calculation, and anyone who knows that math behind it can tell you that it presents no significant insight at all.
So all the people that believe the market is either “Long” or “Short” will bring their soldiers (money) to these points and have a battle. Whoever wins this one can continue to the next battlefield (the next support or resistance point), and the losing team will collect their wounded (the people who were smart enough to put stop losses in place) and bury their dead (the people who got a margin call and will not return to fight today) and continue to the next battlefield. Surprisingly enough (or not so surprisingly) the winners of the last battle are happier and less reluctant to fight, while the wounded only want to get their dignity back. And this is why after breaking the first support or resistance it’s more difficult to break the second or the third one. Now just imagine what happens if the pivot soldiers have accidentally identified the battlefield in the same place as the Fibonacci soldiers and the moving average soldiers – It’s almost like the Scottish bringing the Irish to help them and the British bringing the French to help – we get an even bigger battle.
So what can Social Indicators do for you? Since the Forex market is driven by what Forex traders want it to do, it’s important to identify these three things:
Where is the battlefield?
Who has the strongest army?
Which side has more wounded in it?
We’ll be covering more of the specifics of these questions and their answers in future posts.
See you on the battlefield.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
It is known that the majority of traders in the Forex market are using technical analysis as their only trading technique. Perhaps it’s too difficult to track the GDP, interest rates and unemployment of every country. But it’s very easy to simply follow rules – “if the MACD is above 0 and the SMA of 50 crosses the SMA of 23 then buy” – even a caveman can do that.
The problem is that most Forex traders don’t even spend the necessary time to learn the meaning of these technical indicators, what mathematical basis they rely on, what is the meaning of the parameters in them and who the heck this Fibonacci guy was. (That’s him on the right) As in the example above SMA and MACD are very closely related and they are both rely on a crossover of Moving Averages.
As a result of this Forex traders don’t develop themselves as traders they merely replicate a “system” and might I add “A bullet proof system that works in every market condition” and are extremely surprised when their precious system is not predicting the market as they had hoped.
There is also an inherent problem in Technical Analysis, namely that it relies on a single source of information, historical prices. Since many technical indicators rely on similar mathematical bases, they often generate the same prediction of the Forex market. And this makes traders even more excited because as they say, “all my indicators are pointing in the same direction.”
The biggest problem in technical analysis is not the actual analysis but the way Forex traders implement it.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
A friend referred me to this video on CNN where a TV host is trying to convince a caller that his parents are being taken in by financial scam after someone offered them to double their money every month by trading Forex. The financial world in general and the Forex space in particular is very appealing to people’s weaker impulses when they hope to achieve the dream of making money without working. It’s a lot like those express diets that attract the people who want to lose weight without breaking a sweat.
So here is a little shot of reality: Professional traders in banks or other funds usually go through at least one year of training before they are allowed to touch the bank’s or its clients’ money. So don’t expect to master the domain in a shorter or even similar time frame. A very high return from any sustainable investment activity is never over 3% a month, which annualized is about 42% and also means that you are doubling your money every two years – which is beyond excellent return.
Assuming you need $100k a year to live you would need to trade with a $250k Forex account. If you want to get to a $250k account and you are starting with a $10k account, it will take you nine years to get there, assuming nine years of consistently high returns. Anyone else who says differently is either lying or trying to sell you something. Maybe both.
A good rule of thumb in life and in Forex markets is that if something sounds too good to be true, it probably is.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Well, the Currensee Community continues to grow. Even though we’re still in beta, about 500 traders have joined our community and are sharing more than 100MM in trades monthly! As we’re gearing up for our launch in October, we’re busy rolling out new features to make your Currensee experience even better.
Linking Multiple Broker Accounts
Many of you have told us that you want to link multiple accounts so you can see a full picture of your trades and positions on Currensee. We listened and, in this release, you can now link multiple accounts easily from your Profile in the Accounts section. We’re now also supporting many new additional brokers such as Admiral Markets, FxPro, IKON, Start Forex and TadawulFX. Click here to see a full list of fully supported brokers.
Market Watch Widget
We’ve heard that you love the Market Watch Widget, but that it’s a bit difficult to understand. We’ve improved this social indicator widget to make it more visually representative of what’s going on in the community right now. You’ll see the Community long/short status bar next to each pair moves to represent the ratio of those who are long and short, and the color shows the win/loss status. Check it out, we think you’ll like it!
Community page
You’ll notice we changed the Community Page, too. As our community of traders has grown, we’ve found that it can take a long time for the whole list to load. Now you’ll see a clearer and more concise view, showing the number of trades and size of each trader’s team. This will help you pick out new traders to connect with and grow your own teams.
Feedback Widget
Do you have feedback for us? We want to hear it. You’ll notice an new, orange icon in the bottom left-hand corner of the Currensee platform. Simply click on it from any page and share your site feedback with us. Good, bad, or simply suggestions, we want to hear what you have to say.
That’s all for now. Please continue to tell us what you want to see in the Currensee community and we’ll keep you posted as we move toward launching this Fall.
Happy Trading!
The Currensee Team
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Part of our mission here at Currensee is to provide Forex traders the ability to participate in our platform experience, regardless of which broker they are using. On average, we spend about 20% of our engineering time on accommodating all the brokers and their proprietary APIs in order to give traders the ability to join right away. Supporting the various brokers out in the land of Forex has proven to be a challenging task even though the majority of the brokers see great value in what we do and provide tremendous help in achieving this goal.
Until now.
One broker we haven’t been able to partner with is Oanda. They do have an API which can be used by us to connect their traders to Currensee but they are unwilling to help us get it going after numerous attempts to contact them. When we finally did receive an automated message of some sort, they said that we are welcome to use the API but that the traders from Oanda that use the API will have to pay $600 to Oanda for this privilege. Are you serious?
Now, here at Currensee, we are providing a free service to traders. It seems odd to us that a broker would force its trader to pay for API usage and it’s certainly unacceptable by us to require this from our traders. We are also surprised because we thought that Oanda supported the idea of trader communities and networks and figured they’d be among the first to see the advantages of our Forex trading social network.
So, here’s the bottom line. If you are trading with Oanda and want to use Currensee you have two options. The first is to switch to a Currensee-friendly broker – we support a variety of brokers who are reliable and regulated including Alpari, dbFX, Forex.com, FXCM, FXDD, FX Solutions, IBfx, MB Trading, odl, PFG Best and TradeView Forex (see the full list of Currensee’s US and international supported brokers here). The second option is to write an email to Oanda and tell them that you want to use Currensee as it’s intended to be – free of charge to the broker. Either way, we hope to see all of you Oanda traders on Currensee soon.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
One of the games which is repeatedly used as an example in game theory is called the Prisoner’s Dilemma. In this game, two prisoners are caught and they are each given the choice to cooperate with each other or turn on each other. This game has been used to simulate various real life scenarios including many economical situations and in essence describe any un-trusted transaction between people.
In 1984, Robert Axelrod conducted an experiment in which he asked scientists to play in a tournament of repetitive prisoners dilemma with one another – by creating the repetition of the game Axelrod made it possible for people to adapt their strategies and also created a memory in the game such that each player plays the next iteration with the knowledge of the strategy his opponent played in the previous iteration.
The winning strategy was found to be “tit-for-tat”, which leads to a balance of cooperation between the two prisoners.
Axelrod then conducted another tournament where he disclosed the winning strategy. The surprising thing he found was that even though everyone knew the winning strategy, it still remained the winning strategy. So collaboration on the strategy did not affect the game in any way.
Another variation of the prisoner’s dilemma is called an assurance game and is most commonly known as “Hunt a Stag.” In this game, two hunters can choose to collaborate and hunt a Stag (large and tasty adult deer) or split and hunt a rabbit alone (smaller but just as tasty). The difference between this game and the Prisoner’s Dilemma is that players are allowed to communicate and choose to collaborate.
So creating a proper mechanism for communication and trust between players is essential for collaboration.
One other commonly used game is called the tragedy of the common. This game is played by several players that share the same resources. In this game it has been shown that if the players act independently in their own best interest they would eventually deplete the resource, which is not in their long term best interest. Elinor Ostrum, a political scientist, has researched the matter looking at various communities around the world that share resources. She actually found that it’s true and that most communities have depleted their resources, which was not in their best interest. But she also found something else; there were many communities that didn’t deplete the common resources and managed to sustain a long-term preservation of these resources. By looking closely at communities that succeeded vs. communities that failed she discovered that communities that succeeded in preserving these resources managed to establish institutions for collective actions, and that collaboration was the main reason for the positive outcome.
Robert (Yisrael) Aumann and Thomas Schelling received the Nobel Prize in 2005 for their work on collaboration in games (“The tile of Aumann’s work is “Conflict and cooperation through the lens of game theory”) and addressed the question of which games would promote collaboration and why people chose to collaborate. Part of Aumann’s findings was that multi-player repetitive or infinite games promote cooperation between players because people learn to collaborate in time.
Another contributing factor to cooperation is introduced by some irrationality in the players, meaning that perfection and uniform thinking does not lead to collaboration. There is a need for some of the players to act differently than others given the same situation in order to promote collaboration or, as George S Patton described it, “If everyone is thinking alike, then somebody isn’t thinking.” — George S. Patton.
So if we look at all of these examples we can see that in multi player infinite games with some irrational behavior (like trading for example) sharing and collaboration are always in our best interest. In my mind we still haven’t begun to realize the true potential of collaboration and the payoffs it would yield but we can clearly identify that collaboration, in the eyes of game theory, leads to greater success.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Probably one of the earliest applications of psychology to the financial world was the Prospect Theory in 1979. Two psychology professors, Amos Taversky and Daniel Kahnman, proved that people when faced with a financial decision will not necessarily make the most logical selection. This is because of the way we think about our prospects and not the big picture scenario when making financial choices. Kahnman was awarded the 2002 noble prize in economic for his work in the field.
What they proved is that people are affected by losses more than they are affected by wins when they are required to make a financial decision. For example, when a person is asked to choose between receiving $100 or tossing a coin to receive $210 most people would prefer to take the $100 even though the most cost effective option would be to toss the coin (This is because the probability of winning is 0.5 so the utility function for tossing the coin is 0.5*$210 = $105 which is greater than the other option of $100). Another interesting thing they have found is that that the opposite behavior happens when they are faced with losing money. Most people would prefer to toss a coin with the 50/50 chance of losing $210 as opposed to just giving away $100, which again is not the logical option.
So to make a long story short – people like to make as much money as possible without risk and take more risk than necessary when they’re about to lose money.
We can see one application of this in real life trading where most traders tend to close winning positions sooner, take their profit and avoid additional risk. On the other hand they could leave loosing positions longer, take additional risk for the chance that the market would change direction (which rarely happens) and they wouldn’t loose as much.
There are many other applications of this behavior in real life trading. Stay tuned for the next post in this series, coming soon.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Currensee is the first social network for forex traders. We bring Forex traders from around the world together to make trading decisions in real time using live trading data.
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