From a Travelling Salesman to Forex Trader
CHAPTER – 1 “From a
Travelling Salesman to a Forex Trader”. 4
CHAPTER – 1 “From
a Travelling Salesman to a Forex Trader”
From a travelling salesman
to a forex trader, that looks like a movie tag line or a New York Times
article. But before you jump to any conclusion, let me make this simple for
you, it’s about me “Jacky Cheng” who happens to be a real person with some real
achievements. I would like to talk about my background but for starters let’s
just focus on why and how part.
As it turns out I’m
a successful sales manager who is hardwired to close the deal no matter how
many times people turn their back, well that’s persistence right there. I would
pose the same level of enthusiasm on the 100th door as I did on the
first 99 doors that were slammed in my face. Well, looking at those qualities
every boss would be thinking to have a person like me on their sales team and I
would be one getting all those promotions, pay hikes, bonuses, perquisites and
It looks like a
fairy tale of a travelling salesman who rose above his fellow salesmen, but to
be fair and realistic, it’s boring and rigid. I mean if you’re really that sort
of a person who is happy to carry along a monotonous job, making the same pitch
again and again like a robot then this book doesn’t worth your time, but if
you’re an optimistic person who believe in connecting the dots of past and make
something better then hang on it’s for you.
You see I was good
at what I did-people told me all the time. Most of all it was kind of
comfortable, as you can pay your bills on time, have great food, meet new
people and make a decent living. Then why all this fuss about finding something
more dynamic, more challenging and of course lucrative. It all boils down to
finding your passion, if you’ve got a spring in your step on the way to work
and you couldn’t wait to roll up your sleeves to get the job done then probably
you’ve find your passion. It wasn’t for me and at the same time I couldn’t give
up all the attention and comfort I was getting as a sales manager.
So how did I get
into forex trading, was it an advice from someone or it just occurred to me out
of thin air. Well nothing of this sort happened to me anyway, it was just a
thought of trying something crazy to make money online while not giving up my 9
to 5 full-time job. At least 100 different ideas came up when I started
browsing all the legitimate ways to make ton of money online, the ideas were as
crazy as it gets but it was one idea that struck like a lightning bolt.
As I said earlier I
don’t want to give up my full-time job and yet I want to make a lot of money,
the basics of forex trading will let you know why it struck me like a lightning
bolt. The FOREX (i.e., Foreign Exchange) market is an international market
where the money (currency) of every country is sold and bought freely. It was launched
in the 1970s the introduction of free exchange rates, and the price of one
currency against another that occurs from supply and demand is determined only
by market participants.
There is no external
control, and competition is free because all the participants can decide to
transact or not. In this respect, the FOREX is a perfect market because it
can’t be controlled or monopolized by any of its participants. The enormous
number of transactions executed day after day in a continuous activity make it
the biggest liquid financial market. According to various assessments, money
masses in the market constitute up to US $4.5 trillion a day.
Trading is conducted
all over the world through telecommunications and electronic networks 24 hours
a day, 5 days a week starting from 00:00. There are dealers quoting currencies
in every time zone through the main central markets: Frankfurt, London, New
York, Tokyo, Hong Kong, Australia, New Zealand, etc.
To get a better
understanding of FOREX quotes, you just have to know that one unit of the base
currency is equivalent to the exchange rate in the quote currency. For example,
if EUR/USD is trading at 1.2762, the price of 1 euro (base currency) in dollars
(quote currency) will be 1.2762 dollars.
FOREX trading is
conducted through individual contracts. The standard contract size (also called
a lot) is usually 100,000 units. This means that for every standard contract
you acquire, you are controlling 100,000 units of the base currency. For this
contract size, each pip (the smallest price increment) is worth $10. Many
companies offer mini accounts in which you can trade units of 10,000, where the
pip value is $1 or even smaller.
In comparison with
other markets, trading the FOREX market allows very low margin requirements
because of leverage. In FOREX, you don’t need to obligatorily buy a currency
first in order to sell it later. It is possible to open positions for buying
and selling any currency without actually having it at hand: For a standard
account size, usually Internet brokers establish a minimum deposit such as
$2000 for trading in the FOREX market and grant a leverage of 1:100. That is,
opening the position at $100,000, a trader invests $1000 and receives $99,000
as a credit.
For those wishing to
get started at a smaller investment size, many brokers offer a mini account.
The FOREX mini account offers smaller contract sizes controlling $10,000 units.
The usual account minimum to start a mini account is about $250.
With a mini account,
you only need $50 as a margin deposit requirement per every $10,000 lot traded.
The leverage is usually 200:1 (10,000 divided by 50 = 200), and in some cases
it can rise to 400 or 500:1 (you then would need even less margin to operate).
Thus, with $250, you could trade a maximum of 5 mini-lots; with $500, a maximum
of 10; with $1000, a maximum of 20; etc.
Now you see there
are “n” number of advantages of trading forex, one can argue that you can trade
stocks that are more glamorous and profitable. Well CNBC does bullshit on
stocks all day long, they hardly talk about forex trading, although forex rates
are constantly updated on a side bar but still they don’t do much of a show for
forex. Following key differences will highlight the fact that trading in forex
is far better than trading stocks given some special circumstances which are
individualistic in nature.
The FOREX market is always
open: Like some supermarkets
that are open 24 hours, the FOREX is a “supermarket” of currencies, open 24
hours a day, 5 days a week. The FOREX opens in most of the brokerage houses on
Sunday at 3 to 5 p.m. Eastern Time (ET) and stays open until Friday at 4 p.m.
EST (it must be borne in mind that the opening and closing—Sunday and
Friday—may vary from broker to broker). In this way, traders have the ability
to operate either in the American, Asian, or European markets, which gives them
the advantage of being able to react to certain events or news that is bound to
emerge and also gives them the opportunity to decide their schedules.
No commission is charged: Most brokers do not charge additional fees or commissions to buy or
sell currencies, whether online or by telephone. This is so because of the use
of a fixed spread that is consistent and transparent. The cost of a buy/sell in
the FOREX market is much lower than in any other market (e.g., stock, futures,
etc.). A side note to this is that because of the competition for narrower
spreads and faster executions, some brokers are providing very tight spreads and
extremely fast execution with little latency. In order for them to do this,
however, they are now starting to charge commissions. The commissions vary, and
with a little due diligence, you will be able to find just the right broker.
Orders are executed
instantly: In normal market conditions, the execution
of orders at a given price is done instantly. The trader places the order at
the quoted price, which is being updated in real time. There is no difference
between the price shown by the broker and the price at which the purchase order
is executed. There are special conditions, though, in which market volatility
is such that orders can be delayed or requoted, but under normal conditions,
there are no such delays.
There are no restrictions
on short selling: Unlike the stock market, the
FOREX has no restrictions to open sell positions (short). In the FOREX, there
is a chance to buy or sell regardless of whether the market is bullish or
bearish. Owing to the fact that in the FOREX there is always someone buying a
currency and selling another at the same time, there is no structural bias in
the market. A trader can operate both upward and downward in the market.
There are no
intermediaries: Stock markets that tend to be
centralized have advantages for the operator. But a problem with this is the
need for an intermediary between the stock market and the trader. However,
FOREX intermediaries do not exist, and thus the trader may buy or sell in the
FOREX market without physical intermediaries that can buy or sell a particular
pair at the time that they wish or think is appropriate. In the absence of an
intermediary, the trader gets higher profits at lower costs.
The market is not
controlled for buys or sells: The stock market
is more susceptible to speculation based primarily on rumors of buying or
selling by other companies. I can see this when a big company buys another
relatively smaller company, and the value of the company’s shares increase. But
the stock market is also likely to go down when you think that a company has
been making profits and that investors tend to take profits by selling the
The analysts and firms are
less influenced: The stock market is more
influenced by rumors of one company being bought by another. This is why
sometimes the firms or analysts can recommend a purchase of a particular share
when in fact such share will fall based on rumors of a takeover of one company
In the FOREX market,
analysts just base their studies on the market and are not influenced by rumors
of purchase: This is a market that generates billions
of dollars a day for banks and certainly is necessary for the success of global
Four currencies against
thousands of shares: In the FOREX market, there
are six major pairs, whereas in the stock market, there are thousands of
companies. So analyzing four key pairs is much easier than analyzing thousands
of companies. In the FOREX, obviously there are more than a hundred pairs, but
those that are the most subject to transactions include only six major pairs.
That was FOREX 101
in short, I learned it by reading articles, textbooks, watching video tutorials
and taking mock positions on FXCM platform which is free of cost for beginners.
So now comes the day of reckoning, the day when I entered into my first trading
position. But I dig into details it would be wise to know some basics of taking
positions in FOREX.
The position can be
set up from the start of the trade, with its individual stop-loss and
target-profit levels, or it can be managed as it develops. Setting and trailing
the stops, balancing partial profits, and shifting entry prices in pending stop
or limit orders are other ways of managing your trades.
A position will be
closed automatically when it reaches either the target profit or stop-loss set
price resulting in a loss. Positions also can be closed manually through
specific controls on the platform or by calling the broker directly. When you
close a position manually, you are subject to the same conditions as when
opening at market price, such as requotes if the prices have changed.
The pip or point
(percentage in point) is the minimum unit of movement of a currency. It
symbolizes a 0.0001 variation in four-decimal-based currency pairs, and a 0.01
increase or a decrease in two-decimal-based pairs. In this way, assuming that
the previous price is, for example, 1.2750 on the EUR/ USD and it rises to
1.2799, you will have a difference of 49 pips.
To determine the
amount of loss or gain on a particular trade, you first should set up the value
of a pip and then multiply it by the number of pips the currency has changed
for or against your position since the trade began. If the base currency is
increasing in relation to the quote currency, each pip above the price at which
you purchased it will be counted as profit. And vice versa, every pip that is
lower than the price at which you purchased it would increase your loss.
So initially I
entered into a long position on USD/GBR, after reading a lot of stuff and
engaging in mock trading for almost 3 months I was confident that I can make
some real money by spending 2-3 hours a day. All it requires is some unbiased
discipline and perseverance of following a thoughtful strategy and then
sticking to the same for a long period of time.
I began trading on a
daily basis and it occurred to me that this is something I wanna do for the
rest of my life on a full-time, just six months into real forex trading and I
was quite certain that I no longer wanted to carry along my comfortable 9 to 5
day job. So I quit my job and went on to become an expert forex trader.
You see I don’t have
a background in a forex market in terms of I have never worked in Hongkong
Stock Exchange or the Shanghai Stock Exchange or anything like that. I don’t
have a fancy business degree as such, so I think it the most important take
away is that anyone can become a successful Forex Trader, provided you have the
right application, familiarity with numbers and constant determination. I would
like to make a meaningful point here, no matter what is your background or you
went to business school, or anything like that because it’s not the case at