In this episode of Truth About FX, Walter bring up the topic about what might become of forex trading in the future in terms of technology, government regulations, and education transparency. He takes a quick backtrack on what forex trading was like back in 2000s when people were selling systems and how brokers made money out of it instead of actually interacting with the markets.
Hugh also shares a memory back when he was in high school and how two different soccer coaches helped him shape his strategy and trading psychology.
In this episode of Truth About FX, Walter talks about what he thinks forex would be like in the near future in terms of technology, government regulations, and trading education. He shares some of the reasons why forex traders would leave US, for example, to trade in Australia or Singapore and how business regulations in a country can affect that decision. Walter also taps on the subject of transparency and the reasons why top traders show — or why some wouldn’t show — their trades to online audience.
Hugh also reminisce his high school soccer coaches and how this story reminded him of an important trading principle.
Download (Duration: 15:00 / 17.1 MB)
In This Episode:
00:42 – future FX
02:07 – selfish point of view
03:02 – out of the box
05:21 – a little dodgy
08:39 – facebook account
11:57 – “so what?”
13:33 – mechanical mind
People don’t necessarily see the market in the same way. [Click To Tweet].
Just because you are a good trader doesn’t mean you can explain everything. [Click To Tweet].
Ask yourself: will it fit with my view? [Click To Tweet].
Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.
Hugh: What’s up, Walter? How is it going there?
Walter: Pretty good, Hugh. How about you? What is going on in your life?
Hugh: Pretty good! I am doing this from Estonia right now so it is early in the morning but it’s all good.
Walter: Brilliant! Really early?
Hugh: Yeah, really early. So today’s question is what kind of things you would like to see in the future FX be it software, regulations, education? What is on your mind right now?
Walter: That is an interesting question because I think what we’ve noticed, like you’ve been around currency trading for the long time and I spent watching the markets at least in 2000. And so, you probably noticed like a lot of changes in terms of the way that different governments approach regulations and the different governing bodies or semi-regulatory bodies that have taken over currency trading.
In the Wild West days up until 2005, or from 2000-2005, it was like everyone was a broker and it didn’t take much to open up a brokerage and there a lot of dodgy stuff going on — there still is I think.
Then the next phase is the regulators come in and they clean up. At least in the US, they’ve gone a little bit too far, one way..
Hugh: Yeah, I agree.
Walter: As you know in other place, or other country, it is not as designed and as regulated as it is in the US.
A lot of those brokers, I know they just left. They left the US and they went to places like Hong Kong, London, Sydney and things like that because it’s just wasn’t worth it to do business there. They’ve regulated the business out of there.
So we’ve seen that but, I guess what I would like to see from a selfish point of view for traders out there is I would like to see those people who are selling systems or education. I would like to see them pull back a little bit instead of saying things like “this is the best system” or “anyone can make money out of this” or whatever.
I’d like for them to say the truth which is that we don’t necessarily all see the market in the same way. Just the same way that you might meet somebody and think “Wow!” You know right away that you’re going to be good friends with that person and I might meet the same person and say “Gosh! He just keeps getting on my nerve” or whatever.
It’s the same thing with trading systems, we don’t really recognize that. In the industry of trading education and trading systems, people will sell these things, they make it sound like you can just open up these things, bring it out of the box and just use it.
That is just not true because we end up trading our beliefs. I’d like to see a little bit more transparency in terms of what it takes to trade a system long term. Let’s say you are trading a system for seven to twenty years, that to me is a system that is good for your belief system.
Instead of telling people that anyone could do this and it’s so easy, just wait for the green light for a buy or red light for a sell or whatever. It is just not true because people have to feel like they are in control, at least most traders had to feel like they are in control.
You’ve got to allow the person to dictate at least how they will interact with the market. That is one thing I would say is that the transparency in the sales process where people are looking for trading systems and looking for education, I think that would serve traders well.
Also, in the long term, it would also help the vendors who sell the stuff because they wouldn’t get so much refunds and it wouldn’t have bad reviews if they allowed for different types of personalities to come in for you to, basically, take like Hugh.
Hugh, you are a swing trader, right? So, “Okay, here we’ve got some swing system over here for you” or, “Hey, Martin. You are a trend trader, here is some trend trading system for you”. That is the kind of thing that I would like to see where you could match up the trading beliefs to your trading system.
What about you, Hugh? What have thought along those lines?
Hugh: Along those lines, I think it’s been the classic problem in, not only in trading education, but just education in general, for anything, and I think that it definitely needs to be a lot of transparency.
I mean, especially if you… I don’t know if you’re on Instagram or whatever but I’m on there once in awhile, not necessarily for trading stuff but I see traders portraying fabulous lifestyle or whatever. Some of them are actually living that lifestyle but there’s other people and I’m like “I don’t know, it does not feel right to me”.
Definitely, marketing is a little dodgy but one question that came up to me when you’re talking was if I was somebody listening to this podcast for the first time and maybe I’m new to Forex or trading in general, when you say “transparency” what do you think about people who don’t like to publish their track records or whatever?
Walter: Right, that is a good point. Here is the thing you have to think about that. There’s a couple of things here: one is if you don’t publish your track records there could be a number of reasons. One that comes up the most is going to be he/she is hiding something or he/she does not make mone. That’s the big one.
The second thing is, if you manage money, there can be some legal implications along those lines too. That is something that people do not think about. Like for example: say, Hugh, you are managing $35 million USD and you are trading your client’s money, it’s a little bit tricky for you to reveal that for a number of reasons.
One of them would be you basically do not want to affect your markets. Though one of the things you look for when you start to build up your account is you have to look for a really good broker who is not going to reveal what you are doing.
Basically, will give you the liquidity you want and also not going to step on your toes or make it difficult for your system to continue to work because that is the biggest thing that comes up with trading your skill and ability.
Beyond that, I mean talking about the track record, there’s a couple of reasons why they won’t do it. One is they are not making any money. Two is the lawyers have told them don’t do it. Three is they will tell you that you are a little bit concerned about someone’s background engineering.
I do not really think of it in terms of like “Oh, if people figure out how I am trading, it is going to ruin the markets and the systems”. It is more about your broker. If you are not trading in an interbank market and you are still using like a retail forex broker or a bank or something like that, they can do a whole bunch of things and make it difficult for you so if they know, they can figure out what is going on.
Let me give you an example: let’s say that you’ve got your $35 million fund and you’ve got an account with the Bank of America. Now, I am at trading desk at Bank of America and so if I see “Oh, here’s Hugh. They are going to long EUR and looks like at this price”.
Even though I could actually put some orders on in front of yours, right? You know what I mean? I could do that and could do a lot of things because if I’ll say “Hugh’s right 79% percent of the time, I might as well piggy bank on that”.
That could affect the market. I could get in just before your order gets triggered or whatever, all of those things that you watch out for. There’s a number of reasons why people wouldn’t do that.
I think another one that comes up — I have a friend who recently posted his trade results on his facebook account — the other thing that happens is all the trolls come out and that’s what happened to him when he posted his results up there.
He thought it was pretty good because I think he was making a dollar-eighty five for every dollar at risk. He’s at one point A and then he had around a 50% win rate. His whole thing is like it does not really matter.
He has a unique approach, he does not believe in analyzing a trade and deciding whether to take it. Basically, he just takes a whole bunch of trades and he knows that a handful of them is going to work out and they are going to be the big winners.
That is basically how he trades. He is like a trend follower who takes every single breakout and expecting it to be the next huge trend. He does that, not quite that but kind of like that.
What happened to him was he thought it was pretty good, 51% win rate or whatever, and it was. He was making 1.8 then all of these trolls come out and start telling him he’s doing wrong like, “Oh you need to do this just because your exits all wrong.” You know what I mean?
Sometimes it is just not worth it. Obviously, it’s just not worth it to get that. I get a lot of that too from people who go “Hey, Walter! You don’t trade enough” and “How are you going to compound your money if you’re trading the daily chart?” and things like that which is funny.
I mean, I just took a four-hour chart last night. I don’t always trade the weekly and the daily’s but I think some people, even if they do make money, they’re just like “so what?” They don’t have anything to prove to anyone and it’s not worth for all the trolls to come out.
If you talk to famous people who were in Twitter, they get these same things to even greater extent. They get all these trolls even like semi famous people, like D list celebrities, they get trolls on Twitter and stuff.
The thing is you can post your results for four years every single trade and people would still find a reason why you are an idiot trader. They just want to pull you down. It’s one of those things like you get to a certain point and people… I think part of it is they feel like they should be doing better as a trader.
Maybe they are not even making any money so it feels good to pull someone else down, like pull them down one level and then now I can see or whatever. I think a lot of that is going on, I don’t know.
There is definitely more going on there than you would think because the gut reaction is “Look, trader Joe is not posting his trades so obviously trader Joe is a fraud.” But, I can say there could be a little bit more going on there in terms of this trader Joe worried about his broker, stabbing him in the back.
This trader Joe manages money and his lawyers says don’t do that. This trader Joe is worried about the trolls are going to come out and tell him how he only made 30 pips that day and they made a 150. You know what I mean?
All that stuff just works into it. My thing is it does not really help you in any way because of a couple of things. One: so what? Hugh, you post your result, you made 2,500 pips last month. So what?
Does that mean that you are going to be able to teach that to me? That is the other piece that people forget. They think that I want to go learn from that trader who made 12,000 pips last month or 33% last month.
Well, can he even explain that to me so that I could do that? Even if he can explain it, will it fit with my view? Are that going to match it up? That is another piece that people forget.
They forget that just because you are a good trader, does not mean that you can explain things and anyone who’s tried to have a conversation with someone like a deep mathematics person knows what I am talking about.
Hugh: That reminds of my high school soccer coaches. I have one coach who used to be in a Colombian National Team. He played in World Cup or something, too. I had another coach who didn’t know how to play soccer though but he knew the strategy and everything.
The guy who was the World Cup player was like the worst coach because he get frustrated at Jigger because he can’t do a simple thing that he thought was simple. The other guy, he knew the strategy and he knew how to manage player’s personalities and stuff like that and we did better under that guy. I think that is perfect example for what you are talking about.
Walter: Yeah. That fits the research in Psychology where you get to a certain level of expertise and it’s really hard for you to know what you are doing because it is so mechanical.
That is probably what your soccer coach — the one who was at the National Team — was doing. He had so ingrained those skills that he actually couldn’t really even explain what he was doing. It’s classic.
What you need is somebody who is one, someone who’s been asked the question so many times that they’ve thought about what they’re doing and they realized what they’re doing even though they’ve done it automatically.
Or two, if you get someone who is not a beginner but sort of that intermediate level and they are still aware of what they are doing. It is when you get to the expert level that it becomes so mechanical. It is almost like automatics.
That totally makes sense and I am glad you pointed that. It was a great example for people, Hugh, because a lot of people listening to this are probably thinking “I just want to find a trader who made the most money last month and learn from him”.
Well, I do not know if that is really going to help. Let’s see how. You could try it and then see how it works for you. I’d love to hear comments from people under this episode who tried to learn from really, really good traders and just let us know how and what happened.
What was your experience? Was it good, positive or maybe not? Great question.
Hugh: Cool! We really appreciate the in depth answer here. See you next time.
Walter: See you.