I have been reading up on FX trading recently. And I am wondering why most retail trader lose money. From many places people say that automated trading strategy outperforms discretionary traders? Is that really true Does Technical analysis really work on FX? How does hedge fund trade FX? Thanks a lot if someone can shed some lights on my doubts. If retail FX traders are losing money, it follows that someone else is making it, question is can it be you?
Some FX algo traders are making real money but the nature of this activity is that any given strategy either fades or gets mined out. Some FX traders are executing trades either directly for clients or as part of a service provided to them.
The impression I get is that more money is made from this than prop FX trading of both manual and algo kind. Also there is now a blurring between and robots and humans, a human may decide on the strategy based upon macro factors or some other model and a machine will execute it to get the best prices.
Depends upon what you call TA. Some techniques such as mean reversion can produce positive returns but I'm in general skeptical of it. At my last firm the TA stuff was most eagerly read by the people who sold stuff to clients because it can make a good sales pitch. Also I've seen studies based upon how TA traders trade and it seems often the case that they genuinely believe they are TA trading, but their actually trades tell a different story.
TA is rubbish, but in some markets the participants believe in it so much that it actually effects prices. In FX and commodities, for instance. They will buy what their client is selling and visa versa. The money they make is mostly of fees. It is purely market making business with a very quick inventory turnover rate. Sometimes they will hold positions longer if they know or think a client might be thinking of doing a trade in a little while. Almost all positions are hedged.
At hedge funds it's purely prop trading. They take outright positions without hedging all legs or some legs and aim to make a money based on direction or whatever factor they are using.
Almost all traders at banks and hedge funds use TA. Paul Tudor uses technical analysis. The thing people don''t understand is what kind of TA are they using. They don't use a moving average to trade. It's more involved then that but almost all trading is based on TA. In my opinion, technical analysis is just a tool that, when used with expertise and discipline, can tilt those odds in your favor.
Of course, it's not gonna work all the time. That's enough to make money in the market. You just have to find what's right for you. Everyone in my office uses TA to trade profitably. AlexandreB , myownstrategy , soliton and 2 others like this. Couple of articles that proved discretionary FX trading is dead when competing with automated agents. You must log in or sign up to post here. Your name or email address: Do you already have an account?
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