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Forex Gone Wild

Discussion in 'Forex Basics Boot Camp - Fx Articles by Pharaoh' started by Pharaoh, May 27, 2009.

  1. Pharaoh

    Pharaoh Colonel

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    Forex Gone Wild
    by Pharaoh
    (Currently in a 12 step program for writing addicts)


    An FPA reviewer known as Sydneysider left a link to the article in The Australian in a review for CMC Markets. One of the review moderators passed it to the AsstModerator, and he asked me to write about it. I'd like to thank all three of them for giving me the opportunity to write this.

    I have to admit that when I first read the article in The Australian, I thought it was pretty funny. Later, I realized that there was also a valuable lesson for traders in it.


    Sometimes, forex companies get out of control. Sometimes, a company gets control taken away from it by regulators. Sometimes a company can't control an urge to lie to clients. What happens when the tables are turned and the trader loses control?

    One of the most important lessons of forex trading (or any other type of trading) is to lean to control your emotions. No matter how good your broker is, how good your software is, or how good your system is, the very nature of the market means that you will see at least some trades go into the red. If you panic and lose control of your emotions, your losses will multiply quickly. There's absolutely nothing wrong with feeling angry, afraid, or upset if a trade goes badly. It's perfectly normal to have these feelings when things go against you. Still, if you can't restrain those emotions before clicking that mouse, you need to either learn better control or you need to find another way to make money.

    Of course, dealing with a brokerage that you feel has wronged you can be maddening, but in one case, the anger went way too far. Last summer, an unhappy client of CMC Markets in Australia took his anger (justified or not) beyond legal limits.

    Calling your broker and screaming is something I can understand and even endorse under extreme circumstances. If the managing director of your brokerage moves from a 1.5 million dollar mansion to a 25 million dollar (Australian Dollars - sort of like real dollars, but with a funny accent) mansion while your accounts are getting hosed, I could easily see that as a valid reason to become more than a bit disgruntled as a client. Even so, visiting your broker's offices on 2 separate occasions and making threats against the managing director and his family isn't a very bright idea. This particular investor got slapped with an AVO (apprehended violence order – Australian for “restraining order”) barring him from visiting the brokerage's offices again.

    Even though the CMC managing director in Sydney, David Trew, got his AU$25 million mansion and a restraining order to keep one seriously disturbed customer at a distance, that wasn't the end of the story. CMC ended up having major staff cuts last year and in the fall, Mr. Trew ended up stepping down and leaving the company. Under the circumstances, I would not be surprised if former employees were not just as big a potential problem for him as unhappy customers.

    I don't know if this particular investor's anger at Mr. Trew and CMC Markets was fully justified or not, but he definitely chose the wrong way to go about displaying his anger. There are plenty of perfectly legal ways to let a brokerage know how just how good or bad you feel about them.


    Original article in The Australian

    Article in Compare Shares about David Trew leaving CMC
     
  2. synaesthetique

    synaesthetique Private

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    Forex gone wild, eh?... SHOW ME YOUR PIPS!! *tosses beads* :p

    In all seriousness, its probably a good thing CFDs are not allowed in the US else we would probably have many more stories like this one, or worse, popping up on this side of the pond.
     
  3. blackwidowfx

    blackwidowfx Private

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    CMC - bad bad broker

    I was reading CMC review posted by ex clients, and as soon as you can see problems to withdraw your own money - run from this broker immediately.
     
  4. Gerhart

    Gerhart Recruit

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    Beware of CMC

    Over here in Germany, CMC are drumming their CFD trading very agressively. Germany is "silly money wonderland", as CFDs are allowed, although they are very high risk trading instruments. Many people are not really informed what they can lose when using leverages of 1:100 or more. Just a bit more than their investment...
    One of my friends lost 150k Euro in a demo account, and he is an excellent trader doing successful trading for many years.
    If you "google" for CMC markets, you get a clear picture of that company. Many people lose money due to ( I am just being careful...) "strange" events in their accounts.
    For someone with some IT background, it is clear to see that looking into somebody's trading activites, scanning their stops and creating "spikes" through automated software is as easy as can be. There is a short dely of ca 3 seconds to real time data which is more than sufficient to manipulate data.

    I opened a demo account with some other CFD broker here, and as soon as I started the platform and began trading, suddenly a window popped up and some employee started chatting with me. He knew my name and knew that I was online trading.
    In the meantime, my chart window had gone, I had this silly guy's chat instead. Now figure out yourself what happens if you trade with real money...
    It goes without saying that I deleted my account and will never ever start doing business with them.

    Needless to say, the owner of CMC markets is one of the richest persons in Britain.

    Stay away from CFDs, it is a losing game for traders. Winner takes all, which is always CMC or some other broker.

    Take care...if it looks easy, it isn't. And: there is no free lunch, never.
     
  5. Aldragon

    Aldragon Recruit

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    That´s funny , I was just telling a friend today not to be emotional while trading , anyway it´s widely known that 95% of the people go red on their final balance.
     
  6. SAMMYFX

    SAMMYFX Corporal

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    Any solid article on forex psychology? Most traders fall victims of emotions while trading.
     
  7. ernest8fingers

    ernest8fingers Master Sergeant

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    I think I disagree

    I have heard all the same old crap about people (95%) losing their money in Forex-I believe it is mainly due to 95% of brokers being thieves . Dozens of "little" tricks practiced to perfection. I have cruised this forum for years and I can see only a very few OLD names. The rest are all gone! A few made money and bailed-many more didnt and bailed-and a few (like me)realized the futility of full time Forex Tradering and are about to bail. I now treat this market as a casino more than an investment(this is due in whole to the "Broker"problem-they cant be trusted!)
     
  8. dechap

    dechap Recruit

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    The emotion of fear and anger are traders' worst enemy. A friend of mine will always say, put your emotions in your hip pocket while trading.
     
  9. Pharaoh

    Pharaoh Colonel

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    I think the high failure rate among traders is a combination of the lack of several things.

    1. Lack of basic education. If you don't know that a triple top is going to be solid resistance, you could go long just below it.

    2. Lack of understanding of money management. Increasing your trade amount increases potential profits AND potential losses. "All in" might be fun at the Friday Night poker game, but it's financial suicide for a trader.

    3. Lack of emotional control. Just because you lost the last two trades doesn't mean the marker owes you a good trade. The market doesn't care about your prior trades. The market doesn't care if you win or lose. If you can't remember anything else about emotions while trading, remember this: If you are angry at the market, don't trade. If you are considering driving over to your broker's office to make threats, don't trade.

    4. Lack of a trustworthy broker. I am pleased to see more brokers moving towards STP and ECN models, but still don't trust them. Imagine for a moment that you are a broker with 1000 clients who trade 1 lot per day of EUR/USD. If you arrange for them to have 1 pip slippage ($10) on entries and exits, that's $20 per trade ($10 on entry plus $10 on exit) times 1000 traders = $20,000 extra profits every day. A lot of brokers have many more traders who trade a lot more money. The temptation to do even a 1 pip manipulation of price must be huge.
     
    #9 Pharaoh, May 29, 2009
    Last edited: May 29, 2009
  10. geoffrey

    geoffrey Private, 1st Class

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    Emotions And Anger Are Indeed Influential Factors

    I will want to agree wholly with Pharoph. The moment a trader graduate from demo trading to live trading emotion seems to play a dominant factor; to make more within a short possible time or to avoid negative trend. This indeed leads to frustration and anger. This anger is extended to the broker especially when tradings are not favourable. I think we should always remain calm knowing that trend will always not remain one sided.

    The very fact of this emotional reactions during trading is because a lot of traders most at times are mis-informed of the reality of what is obtainable in forex trading. They are only given the positve side in trading and the moment it turns against them, emotional reactions becomes inevitable.
     

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