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Forex Trader Mentor
Newsletter # 5
16th February 2005
There are many ways to trade-after all, that is what makes a market. One of these is 'News' trading. It does not require technical analysis, and gives some good opportunities. Oh yes-the brokers hate it!
It involves profiting from a movement after a scheduled news event, such as non-farm payrolls. Normally, I would not advise traders holding positions over these economic data releases, because the market can become very volatile. However, by putting on a 'straddle', it can give results. It is also high-risk stuff!
A straddle is normally associated with options, where you buy a put and a call, usually at the same 'strike'. If the market moves in one direction or the other, and moves sufficiently to cover the cost of the premiums, you make money at expiry (or selling back the 'in the money' option). In cash terms, it is possible to replicate this by placing limit orders above and below the current market price 10 minutes or so before a news release. Example: Suppose cable (GBP/USD) is at 1.8575. Place an entry order to buy, at 1.8595 and an entry order to sell 1.8555. If the cable jumps up on the news, you get filled at 1.8595. Here is the crucial bit: Take the order off at 1.8550! Two things can (and probably will) happen. It is no good setting a stop- the 'stop hunters' will try and stop out the news traders, by selling down when the first wave of buying has taken place. You need nerves of steel here! It could go 30 or 40 points down! After that, (and I mean this is happening with two minutes of the news release!) the rate will climb and continue climbing. The art is to stay in. When it has gone 50 points, you can set a stop at the entry. (If you use the FTM TradeCraft system, you will be able to better judge your exit). Stay in as long as possible, because sometimes, news can cause a trend reversal.
Brokers hate this because they risk being left 'holding the baby'. Many brokers promise tight spreads in fast markets, but the banks they interface with do not necessarily provide them that luxury. So the brokers get hammered. I have heard that they have blacklists of news traders, so you have to get in 'under the radar'.
More than one way to kill a cat.... (Part Two)
This is the second in a series of articles about how to make it when you don't have the capital.
As you become more succesful as a trader, you will most likely learn that although you can make a good return, your capital isn't enough to really make a living at forex. The wisest way forward is to get some capital from other sources. In most countries, you will have to be regulated to be able to get other investors. In the US, I understand it is possible if you have under 15 investors, to be an investment advisor to get an exemption from the Investment Advisors Act. However, the U.S. is moving towards a more regulatory environment. You should look at the Investors Advisors Act of 1940 and similar Acts - in fact, get a lawyer if in doubt!
You could go to your old aunt and ask her to fund you and in this case you will have to have a power of attorney, effectively to trade her money on her behalf. You would typically get a performance fee for this (say, 30%).
If you are eventually going to manage other people's money professionally, you may be best off establishing an offshore company in a place such as the British Virgin Islands. Am I advocating tax evasion? Not in the least! Because you don't have to pay corporation tax on profits in this and other offshore centres and they have double-taxation agreements with most countries, your capital can accumulate. When you repatriate the money to your country, of course you should declare the earnings. Another reason for having an offshore company is that you can get an audited track recored and when you come to the stage where you make an offering document to your investors, you can convert the company into a hedge fund.
Part 3 to follow next issue: Find out the steps to become a professional money manager.
If you have visited the Forex Trader Mentor website recently, you may have seen that I am endorsing the Rapid Forex courses. The reason for this is that I was looking for a good course for my clients. It is important to get a good grounding in forex before you start trading and this looked about the most cost-effective. Of course, you can still get the very personal, intensive training with me. I must admit, I thought the promotion was 'glitzy', but after going through the courses, I could not fault them.
There are various packages, starting from the starter package, through the Fortune Package, the Success Package, the Clever Profits Package and the Supreme Profits Package. As well forex knowledge, you will also get some great inspiration for trading systems. It is my opinion, though, that you will still need guidance and a money management system to get the best out of this.
There is even a free e-course for you to download.
Imagine that you had never driven a sports car before and you were given a Ferrari. You could drive down Main Street at 250 mph, but you would soon crash! You would need close supervision to learn how to tame the pure energy. So is it with the systems like 'Forex Surfing'. Rapid Forex will handle the knowledge transfer; I will handle the competence building!
The Chinese Government apparently changed the laws in January to allow individuals to use foreign brokers and services for forex trading. Given the fact that there are 10 million new 'middle-class' persons every year and the Chines are inveterate gambler, look to China for the next wave of forex traders!
New York seems to be the most popular place on the planet for forex traders, according to the stats I get from my site. Over 8% come from New York or Brooklyn. Having said that, you Canadians out there are also keen traders: Toronto comes in with just over 3% followed by Chicago.
Archive: You can read the previous newsletters here: