…sharing this article to help you avoid the mistakes I have made…
Unless you are the Gugenheim Foundation and managing 294 Billion Dollars, you do not need a portfolio. With the large numbers your objectives would become very different as well. You are not eyeing major capital gains, what you are trying to do is storing wealth into the future with hopefully minimal losses. Pension funds and the retail are the default suckers to dump unwanted stocks to. A portfolio would multiply the possible ways of accumulating losses and would heavily cap your gains potential.
Stocks make zero sense to me: for the few that pay dividends, you would have to have held them a year back, and say one dishes out 8% which is the very steep end of the spectrum, but the stock itself is down 10% from where you bought it at, what did you gain at all? Wash sale rule makes it futile to sell within 3 months, for you do not get to have the benefit to write off losses, yet you have to pay capital gains on all of your wash sales (I had to pay capital gains on 32k despite of my portfolio being down 35k in my first year; by now even unreported crypto gains may set you up for tax evasion). Stocks come with all kinds of risks from merger, earning reports, medicine trials, mismanagement. I only owned like 10 different stock in my entire life, and 3 of those ended up in court papers because of mismanaging inverstor money (Apollo Group, Ormat, can’t remember the 3rd, was it SmithTown Bank?). I ended up opting for Mark to Market, but that still did not answer all the headaches that come with owning stocks.
There is another way to buy into a company’s growth. Look up what Chamath has to say about Tesla and corporate bonds. They come with 0% downside risk if the stock drops and 90% participation in the upside. He was the guy calling Amazon’s 25-year 25% a “drop mic.”
Here’s Buffett’s average yearly return for comparison:
For further gain percentages comparison, Jim Rogers & Gerorge Soros’s Quantum Fund – so goes the legend – had returned 4,200% gains in 10 years. That’s not 420% per year, it was calculated with 45% compounded gains yearly (although that figures to be 4,108% I believe). Some people have no living expenses or taxes to pay!
My education was very expensive: $250k and the opportunity cost of a whole decade. Most of my losses were due to Weekly Options expiring worthless and triple leveraged, index based ETFs, which had daily maintenance cost plus back then every trade ran me $7.50-$8 . (ThinkOrSwim was a little less than ING).
See, Go West & Invest did not pan out for me. My whole investment portfolio reached a temporary peak of +15%, when I went to DisneyLand just to return for a major gap down (with triple leverage) kicking in a cascade of having to fill in margin / averaging down until 6 months later down the road missing out on the end of the bear market’s bottom and holding virtually no positions for the run up. I was losing an additional 20-30% with every gap down for 3 weeks straight, which led me to eventually make the stupidest steps of my life: betting naked weekly calls 20k at a time & wiping them all out at the end for expiring out of the money (3 times of that as well).
The biggest misconception for those who can even distinguish between a stock and a currency, is that they think that everything that has data that can be turned into a candle chart can be traded the same way. Obviously an option can be charted but it does not trade the same way as the underlying stock. Not as obvious are the differences between stocks, ETFs, futures, commodities, currencies.
I used to trade UNG for a while. It was a pure windmill fight on the long side due to the underlying contango which I was not conscious about at the time, yet I had come to learn the way to survival by knowing when the weekly natural gas stocks report came out (I think it was 10 AM PST) and dumped on up moves my averaged down long entries.
But you obviously want more than survive.
I remember when a social media user was bragging about batting 16% with his portfolio in one year. He clearly had holdings at the moment he posted this, so he had multiple risk factors that could had re-adjusted the bottom line even the next day. Compare his temporary number with my yearly gains and the fact that I am all cashed out most of the time.
Not that Forex is much too easy. I do not know a single person who has been successful on a multiple-year time frame, and I am no exception.
I’m not sure how self proclaimed trading educators came up with the volatility difference between equities and Forex is 20% less for the latter, when you can see that a 1% move in USD translates to 5% on the S&P.
Yet I have worked out a way that lends me the hope of catching up with the losses and excel into the future. There is a good chance that I can claim back all of my Forex losses in the coming year.
To succeed in Forex, I had to find and exploit all possible edges. Starting from the lowest cost, the highest leverage, best liquidity (only one currency pair qualified); getting the size right, to building the right tools & indicators.
Finding the right broker without knowing what is out there and what parameters to look for wasn’t smooth sailing either. FXCM with their split window system was confusing and without MQL4 I could not possibly have developed the right tools. With Easy Forex I learnt about how important the spread size was having a “fixed spread” account. It was not actually fixed, but more like minimum 3 pips on EUR/USD, minimum 8 pips on GBP/USD that I used to trade a lot and 14 pips on an exotic pair like AUD/NZD. Imagine being at 14 pips loss the moment you open a trade!
Squared Financial taught me about the importance of being able to deposit without delay onto my account. I had to make phone calls to the market maker (here meaning spread-adjuster) sitting in to beg them to credit my funds over the phone. I got to learn their names & personalities! Later they passed me down to a sister company due to ESMA and forgot to mention that my 300:1 leverage was gone forever and now trade with the Cyprus forex company with 30:1. The worst of all worlds.
I never had a real account with IC Markets, but since I was testing all of my auto trading routines on their demos, I have come to learn intimately a painful feature of daily transaction cap: they would suspend your account if you exceed 25k transactions – which may sound like a lot, but for instance a trail stop or a frequent delete / place pending order loop can surpass this kind of a limitation in 15 minutes.
LQDFX had a lot size limitation of 50 (compare it with 1000 at Squared Financial) and bad liquidity.
Brokers may take money away from you, but what they cannot take away is your intelligence with which you can innovate and find your way to making profits in this world full of scams.
I used to hand out my Broker Auditor routine in the software package that came with my e-book, the Computer Aided Trading.
People who are satisfied with their broker’s 2 or 3 pips spread should pay attention to the average trade pips of my statement. I pay less than a pip round trip for commission and spread. Even if I only made 10 cents on a trade, one million times that is a 100k -this can buy you a property or at least a half in most countries (I paid for my 3-bedroom house in the Philippines a little over 30k USD with the upgrades).
Cheer up, you have not yet hit rock bottom if you did not end up having to work as a night kitchen porter at the Pullman Hotel.
What you should under no circumstances lose is your integrity.
There must have been people who were able to make 10x gains in a year, but they certainly weren’t the YouTube high fliers selling you their crap.
Despising scammers, staying away from them and their ways is in your best interest, and I am begging you to avoid at all cost fake gurus such as Samuel Leach, Stephen Dux and Tim Sykes – they would only ever be able to show forged proofs i.e. on Profitly – which is owned by Mr. Sykes or via owning a Forex broker that gives a leverage to forge account statements – and this guy even ventured into an ICO of his own. Ask yourself the question now, why is anyone issuing an ICO at all? To me it sounds like the need of doing this comes with a certain kind of personality.
Don’t bother with binary options either. I personally never fell for CFD trading or Crypto, but had my schooling in most other. Do not fall for automated trading routines either, if you do not have the same data provided by the same broker and the same privileges, your results would be wildly different.
Sure, I have things for sale here. I would be an idiot for giving away everything for free, for I have expenses such as the blog or the maintenance fees of the USD account, but I don’t over promise and under deliver and certainly have personal problems with injustice.
I sold 2 electronic books with my added software package for $25 each and gave access to 2 people to all of my routines and their updates for $52 and $56. So don’t compare me with scammers ripping you off for thousands for worthless junk.
See for yourself how different it is what I say on how things operate and what pours at you from wishful thinking self-claimed “educators” – which seems to be a never ending cascade of drawing lines, triangles, percentages and comparing things that should be traded on their own merits >
The Sweetest Perfection (This last one is about mean reversion – there is no quality info on the subject anywhere.)
As for my trading, I get biassed by the media as anybody else, and filling up margin is part of the things I have to engage in at times. Although I seem to know all the answers – see the 4 links above – I do not know them by heart. That tiny transition would take me from being the worst trader who can make 1000% gains in a year to an absolute phenomenon. In the meantime I’ll remain Macdulio, the professor of trading.
As for the intelligence mentioned, I can honestly say that I have managed to find the answers for all major questions without using anything that anybody was ever teaching / broadcasting. Did you pay attention to how many times did I mention trendlines and Fibonaccis? Automatization can hold against a bad bias. Defying all odds, I found the right hedging conditions, the most of the proper exits and many of the best entries. Try to do what I did with merely having data flowing from a broker: figure out how the trading of a given instrument works.
“You don’t want to come across someone with a 100% win rate” – a sentence from a YouTube Forex trader arbitrarily drawing 1:3 ratio brackets based on virtually nothing. I don’t want to know you either. Or perhaps he wasn’t talking about me, I’m only averaging between 99.3% and 99.8% in most months. For you the 3:1 is risk management, for me it is a loss-application. I guess I do resemble Warren Buffett since this thinking was attributed to him: “Rule Number One: Never Lose Money. Rule Number Two: Never Forget Rule Number One.”
So, referring back to the beginning: Do you need to make a court case before putting on a trade? Does it matter if the ECB president does not like vanilla cupcakes? Why waste your time with the whys?