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Confessions of a Rabbit Forex Trader

Posted 02-04-2009 at 09:11 AM by Cableboy
(This is a bit of fiction drawn from correspondance I have)


I am writing this because I have been a FOOL! I got tied up in the forex market and within a short time, I have lost most of my savings.

I was really lucky (though I thought it was skill) in 2002. I managed to buy a condo with a cheap loan and when the price moved up, my mortgage broker asked me if I wanted to leverage my free value to buy another apartment to rent. In a short time I had 5 properties! Easy-peasy! I sold out in 2006. I thought I could walk on water. I was a real real estate investor.

Looking around for other things to invest in, someone told me about the forex. I had never heard about it before and the only forex transaction I had ever done was to by some pesos to go on vacation.

This sounded really good. I could see that this was fairly easy to understand: There were two currencies and one went up or down relative to the other, and the good 'ol US Dollar was often one of the currencies involved.

I looked at oil and bonds, but it was when "Forex Made Sleasy" came to town and offered a free seminar in a downtown hotel. I saw the infomercial and it sounded really good. A two day free seminar. It sounded very reasonable and the speaker was very convincing. He said that he had made a fortune by just following the signals. These signals were provided by a bit of software, which showed some green arrows when to buy and sell. He even offered to open a broker account for me.

Of course, I had to pay for the system, but $5,000 didn't seem too bad. I was going to make that in a couple of days.

So I opened my account with FX Crapital Markets, paid my $100,000. Wow! They were going let me trade a whole $10 million bucks! I was going to own this market.

I went home, bought the latest PC, got a DSL connection. I bought 3 screens, so I could see all those pretty charts. I set up my office as a trading room - even got clocks on the wall to show the times in Hong Kong, Dubai (wherever that is!), London and New York. I was a real wheeler-dealer.

I was told that most of the action takes place in London, so I set the alarm to get up at 3 a.m. There was the first signal! Buy! So I bought. I had decided to risk 10% of my capital and the software said I could trade 10 'lots', so 1,000,000 Euro (I was trading Euro/dollar) . I had heard about stops, so not wanting to risk too much, I set this to 10 'pips' below where my entry order was, and I set my limit to 10 points above. There were no commissions, so I knew where I was. The signal was right! I made $1,000! It was the quickest grand I had ever made.

My, the elation! I was hopping around for joy. I did a mental calculation that by the end of the week, I would be buying a Ferrari!

I waited for the next signal. Sell! I sold, $1,000,000 on the same conditions and bingo! A winner!

I thought that this was just like falling off a log, so I figured that the next trade, I would bet 25% of may capital! Only this time, I was 'stopped out' . I decided to do the dollar against the British Pound instead of the Euro. Wow! does that move or what?

I was now down $500 for the day.

The next day, I went back to the 10%/10 pips, but got stopped out. The sick thing is that the market went the 'right' way shortly afterwards. I could see what the problem was. It was my stop loss.

So now, after 6 trades, I was down $3,500. What had happened to my initial success. I was depressed.

The next trade, I bought. I set no stop or limit. The market went down initially 20 points. Ok, I thought, I will be cool. It is 'only' $2,000. It went down another 30 points and now I was scared! $5,000! What the hell should I do? I must have sat there for 5 hours watching the market drift between a loss of $1,000 and $5,000. I was looking at the news, the charts, looking for good reasons (as if I would know that!) why the market should go up.

At last I hit break even and even a small profit. I took the decision to take the profit. $500! Well, a profit is a profit, after all.

Anyway, I thought that was a reasonable way to approach it, but after 3 bad signals, which cost me $12,000, I decided the software was a piece of crap.

OK, I thought, I will enrol for the broker training course. That was fascinating - all those chart systems, Japanese candlesticks. I learned about hanging men, doji's, moving averages, whatever. I was going to watch 10 chart studies and when they all aligned, bang! I would trade.

I was really into this forex - better than working. Some days I had good days and sometimes bad, and at the end of the month I was actually ahead!

However, things went pear-shaped after that. I started noticing funny things happening with the broker, especially when I put in a stop loss. My customer support person had called me and warned me about not setting stops, saying it was a bad trading policy.

One day, I had a position, and has set a stop. Not a lot was going on, and I went out to get some coffee. When I came back, the market went up above my entry level. I looked at the position - but it was gone! I should have had $15,000 profit, but instead, there was a $5,000 loss!! I had been stopped out, but I couldn't see on the chart system I had invested in that the price had even been at my stop level!

I called the broker, and he said "Oh yes, you were stopped out". I protested, but he simply said that the market had traded down.

I was so annoyed! I went in and bought the market - but of course, it was the top of the market. By the end of the day, I was overall $45,000 down! I felt sick - and scared.

Forex was not so 'easy' after all. It's funny, because I am a reasonable golfer. When I started I took lessons - otherwise I would have been a rabbit golfer. I sure feel like a rabbit trader now!

To add insult to injury, there were some additional charges on my account, for 'roll overs'. I don't know what they are, but the broker wanted about $3,000.

My forex adventure is over. Luckily I got out with some money. Including software, broker charges and losses, I am down $60k out of my original $100k in 2 months.

Forex? - complete scam!"
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