are you a gambler? no, just a FOREX trader

:lol
FOREX is my new hobby. By a twist of fate....nah, just by coincidence my sister heard the ad and wanted to drag me along.... I signed up for a free course in which they introduced students to basic FOREX concepts and practices, and promoted subscription to ProAct, a FOREX charting software to help guide traders in market direction, but that's a topic for another blog entry.

Now, for this post, why do I think FOREX is risky, yet still happily explore it?

First of all, since I was lucky enough that the FOREX club I belong was able to negotiate with the broker to allow their students to open and play around with the micro accounts if they wish. Micro account means we're trading at 1/100 the standard cost. Fair enough, I opened a $500 account with FXDD (www.fxdd.com) to play with, since paper-trading isn't doing too much to my blood (or blood pressure :P) and I can't learn too well that way. $500 is still small enough for me to risk, as a tuition to my learning. It would have been a whole different mentality if I had to open a $50000 account to learn FOREX trading!!!

The FOREX risk factor?
Lets look at traditional stock trading, say you'll need to lay out $100 to by a share of $100 stock. It is a 1:1 leverage. If that stock goes up or down 1%, your gain/loss is $1. The riskier stock traders sometimes trade on margin, so you'll be trading on 1:5, 1:10, 1:25 margin, yeah? And be very careful when there's a margin call. In FOREX, the leverage is typically 1:100 (or 1:200), that is a huge leverage power, which also translate to huge risk. When I lay out $100 I can buy $10000 worth of currency, and when that currency pair fluctuates by 1%, you either double your investment or wash it out.

Why is it still ok to trade?
Because if you can train yourself to be disciplined, statistically if you don't trade more than 2-5% of your account, then you'll be very unlikely (1/million probability) to bankrupt your investment. It sounds small I know - but if you think about the 1:100 leverage, that 2% already allows you a buying power double the amount of your investment.

Like the stock market, FOREX market is speculation based. Market goes up and down every day, so there's opportunity for trades every single day; so don't worry about missing out, just concentrade on discipline, discipline, discipline.

FOREX market opens 24/7, Sunday 1pm through Friday 1pm, and you're not limited to trading only in the US market (New York), you're trading global market. I can typically trade the London opening market (which opens around midnight PST) and New York openning market (which opens 5am PST, 8am EST), to work around my day job.

Am I winning so far?
Well, what do you expect? :P
With my $500 account, I was down to $450 at one point and up to $630 at one point. I credit and blame it to my learning curve. I am still a student nowhere remotely close to an actual trader, leave alone a professional trader. Though I can unbiasedly say that so far the winning trades seemed pretty good, where greed and inexperienced reaction contributed to many or most of the loosing trades.

I will be VERY VERY nervous, though, when I start making good profit on my tiny $500 account, and ready to advance to the real account. I will probably be trading with a slightly different mentality and slightly skewed discipline, though I try not to o_o