No Win - No Fee, or Monthly Subscription?

[glennki]

Originally Posted by bobnat

To say they were on the right side of their trades is misleading. We can look at damn near any losing trade and say that if we stayed in long enough we would have won.

I have to agree with the arrogance of intelligence. I wanted to illustrate that had LTCM, who had some extremely clever people, not been so heavily leveraged, they wouldn't have had a margin call, and could have hung on until the spreads converged again. This eventually did happen and the *very* losing trades turned around, illustrating that if one can hang on long enough, then one could come out on the right side of almost any trade. It must have been a long and scary ride for those who bailed LTCM out though.

And whilst it would have made sense to take profits earlier, with real money a person has far less chance of going bust. There are the Enron and WorldCom type exceptions. Leverage is a killer. So for new traders, the lesson should be to avoid excessive leverage (and derivatives).

And could've, should've, would've.....Yoda, Yoda, Yoda

Originally Posted by bobnat

As we used to say in Boston, if only my sister had balls she’d be my brother.

Great quote - Thanks for the laugh

[bobnat]

I absolutely agree about the leverage. It wasn't just the folks at LTCM but the banks, countries, and funds that gave them money and credit because they thought they couldn't lose. Pure, unadulterated greed, imo. It'll get everyone in the end.

Nat

[MickMason]

Originally Posted by glennki

Mick, Do you know of a book that tells the Barings story well?

Sorry no, I watched the film (Rogue Trader) and read a few online media reports, probably not the most accurate. I expect he's got an autobiography which would make a great read I imagine!

Mick

[glennki]

I'd like to add to my comment from earlier (extract below):

Originally Posted by glennki

"there is only one true measure of trading success. And that is the first option - pips gained/lost"

Measuring the number of pips moved (in your favour or against you) is a measure that is independant of the trader's account size, the leverage they use, and the position size that they take. And therefore it is a measure that is independant of the RISK that a trader takes.

There is another factor to consider, when adjudicating the number of pips gained, say per month, by a signal_service. And that is whether one has the capital to trade all the signals_.

If one signal_service gains on average 300 pips per month, and another 1000 pips per month, many people may be left with the impression that provider 2 is the better of the two, and will sign up there. But the number of signals_ issued, and consequently, the number of open positions at any one time, may not allow the subscriber to trade all the signals_ without over-exposing their account. (I am expecting a barrage of rebuttal at this...)

When one has entered trades based on the first few signals_, and has reached one's maximum risk level, some people may be tempted to enter trades based on further signals_ with a hope of achieving even greater gains. All that this does is bring on a greater risk of a margin call. Once again, leverage will be the killer if the multiple positions are highly correlated and the tide turns against one.

Therefore, I think that quality signals_ on 2-4 pairs with low correlation, are more useful than 16 pairs that are all against the USD. It's less effort and stress to manage fewer positions in any case. Perhaps a better measure of service is pips/number of pairs.

[MickMason]

Originally Posted by glennki

I think that quality signals_ on 2-4 pairs with low correlation, are more useful than 16 pairs that are all against the USD.

Good point, but do you think a relatively new'ish trader can juggle anything more than one pair (I'm assuming people who buy such a service are just starting out)? Also, spreads tend to get wider on crosses so would it be sensible to stick to the majors? The most popular pair must be Eur/Usd.


Mick

[glennki]

Well, most new traders whom I have come across don't have the patience to wait hours or days for signals_ on one pair, so they start jumping around multiple pairs, which leads to disaster. Personally, I can handle 6 pairs max then I get burnout or reach my risk limits. I prefer to stick to 4 pairs and do thorough analysis. I seldom trade 4 pairs simultaneously.

At a recent trader's support meeting that I was requested to attend, I was amazed at how equity EOD traders we analysing hundreds of stocks at a time. And then someone said he uses a magic thing called OmniTrader to do it for him. I gave up.

My opinion is that a totally new forex trader should start with analysing only the EUR/USD or GBP/USD, and then pick another pair with low correlation after a few weeks. My suggestion would be the EUR/JPY since the signals_ are normally wildly independant of the aforementioned pairs. But I have found the Yen a tricky one to trade in the past. However, as a learning process, I think the low correlation leads to some dispersal of entries and exits, so alleviates some of the impatience or boredom factor.

[MickMason]

Originally Posted by glennki

Well, most new traders whom I have come across don't have the patience to wait hours or days for signals_ on one pair

My opinion is that a totally new forex trader should start with analysing only the EUR/USD or GBP/USD, and then pick another pair with low correlation after a few weeks.

Sorry, I was talking more daytrading which I think is where most people start, 2 or 3signals a trading session on Eur/Usd is ample to turn a decent profit.

Yes, I agree, picking pairs from different markets is sensible, ie European and Asian.


Mick