Author Archives: Orli Perez

In the last post of the Ask the Expert series, Scott Boyd and Dean Popplewell began chiseling away at a question we received about spotting trend reversal.  Today they will focus on another facet of trend reversal: using Bollinger Bands.

Traders have long understood the relationship between volatility and trends. Volatility – that is, the degree by which an exchange rate varies over time – tends to increase as a market trend gathers momentum. This is because traders are buying and selling in greater frequency as they attempt to get in on the trend. However, as the trend nears the end of its run and traders slow their activity, volatility naturally declines.

Because volatility provides immediate feedback on the level of market activity, it is an important technical indicator. One of the most common methods of measuring forex volatility is through the use of Bollinger Bands placed over a price chart as demonstrated below:

Bollinger Bands show changes in market volatility through the width of the two bands formed by the three lines, and the more volatile the currency pair price, the wider the bands grow. In the example above, you can see the bands widening as the price decreases until it reaches a point where the bands suddenly narrow. This indicates that volatility has quickly tailed off which means that market activity has reduced.

Coming as it does following a price decline, this is a strong indication that the rate is likely to increase as market participants consider the new market price. If the price finds support and buyers come in at the current price, the bands will widen in response to the increased activity.

You can learn more about Bollinger Bands on the OANDA fxTrade website.

Next time we’ll continue discussion of spotting trend reversal by looking at different price patterns. Okogba Papa Woyin-Emi (who sent in this question via Facebook), you have been keeping our expert panel busy answering this one! Have questions for Scott and Dean? Send them to us via Facebook and Twitter. We are excited to see what you come up with.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

1 Comment

Welcome back to our Ask the Expert series with Oanda’s Scott Boyd and Dean Popplewell. This week’s question comes from our Facebook page:

Okogba Papa Woyin-Emi asked “What are the best ways to spot trend reversal?”

Great question, and not one that can be answered fully in a single post. So we’re going to tackle this important topic in multiple phases, starting with… spotting trend reversal using Relative Strength Index:

Regardless of individual trading strategies, all traders share a common goal – identifying as early as possible, potential trend reversal points. The earlier you can get in on a reversal, the greater the potential for profit. Unfortunately, it is also true that the earlier you act, the greater the chance that what you thought was a trend reversal is really just a fluctuation and once the tend resumes, you may suddenly find yourself on the wrong side of the trend!

To help avoid this scenario, there are several approaches you can take to improve your analysis of the current market trend. Generally speaking, analysis falls into one of two types – fundamental analysis and technical analysis. Fundamental analysis consists of news events such as central bank actions or the latest unemployment figures. The rule of thumb is that when news is seen as a positive sign for a country’s economy, the currency tends to perform better. While the correlation between economic performance and exchange rates is helpful when defining an overall trading strategy, this approach offers little insight into potential reversal points.

This is where technical analysis comes in. Technical analysis involves the use of charts and historical prices in an attempt to determine future prices and over the years, a whole host of technical indicators have been developed. We don’t have room to discuss them all here, but we’ll cover a few our favorite indicators and show you how they can be incorporated into your own studies.

Relative Strength Index

The Relative Strength Index (RSI) calculates the total average losses and gains for a currency pair and uses this information to determine the strength of the latest price in relation to the previous price. A numerical value is determined as part of the RSI calculation and this number is plotted on a chart segmented from 0 to 100 and placed at the bottom of a price chart as illustrated below:

If the RSI value falls in the 30 or under range in the chart, it is considered undersold suggesting that the market could soon start buying the currency pair thereby pushing the rate higher. A reading of 70 or higher on the RSI scale is considered overbought and identifies a potential opportunity to short the currency pair ahead of a falling exchange rate.

In addition to the undersold and overbought designations, traders also look for what are known as centerline cross-overs. When the RSI crosses over and above the center line (50 on the scale), the buyers are winning and upwards momentum is gaining. When the RSI crosses under and below the centerline, the sellers are gaining and the downwards trend is gaining momentum.

For more detailed information on these and other technical indicators, we invite you to check out OANDA’s fxTrade technical analysis tutorial.

We'll have more on this topic soon, including how to spot trend reversal using Bollinger Bands and different price chart patterns. Have questions for Scott and Dean? Send them to us via Facebook and Twitter. We are excited to see what you come up with.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

This week the financial headlines seemed to all center around a handful of categories: Ireland and all the things they do wrong, Germany and what they do right, the rest of the EU scrambling in the middle, Bernanke getting flack over QE (still), and China as the next big thing.

If this week’s news stories are any indication, we’re in for a game-changing 2011. Here’s some light reading for you before Thanksgiving.

The Eurozone Shuffle:

The Bernanke Burn:

China, China:

Or, if you’re pressed for time:

If you haven’t already, check out Yohay’s recent posts on Forex Crunch on his Forex portfolio. He writes about the Trade Leaders Investment Program, and you can watch a Forex investment portfolio as it develops in real time. Pretty exciting stuff!

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

We asked our Facebook fans to submit their questions for our Ask the Experts series. We gathered a lot of great questions—and don't worry, we'll get to them all in due time—and passed them along to our experts, none other than Scott Boyd and Dean Popplewell of Oanda. So here's this week's question:

Mani Mohseni asked "What is the Ichimoku Cloud strategy?"

Well Mani, here is your answer, brought to you by Scott and Dean:

At first glance, the Ichimoku Kinki Hyo – or Ichimoku Cloud – may seem nothing more than a dizzying array of lines and colors. In reality, it is actually a very clever indicator that provides feedback on support and resistance levels, trend direction, and trend strength.

To define the Ichimoku Cloud,  A total of five components are calculated. These are placed on a price chart as five individual lines and include:

  1. Tenkan-Sen (Conversion Line)
  2. Kijun-Sen (Base Line)
  3. Chikou Span (Lagging Span)
  4. Senkou Span A (Tenkan-Sen + Kijun-Sen)
  5. Senkou Span B (Highest high price + Lowest low price)

The “cloud” is formed by the Senkou Span A and Senkou Span B lines with Senkou Span A (green line) representing one boundary of the cloud and Senkou Span B (yellow line) forming the other boundary. When placed on a price chart, the Ichimoku Cloud appears as follows:

Identifying Trends with Ichimoku Clouds

There are two basic ways that traders use the Ichimoku Cloud to identify trends. The first one compares the current market price (the grey min / max line in this price chart) with the cloud formed by the Senkou Span A and Senkou Span B lines. When the price is rising above the cloud, the trend remains positive as the buyers outnumber the sellers – when the price is below the cloud, the sellers are winning over the buyers.

The color of the cloud itself has significance. In the example above, the cloud is shaded green to indicate a rising trend, and yellow when the trend is falling. Note that most trading platforms enable you to set your own colors for all these elements.

In addition to the position of the price within the cloud, traders look for buy and sell signals generated by crossovers. For example, when the Tenkan-sen line crosses over and above the Kijun-sen, this is considered a buy signal. A sell signal results when the Tenkan-sen crosses under and below the Kijun-sen. This works because the Kijun-sen is calculated using more of the most recent prices than the Tenkan-sen. This means the Kijun-sen reacts more slowly to price changes than the Tenkan-san and when it is crossed by the Tenkan-san, it indicates increasing momentum in the current trend.

This concept should seem very familiar to those who work with multiple moving averages where traders typically employ a fast moving average and a slower moving average. When the fast moving average catches and crosses over the slower moving average, a buy or sell signal is generated depending on the direction of the crossover.

Finally, the Chikou Span provides insight into the strength of a buy or sell signal. Like the Kijun-sen, the Chikou Span – known as the Lagging Span – reacts more slowly to price changes. If the Chikou Span is below the current price, the sell side still has momentum, but if the Chikou Span is above the current price, momentum is with the buyers.

This illustrates just some of the analysis feedback provided by the Ichimoku Cloud. You can learn more about the Ichimoku Kinko Hyo and other forex indicators at the OANDA fxTrade website.

Have questions for Scott and Dean? Send them to us via Facebook and Twitter. We are excited to see what you come up with.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

This week we are thrilled to put the employee spotlight on David Karp. Many of you may already know David from our webinar series, which he graciously hosts at 7am EST. He is part analytics extraordinaire, part social media maven, and fan of all things orange. His blog limeduck.com has a post for every occasion, and can answer 99.2% of life's greater questions.

Official title: Director of Marketing

Unofficial title: "umm, are you the one I should talk to about..."

From: New York City.  Got a problem with that?  Good. I didn't think so.

Journey to Currensee: Art School, Business School, IBM, Startups, go figure.

Favorite thing about the office: Free fig newtons

Favorite project here at Currensee: The Orange Couch

I would never trade my Orange Couch.

When not rockin’ it at Currensee, you’ll find me At a secure undisclosed location (unless you're on Foursquare) making, writing about, photographing or maybe even eating food.

Favorite expression: What could possibly go wrong?

Celebrity doppleganger: Gonzo. What do you mean he's not a celebrity?

Stay tuned for next week’s employee spotlight.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Investing and business headlines this week were dominated by talks of currency manipulation and the G20 meeting. There were concerns over underestimated inflation in China, the weaker Eurozone economies dragging down stable partners, and what the safest (in relative terms) economy to invest in. It was a hectic week in news, indeed, but here’s to hoping that we won’t hear about quantitative easing (QE2) for a little while.

Here are our Top 10 headlines of the week we could not help but share:

Happy Friday!

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

At some point in every trader’s career, they have to look deep and ask themselves this question: Is trading currencies the right choice for me? While we hope the answer is a resounding “Yes!” we also want people to realize that Forex trading involves risk and an investment of resources (money, time, dedication, etc.) that not every person has, or is willing to lose.

Earlier this year a survey was conducted of Forex traders, looking to dive deeper into their collective psyche to understand the technology and environment in which they thrive. (You can find their detailed results here.) Today came part two of their scientific study, this time honing in on trading strategies and profitability. (Results available here.)

Of some 3,000 Forex traders surveyed, here are some highlight results:

  • Forget the S&P! 34% said the Forex market’s potential for returns, regardless what that “other” market is doing was the best reason to trade currencies.
  • Elementary, my dear Watson. 16% find currencies are the “most interesting and intellectually stimulating asset class.”
  • What a “perky” market. Being open 24 hours (15%), low capital requirements (13%), and liquidity (12%) are nice advantages too.
  • The “techies” win. Over half (53%) use a combination of fundamental and technical analysis to formulate their trading strategy. Pure “techies” (36.1%) outnumbered their pure fundamental traders (8.1%) four times over.
  • The end is near. The market is dominated by short-term thinking (48.8%); only a handful trade for the long term in this asset class (8%)
  • One of these things don’t belong with the other. Taking a look at the average profits/loss per trade, here’s the breakdown:

Those are some pretty impressive numbers, especially with a side-by-side comparison. Forex traders seem to be working their way up the profit food chain, while keeping those losses to a minimum. This goes completely against the foreboding “95% losing” statistic that is commonly thrown around. We wouldn’t want to be the ones to call foul, but Yohay already beat us to it:

One explanation is that the survey doesn’t meet statistical standards, and accidentally met a bunch of successful traders.

[In the Forex world, that would be a statistical anomaly.]

Another, more logical explanation could be that most lost traders just burned out, never returned to trade Forex and therefore weren’t the target audience of the survey.

[Perhaps.]

A third explanation could be that many traders are in denial of their losses. Denial of losses means that the traders don’t encounter their mistakes and don’t learn the lessons for the future.

[Ding ding ding!]

The fact of the matter is that not every trader can be profitable; it’s not true in any financial market, much less in the volatile currency markets. In part 1 of the research results, 91% of those surveyed identified themselves as “individual traders,” but we know better. No man is an island; Forex traders rely on variety of resources—from blogs to commentary to each other—to keep their insights and sanity in check. There is a unique air of collaboration amongst those who track the EUR/USD. Sharing insights and collaborating on strategies is a cornerstone of this market not seen in other asset classes, and we’re happy to help facilitate what can sometimes feel like a lonely endeavor through the Currensee social network.

Our CEO Dave will be the first to caution any queasy Forex trader that is you don’t feel 100% comfortable losing it all tomorrow, don’t do it. That being said, you don’t have to be a successful FX trader to be a profitable FX investor. There are 2 major distinctions here:

  1. Think about currencies as a long-term addition to your diversified portfolio, not just a transactional asset class;
  2. Leverage the experience of those who came (and succeeded) before you.

Intrigued yet? Learn more about the new way to invest in Forex.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

In case you haven’t heard, the global Forex market is growing. Actually, more like exploding. As with any growing trend, market researchers seek to study and better understand the motivations of the people participating in this financial phenomenon.

Recently, some 3,000 Forex traders participated in a survey of what makes them tick. The full results (and there are some pretty neat stats in there) can be found here, but here are the bits that caught our attention in particular:

  • Does this sound like you, Joe Forex Trader?

    63% of traders surveyed say they trade currencies exclusively, another 37% throw in other asset classes into their investing mix.

  • 77% of you are new to the game, with 1 to 5 years under your belt.
  • The overwhelming majority (91%) are individual traders; there aren’t so many institutional or money managers in this bunch.
  • 84% of these individual traders are charting their next moves from home. Which begs the question: what does your boss think about you spend 16% of your workday tracking currencies? We won’t tell.
  • Just about one-third are following the markets and news using a mobile device. Not too shocking (except that it’s actually lower than we expected). Who isn’t 100% connected 98% of the time these days?

These findings are just one example in a recent move to better understand the inner psychological (and technological) profile of the Forex trader. Identifying these characteristics is crucial in this growing, increasingly social financial market. Need we remind you - $4 trillion traded daily. Everyday. Think about that for a moment.

All this talk about research and insights inspired us to do our own market study. We wanted to explore the Currensee community as a microcosm of the great Forex population, and the results were astonishing:

  • Photo by Matthew Field

    If Currensee were a country, it would be larger than Monaco.

  • We’d also be just slightly smaller than Liechtenstein. A recount is in the works.
  • To represent the Currensee population visually, our little social network would fill the Tokyo Marathon. This is great news, because I don’t know if you know this about us, but we’re runners too!

Our research results can be audited here. We believe our methodology to be ironclad.

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

1 Comment

In the spirit of transparency I must admit that I am not, by anyone’s definition, a Forex expert. I speak the language, I read plenty of news and commentary on it, and I am surrounded by the topic all day, but let’s just say my name won’t be in lights on the Currensee Leaderboard any time soon. One of my roles at Currensee is to serve as the company’s pulse on the Forex world, which means it’s my job to dive into technical analysis and economic news, and deliver to our community the most relevant and interesting Forex articles, blog posts, and videos available. If you want to be in this “inner loop”, look no further than Twitter, where we share the best Forex analysis and news we can find.

There’s no shortage of pointers for amateur and experienced traders out there. I’ve found some of the best insights come in the form of lists. These fortune cookie-sized quick tips have a few things in common. They are typically…

  • Short and to the point;
  • Timeless (you can read them today, tomorrow, or a year from now and the point still rings true);
  • Not experience biased (whether you’ve been trading for a week or a decade, there’s something for everyone to take away);
  • And best of all, actionable!

So here are some lists I’ve found along the way.

TEN: 10 things that separate the pros from the amateurs. My personal favorite tip is to be the contrarian trader. Buy the rumor, sell the news. You know what they say about following the herd…

NINE: These 9 tips will separate yourself from the 90% of unprofitable traders. Ironically, one of the points is about taking every piece of “advice” with a grain of salt.

EIGHT: The 8 most common Forex trading myths. Stop-losses are not a sign of weakness; use them.

SEVEN: 7 tips to Forex success. Alright, so some of the tips on this list contradict themselves – take the well-marked trading path, but think like a contrarian; trust your instincts, but don’t get gushy and emotional.

SIX: These 5 reasons + 1 emotion (that's 6) are the reasons for your margin calls. Ignore them at your own peril.

FIVE: Ready to go pro? Here are 5 must-haves before quitting the day job.

FOUR: The 4 best technical indicators for new (or new to Forex) traders. No need to get elaborate with your charting skills at the beginning.

THREE: 3 challenges to conquer for trading success. Some days you’re up, some days down, and sometimes you’re just bored. There’s money to gain (and lose) in each scenario.

TWO: Divvying up the major currencies into 2 categories: risk averse and those with an appetite for risk.

ONE: Every Forex trader had to start somewhere, and they likely wish someone smarter had been around to share with them lesson #1 of trading. It probably would have saved them a lot of pips and heartache.

+ONE: One more tip for the road. Heed this warning: Do not put all your currency pairs in 1 basket. There are seven major currencies, and countless combinations. Don’t pigeon-hole yourself with one pair.

Read any words of wisdom for Forex traders recently, have it saved to your bookmarks, or (even better) write some of your own in a blog? Share it with us!

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

2 Comments

You know it, and you know it well – the spam email. These get-rich-quick emails offer all sorts of bizarre ideas, from Forex robots to vacation timeshares to [insert useless product here]. Typically, these “investment opportunities” have a few things in common:

  1. No one has ever thought of this idea before. This random guy from Wheresthat, USA is really onto something.
  2. These forward thinkers come from real innovation hubs where new, great ideas are born, like Winner, South Dakota.
  3. The product in development, acre of land for sale, or goat up for adoption is always on the cusp of something - a new feature, giving birth to a new baby calf, whatever. Bottom line is that since it’s a work in progress, they cannot show you a photo of it, not even a blurry one. There’s no tangible proof this product actually exists.
  4. This product-goat-thing is so unique, it is spoken about in hushed tones. Everyone is out to steal this revolutionary idea, so you cannot ask too many questions about it.

Sound familiar?

Photo by Gonçalo Valverde

We recently got an email from someone asking for an investment in his new, shiny Forex robot. Clearly this guy didn’t do his homework, because he doesn’t know where we stand on robots. When we get these kinds of solicitations, we get a good laugh at how cryptic and mysterious they make the Forex market and software development process sound.

For entertainment purposes only, we’ve deciphered this email below. Names have been changed to spare the sender embarrassment, but really – what kind of fools do you take us for?

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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.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.