Have seen a couple of quotes like this one that I find myself questioning.

It seems to me in Forex (and almost all other markets) you have end users who desire to own the product that the market trades in for reasons that are independent of whether they think it's overvalued or undervalued.

Central banks I guess make trades to change alter the value of their currency relative to another. Hedge funds, though I suppose they often do straight currency speculation, may simply be hedging against currency risks in what they consider to be their real investments.

This is why you can make money doing scalping or market making: you are offering liquidity in exchange for a spread (credit to RedMan).


If this were truly a zero sum game where you guys were all competing directly with billionaire funds and there were no end users who knowingly make trades that are intrinsically -EV, you guys would all be ****ed.


[I may be off on all of this, I don't trade or follow forex or anything. I just think the concept of a zero-sum game is often misapplied to many, maybe all?, forms of trading.]

I agree with MM. You always have those who need the product and fuel the market. If you trade the future, you don't pay the spread either, just commission, and it's a larger market. I still haven't seen any real benefit of trading spot Forex over the future. But the point being, when a large company wants Euros, they want Euros. Yeah, their broker can play around a little to get a better price, but he needs to have those contracts purchased by a deadline.

To boot, I don't think you need to jump into the deep end for other reasons. You can build on your knowledge by focusing. First, learn to read price... it's definitely not that simple and will take you months/years depending on how much time you devote to it. I've undergone 4 months of full time study and am just starting to understand the things I don't understand (what to work on etc).

From there you just pick one simple setup, understand why it works, what market context makes it work, backtest the **** out of it then trade it live in simulation until you're sure you're profitable. Rinse and repeat.

In a way, the training wheels for Forex are better than those for poker. Play money just isn't real poker at all. While simulation trading also has some drawbacks, like no slippage etc, it's my opinion that it isn't hugely different. Plus there are ways to manage slippage that you can learn along the way, it's not necessarily a continuous problem, although that's highly dependent on your style of trading.

i'm a discretionary forex trader. i don't use 6 pip stops. when possible i go for 1000+ pip moves with reasonable stops. i guess you'd characterize me as a "gambler" even though my risk of ruin with my strategy is pretty small, but anyone including you can lose lots and lots of trades in a row...it's a possibility.

i think you may be underestimating the skill needed to employ the strategy you list above. you're not matching buyers and sellers - keeping your net exposure at nil. instead you're using your experience and intuition when you believe the spread has widened, and then you take a position with a stop 4 ticks away and a limit about 8 ticks away and repeat again and again. you won't make a lot of money but hey you won't lose a lot of money. and if you're an IB with a self traded account you get what's effectively rakeback and boom there's where the real money is. am i way off here?

I don't think you're off. It's not easy at all. My 4 months of study is worth years of study as most people have to do it (with family and job obligations). I do have family obligations, but no job obligation... so I spend about 60 hours a week focusing on improving at trading.

It's just been this last week or two that I really have started to understand what needs to be done to make good money. That said, even today I made some very fundamental errors... so I don't think you are off by saying the above strategy is very difficult. I'd like to think that I'm not underestimating it though, and if sounds like I'm understating the difficulty then I'd definitely like to clear that up.

I would only partly agree with what you said that I'm using experience and intuition. I think I use as much objective data as possible. My big picture ideas are pretty simple, straightforward, repeatable. Upward momentum at support is going to be really tough to break and vice versa. The execution can get a little hairy at time, because as you said, that's the incredibly difficult skill to master.

So yeah, my goal isn't to scalp a bajillion "setups" it's to read market context and put myself in extremely high probability situations. I'm extremely confident it can be done, and I've seen it done. To have a string of 20 losses with a 60% edge is nearly impossible. Make that 70%, 80% and even a string of 5 losses becomes really tough to happen.

IMO, we will never have an accurate comparison between trading stocks and poker because the people who are actually good at poker and still successful don't have any incentive to be learning trading from scratch or posting a buncha rhetoric ego-stroking on this msg board about it.

Thus, we are left with mostly people who weren't making that much money in poker or those who failed/stopped winning at poker who decided to switch... so their perspective on how hard forex is relative to poker will be considerably different than how easy forex may seem to the actual winning poker players. I don't see anyone that's actually winning at poker and continuing to improve and get better switching over to trading to start from scratch, so most of the people who have probably aren't that good at poker TBCH.

Getting pretty leveraged up last week in forex turned over a new leaf in psychological realizations. I noticed when everything was good in forex, it was like another decent day on the tables. Things started to go bad towards the end of the week and I just wanted out. Its like big mtt scores in poker, I just think you should be pretty excited when u win 50-100k+ but its just not really the case. You just have some extra cash and life goes on. But the poker loses hurt much much more then the win which is standard according the gambling studies. The psychological panic in forex though (real or perceived) made me realize some weaknesses in my poker game. Obviously not tactical stuff, psychological stuff. I just didn't think trading some forex was going to help my poker game, but it was a true paradigm shift.

Just my random thought

its pretty sick that it took me 5 min to write this, and it posted right after u boobies.

fwiw, there are a few people who have posted itt that do both successfully. It's not my business to point out who they are and force them to give us a "The Well", but they exist. And I'm definitely not counting myself as one.

masterLJ,

your not the themasterJ33 or something like that right

TL its definitely not easy (in fact I think its harder than most trading strategies) however you nailed the one major advantage, you never ever get hit for a large number. Its a really huge advantage, you can trade much larger sizes than you might with other strategies because of that. A bad day for me is down a few ticks and commissions which is about half the size of a winning day.

x_____x,

Nosir, but I believe that guy plays HU a bit. I played professionally (mostly HU) for 3-4 years and am transitioning to trading.

I guess to be concise and to sum up why I personally like trading better than poker, is because you can manage risk much much better. In poker, your ability to manage risk is extremely limited. Sometimes to protect a $100 investment you have to gamble an additional $1k (think 3betting with AK in 6m and being 4bet at 5/10 or whatever).

In trading, you have tons more ability to do this. You're never forced to take a trade.

sounds like you are mislabeling your strategy as a market-making strategy when really it's a scalping strategy right?

It is absolutely scalping. I don't think I ever said different =)

Never said it was MM'ing, it relies on the spread though. I mean pure MM'ing is dead if youre not a HFT no? At least thats what mrbaseball seems to say.

redman said something about a "simple variation on market making" and it didnt really jive with me as actually market making.

sounds a lot like professional grinding DoNs exclusively.

I understand the point you're making, but all currency transactions (and all market transactions) for non-speculative purposes are taking place within the context of the broader market. Thus, when I'm purchasing a currency or stock or whatever, I'm not setting my own price for what I'd be willing to buy it at. The market has arrived at a price so my impact (absent ridiculous size) should be minimal. Ignoring the percentage of these non-speculative transactions that take place in currencies and other markets (which is pretty small), you're competing with every other trader for every inefficiency.

Put another way, if you are playing poker heads-up against a fish, it's easy to take their money because you are the only person competing for that opportunity (inefficiency). In contrast, if you've identified an inefficiency in a market, it's basically a race to the bottom in terms of what margins you find acceptable vis a vis other market participants who have identified the same inefficiency.

Even if it follows that one is purchasing an asset for a non-speculative purpose, I think it's reasonable that that person "lost" if the counterparty buys back the asset cheaper. Of course, every transaction will have these winners or losers based on different timeframes which is what makes trading so interesting.

Tony,

do you feel scalping is the same as short stack bum hunting 5/10NL with 200 buck bullets?

yes, if the player leaves the table every time he reaches $450 so you'd either lose 200 or make 250.

(slightly) more respect for the guys who come in with 200 and wait till they hit 1000 before cashing out. that would be like a 10 pip stop loss and 100 pip limit on every trade.

I don't know any of the scum bags that don't insta leave after they hit 450 and sit 200 at another table. The guys that take the bi weekly shot with 200 are fine, but they are few and far between.

i can just feel the love in this thread, i can see the point about liquid money the scalpers provide but even sum game blah blah.... i don't have an opinion yet.

imo if you're not bumhunting the markets, you're doing it wrong.

my personal opinion on this:

employing a strategy where all you do is take profit or loss within 1/10 of a cent of the open price means you must have almost no confidence in trading markets. sure scalping profitably is a skill, but if you can master the scalp, you can learn to trade in longer time scales where potential profits are much much higher.

there's a reason why lepatata* soros and buffett don't scalp.

*(i scalp when the market is unambiguously ripping to one direction...big leverage...small stops and limits)

I feel like we are now debating which flavor of pie is superior.

Scalping endgame can be wildly profitable on something like the ES or whatever. You can throw around a ton of cars and make lots and lots of money.

People have very different goals about what they want to get out of trading/life, so it's hard to say. But you even said it, you feel that if you learn to scalp you can apply it to bigger and better things. Personally, I'm still in the learning process.

1/10 of a cent is pretty sick. that could be more like the guy that plays one hand hu, steals your BB then hits the road. Already feeling tilted.

Good call with the gold tony, scooped this morning at 1187

It's leveraged.

That could be $12.50, $25, $100... or even $2500 per 10th of a cent.

i cut my gold longs during the 11am mini spike (early as usual)