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Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
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Former investment bank FX trader: Risk management part 3/3

Former investment bank FX trader: Risk management part 3/3
Welcome to the third and final part of this chapter.
Thank you all for the 100s of comments and upvotes - maybe this post will take us above 1,000 for this topic!
Keep any feedback or questions coming in the replies below.
Before you read this note, please start with Part I and then Part II so it hangs together and makes sense.
Part III
  • Squeezes and other risks
  • Market positioning
  • Bet correlation
  • Crap trades, timeouts and monthly limits

Squeezes and other risks

We are going to cover three common risks that traders face: events; squeezes, asymmetric bets.

Events

Economic releases can cause large short-term volatility. The most famous is Non Farm Payrolls, which is the most widely watched measure of US employment levels and affects the price of many instruments.On an NFP announcement currencies like EURUSD might jump (or drop) 100 pips no problem.
This is fine and there are trading strategies that one may employ around this but the key thing is to be aware of these releases.You can find economic calendars all over the internet - including on this site - and you need only check if there are any major releases each day or week.
For example, if you are trading off some intraday chart and scalping a few pips here and there it would be highly sensible to go into a known data release flat as it is pure coin-toss and not the reason for your trading. It only takes five minutes each day to plan for the day ahead so do not get caught out by this. Many retail traders get stopped out on such events when price volatility is at its peak.

Squeezes

Short squeezes bring a lot of danger and perhaps some opportunity.
The story of VW and Porsche is the best short squeeze ever. Throughout these articles we've used FX examples wherever possible but in this one instance the concept (which is also highly relevant in FX) is best illustrated with an historical lesson from a different asset class.
A short squeeze is when a participant ends up in a short position they are forced to cover. Especially when the rest of the market knows that this participant can be bullied into stopping out at terrible levels, provided the market can briefly drive the price into their pain zone.

There's a reason for the car, don't worry
Hedge funds had been shorting VW stock. However the amount of VW stock available to buy in the open market was actually quite limited. The local government owned a chunk and Porsche itself had bought and locked away around 30%. Neither of these would sell to the hedge-funds so a good amount of the stock was un-buyable at any price.
If you sell or short a stock you must be prepared to buy it back to go flat at some point.
To cut a long story short, Porsche bought a lot of call options on VW stock. These options gave them the right to purchase VW stock from banks at slightly above market price.
Eventually the banks who had sold these options realised there was no VW stock to go out and buy since the German government wouldn’t sell its allocation and Porsche wouldn’t either. If Porsche called in the options the banks were in trouble.
Porsche called in the options which forced the shorts to buy stock - at whatever price they could get it.
The price squeezed higher as those that were short got massively squeezed and stopped out. For one brief moment in 2008, VW was the world’s most valuable company. Shorts were burned hard.

Incredible event
Porsche apparently made $11.5 billion on the trade. The BBC described Porsche as “a hedge fund with a carmaker attached.”
If this all seems exotic then know that the same thing happens in FX all the time. If everyone in the market is talking about a key level in EURUSD being 1.2050 then you can bet the market will try to push through 1.2050 just to take out any short stops at that level. Whether it then rallies higher or fails and trades back lower is a different matter entirely.
This brings us on to the matter of crowded trades. We will look at positioning in more detail in the next section. Crowded trades are dangerous for PNL. If everyone believes EURUSD is going down and has already sold EURUSD then you run the risk of a short squeeze.
For additional selling to take place you need a very good reason for people to add to their position whereas a move in the other direction could force mass buying to cover their shorts.
A trading mentor when I worked at the investment bank once advised me:
Always think about which move would cause the maximum people the maximum pain. That move is precisely what you should be watching out for at all times.

Asymmetric losses

Also known as picking up pennies in front of a steamroller. This risk has caught out many a retail trader. Sometimes it is referred to as a "negative skew" strategy.
Ideally what you are looking for is asymmetric risk trade set-ups: that is where the downside is clearly defined and smaller than the upside. What you want to avoid is the opposite.
A famous example of this going wrong was the Swiss National Bank de-peg in 2012.
The Swiss National Bank had said they would defend the price of EURCHF so that it did not go below 1.2. Many people believed it could never go below 1.2 due to this. Many retail traders therefore opted for a strategy that some describe as ‘picking up pennies in front of a steam-roller’.
They would would buy EURCHF above the peg level and hope for a tiny rally of several pips before selling them back and keep doing this repeatedly. Often they were highly leveraged at 100:1 so that they could amplify the profit of the tiny 5-10 pip rally.
Then this happened.

Something that changed FX markets forever
The SNB suddenly did the unthinkable. They stopped defending the price. CHF jumped and so EURCHF (the number of CHF per 1 EUR) dropped to new lows very fast. Clearly, this trade had horrific risk : reward asymmetry: you risked 30% to make 0.05%.
Other strategies like naively selling options have the same result. You win a small amount of money each day and then spectacularly blow up at some point down the line.

Market positioning

We have talked about short squeezes. But how do you know what the market position is? And should you care?
Let’s start with the first. You should definitely care.
Let’s imagine the entire market is exceptionally long EURUSD and positioning reaches extreme levels. This makes EURUSD very vulnerable.
To keep the price going higher EURUSD needs to attract fresh buy orders. If everyone is already long and has no room to add, what can incentivise people to keep buying? The news flow might be good. They may believe EURUSD goes higher. But they have already bought and have their maximum position on.
On the flip side, if there’s an unexpected event and EURUSD gaps lower you will have the entire market trying to exit the position at the same time. Like a herd of cows running through a single doorway. Messy.
We are going to look at this in more detail in a later chapter, where we discuss ‘carry’ trades. For now this TRYJPY chart might provide some idea of what a rush to the exits of a crowded position looks like.

A carry trade position clear-out in action
Knowing if the market is currently at extreme levels of long or short can therefore be helpful.
The CFTC makes available a weekly report, which details the overall positions of speculative traders “Non Commercial Traders” in some of the major futures products. This includes futures tied to deliverable FX pairs such as EURUSD as well as products such as gold. The report is called “CFTC Commitments of Traders” ("COT").
This is a great benchmark. It is far more representative of the overall market than the proprietary ones offered by retail brokers as it covers a far larger cross-section of the institutional market.
Generally market participants will not pay a lot of attention to commercial hedgers, which are also detailed in the report. This data is worth tracking but these folks are simply hedging real-world transactions rather than speculating so their activity is far less revealing and far more noisy.
You can find the data online for free and download it directly here.

Raw format is kinda hard to work with

However, many websites will chart this for you free of charge and you may find it more convenient to look at it that way. Just google “CFTC positioning charts”.

But you can easily get visualisations
You can visually spot extreme positioning. It is extremely powerful.
Bear in mind the reports come out Friday afternoon US time and the report is a snapshot up to the prior Tuesday. That means it is a lagged report - by the time it is released it is a few days out of date. For longer term trades where you hold positions for weeks this is of course still pretty helpful information.
As well as the absolute level (is the speculative market net long or short) you can also use this to pick up on changes in positioning.
For example if bad news comes out how much does the net short increase? If good news comes out, the market may remain net short but how much did they buy back?
A lot of traders ask themselves “Does the market have this trade on?” The positioning data is a good method for answering this. It provides a good finger on the pulse of the wider market sentiment and activity.
For example you might say: “There was lots of noise about the good employment numbers in the US. However, there wasn’t actually a lot of position change on the back of it. Maybe everyone who wants to buy already has. What would happen now if bad news came out?”
In general traders will be wary of entering a crowded position because it will be hard to attract additional buyers or sellers and there could be an aggressive exit.
If you want to enter a trade that is showing extreme levels of positioning you must think carefully about this dynamic.

Bet correlation

Retail traders often drastically underestimate how correlated their bets are.
Through bitter experience, I have learned that a mistake in position correlation is the root of some of the most serious problems in trading. If you have eight highly correlated positions, then you are really trading one position that is eight times as large.
Bruce Kovner of hedge fund, Caxton Associates
For example, if you are trading a bunch of pairs against the USD you will end up with a simply huge USD exposure. A single USD-trigger can ruin all your bets. Your ideal scenario — and it isn’t always possible — would be to have a highly diversified portfolio of bets that do not move in tandem.
Look at this chart. Inverted USD index (DXY) is green. AUDUSD is orange. EURUSD is blue.

Chart from TradingView
So the whole thing is just one big USD trade! If you are long AUDUSD, long EURUSD, and short DXY you have three anti USD bets that are all likely to work or fail together.
The more diversified your portfolio of bets are, the more risk you can take on each.
There’s a really good video, explaining the benefits of diversification from Ray Dalio.
A systematic fund with access to an investable universe of 10,000 instruments has more opportunity to make a better risk-adjusted return than a trader who only focuses on three symbols. Diversification really is the closest thing to a free lunch in finance.
But let’s be pragmatic and realistic. Human retail traders don’t have capacity to run even one hundred bets at a time. More realistic would be an average of 2-3 trades on simultaneously. So what can be done?
For example:
  • You might diversify across time horizons by having a mix of short-term and long-term trades.
  • You might diversify across asset classes - trading some FX but also crypto and equities.
  • You might diversify your trade generation approach so you are not relying on the same indicators or drivers on each trade.
  • You might diversify your exposure to the market regime by having some trades that assume a trend will continue (momentum) and some that assume we will be range-bound (carry).
And so on. Basically you want to scan your portfolio of trades and make sure you are not putting all your eggs in one basket. If some trades underperform others will perform - assuming the bets are not correlated - and that way you can ensure your overall portfolio takes less risk per unit of return.
The key thing is to start thinking about a portfolio of bets and what each new trade offers to your existing portfolio of risk. Will it diversify or amplify a current exposure?

Crap trades, timeouts and monthly limits

One common mistake is to get bored and restless and put on crap trades. This just means trades in which you have low conviction.
It is perfectly fine not to trade. If you feel like you do not understand the market at a particular point, simply choose not to trade.
Flat is a position.
Do not waste your bullets on rubbish trades. Only enter a trade when you have carefully considered it from all angles and feel good about the risk. This will make it far easier to hold onto the trade if it moves against you at any point. You actually believe in it.
Equally, you need to set monthly limits. A standard limit might be a 10% account balance stop per month. At that point you close all your positions immediately and stop trading till next month.

Be strict with yourself and walk away
Let’s assume you started the year with $100k and made 5% in January so enter Feb with $105k balance. Your stop is therefore 10% of $105k or $10.5k . If your account balance dips to $94.5k ($105k-$10.5k) then you stop yourself out and don’t resume trading till March the first.
Having monthly calendar breaks is nice for another reason. Say you made a load of money in January. You don’t want to start February feeling you are up 5% or it is too tempting to avoid trading all month and protect the existing win. Each month and each year should feel like a clean slate and an independent period.
Everyone has trading slumps. It is perfectly normal. It will definitely happen to you at some stage. The trick is to take a break and refocus. Conserve your capital by not trading a lot whilst you are on a losing streak. This period will be much harder for you emotionally and you’ll end up making suboptimal decisions. An enforced break will help you see the bigger picture.
Put in place a process before you start trading and then it’ll be easy to follow and will feel much less emotional. Remember: the market doesn’t care if you win or lose, it is nothing personal.
When your head has cooled and you feel calm you return the next month and begin the task of building back your account balance.

That's a wrap on risk management

Thanks for taking time to read this three-part chapter on risk management. I hope you enjoyed it. Do comment in the replies if you have any questions or feedback.
Remember: the most important part of trading is not making money. It is not losing money. Always start with that principle. I hope these three notes have provided some food for thought on how you might approach risk management and are of practical use to you when trading. Avoiding mistakes is not a sexy tagline but it is an effective and reliable way to improve results.
Next up I will be writing about an exciting topic I think many traders should look at rather differently: news trading. Please follow on here to receive notifications and the broad outline is below.
News Trading Part I
  • Introduction
  • Why use the economic calendar
  • Reading the economic calendar
  • Knowing what's priced in
  • Surveys
  • Interest rates
  • First order thinking vs second order thinking
News Trading Part II
  • Preparing for quantitative and qualitative releases
  • Data surprise index
  • Using recent events to predict future reactions
  • Buy the rumour, sell the fact
  • The mysterious 'position trim' effect
  • Reversals
  • Some key FX releases
***

Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

RBI & how its policies can start to affect the market

Disclaimer: This DD is to help start forming a market view as per RBI announcements. Also a gentle reminder that fundamentals play out over a longer time frame than intraday. The authors take no responsiblity for your yolos.
With contributions by Asli Bakchodi, Bran OP & dragononweed!

What is the RBI?
RBI is the central bank of India. They are one of the key players who affect India’s economic trajectory. They control currency supply, banking rules and more. This means that it is not a bank in which retailers or corporates can open an account with. Instead they are a bank for bankers and the Government of India.
Their functions can be broadly classified into 6.
· Monetary authority
· Financial supervisor for financial system
· Issuer of currency
· Manages Foreign exchange
· Bankers bank
· Banker to the government
This DD will take a look at each of these functions. It will be followed by a list of rates the RBI sets, and how changes in them can affect the market.
1. Monetary Authority
One of RBI’s functions is to achieve the goal of “Price Stability” in the economy. This essentially means achieving an inflation rate that is within a desired limit.
A monetary policy committee (MPC) decides on the desired inflation rate and its limits through majority vote of its 6 members, in consultation with the GoI.
The current inflation target for RBI is as follows
Consumer Price Inflation (CPI): 4%
Upper Limit: 6%
Lower Limit: 2%
An increase in CPI means less purchasing power. Generally speaking, if inflation is too high, the public starts cutting down on spending, leading to a negative impact on the markets. And vice versa. Lower inflation leads to more purchasing power, more spending, more investments leading to a positive impact on the market.
2. Financial Supervisor For Financial System
A financial system consists of financial markets (Capital market, money market, forex market etc.), financial institutions (banks, stock exchanges, NBFC etc) & financial assets (currencies, bills, bonds etc)
RBI supervises this entire system and lays down the rules and regulations for it. It can also use further ‘Selective Credit Controls’ to regulate banks.
3. Issues of currency
The RBI is responsible for the printing of currency notes. RBI is free to print as much as it wants as long as the minimum reserve of Rs 200 Cr (Gold 112 Cr) is maintained. The RBI has total assets or a balance size sheet of Rs. 51 trillion (April 2020). (1 Trillion = 1 Lakh crore)
India’s current reserves mean our increase in currency circulation is well managed.
4. Manages Foreign Exchange
RBI regulates all of India’s foreign exchange transactions. It is the custodian of all of foreign currencies in India. It allows for the foreign exchange value of the rupee to be controlled. RBI also buy and sell rupees in the foreign exchange market at its discretion.
In case of any currency movement, a country’s central bank can directly intervene to either push the currency up, as India has been doing, or to keep it artificially low, as the Chinese central bank does. To push up a currency, a central bank can sell dollars, which is the global reserve currency, or the currency against which all others are measured. To push down a currency, a central bank can buy dollars.
The RBI deciding this depends on the import/export and financial health of the country. Generally a weaker rupee means imports are more expensive, but are favourable for exports. And a stronger rupee means imports are cheaper but are unfavourable for exports.
A weaker rupee can make foreign investment more lucrative driving up FII. A stronger rupee can have an adverse effect of FII investing in markets.
5. Banker’s Bank
Every bank has to maintain a certain amount of reserve with the RBI. A certain percentage of a bank’s liabilities (anywhere between 3-15% as decided by RBI) has to be maintained in this account. This is called the Cash Reserve Ratio. This is determined by the MPC during the monetary policy review (which happens every six weeks at present).
It lends money from this reserve to other banks if they are short on cash, but generally, it is seen as a last resort move. Banks are encouraged to meet their shortfalls of cash from other resources.
6. Banker to the government
RBI is the entity that carries out ALL monetary transactions on behalf of the Government. It holds custody of the cash balance of the Government, gives temporary loans to both central and state governments and manages the debt operations of the central Government, through instruments of debt and the interest rates associated with them - like bonds.
The different rates set & managed by RBI
- Repo rate
The rate at which RBI is willing to lend to commercial banks is called as Repo Rate.
Banks sometimes need money for emergency or to maintain the SLR and CRR (explained below). They borrow this from RBI but have to pay some interest on it. The interest that is to be paid on the amount to the RBI is called as Repo Rate.
It does not function like a normal loan but acts like a forward contract. Banks have to provide collateral like government bonds, T-bills etc. Repo means Repurchase Option is the true meaning of Repo an agreement where the bank promises to repurchase these government securities after the repo period is over.
As a tool to control inflation, RBI increases the Repo Rate making it more expensive for banks to borrow from the RBI with a view to restrict availability of money. Exact opposite stance shall be taken in case of deflationary environment.
The change of repo rate is aimed to affect the flow of money in the economy. An increase in repo rate decreases the flow of money in the economy, while the decrease in repo rate increases the flow of money in the economy. RBI by changing these rates shows its stance to the economy at large whether they prioritize growth or inflation.
- Reverse Repo Rate
The rate at which the RBI is willing to borrow from the Banks is called as Reverse Repo Rate. If the RBI increases the reverse repo rate, it means that the RBI is willing to offer lucrative interest rate to banks to park their money with the RBI. Banks in this case agree to resell government securities after reverse repo period.
Generally, an increase in reverse repo rate that banks will have a higher incentive to park their money with RBI. It decreases liquidity, affecting the market in a negative manner. Decrease in reverse repo rate increases liquidity affecting the market in a positive manner.
Both the repo rate and reverse repo rate fall under the Liquidity Adjustment Facility tools for RBI.
- Cash reserve ratio (CRR)
Banks in India are required to deposit a specific percentage of their net demand and time liabilities (NDTL) in the form of CASH with the RBI. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. These reserves will not be in circulation at any point in time.
For example, if a bank had a NDTL (like current Account, Savings Account and Fixed Deposits) of 100Cr and the CRR is at 3%, it would have to keep 3Cr as Cash reserve ratio to the RBI. This amount earns no interest.
Currently it is at 3%. A lower cash ratio means banks can deposit just a lower amount and use the remaining money leading to higher liquidity. This translates to more money to invest which is seen as positive for the market. Inversely, a higher cash ratio equates to lower liquidity which translates to a negative market sentiment.
Thus, the RBI uses the CRR to control excess money flow and regulate liquidity in the economy.
- Statutory liquidity ratio (SLR)
Banks in India have to keep a certain percentage of their net demand and time liabilities WITH THEMSELVES. And this can be in the form of liquid assets like gold and government securities, not just cash. A lot of banks keep them in government bonds as they give a decent interest.
The current SLR ratio of 18.25%, which means that for every Rs.100 deposited in a bank, it has to invest Rs.18.50 in any of the asset classes approved by RBI.
A low SLR means higher levels of loans to the private sector. This boosts investment and acts as a positive sentiment for the market. Conversely a high SLR means tighter levels of credit and can cause a negative effect on the market.
Essentially, the RBI uses the SLR to control ease of credit in the economy. It also ensures that the banks maintain a certain level of funds to meet depositor’s demands instead of over liquidation.
- Bank Rate
Bank rate is a rate at which the Reserve Bank of India provides the loan to commercial banks without keeping any security. There is no agreement on repurchase that will be drawn up or agreed upon with no collateral as well. This is different from repo rate as loans taken with repo rate are taken on the basis of securities. Bank rate hence is higher than the repo rate.
Currently the bank rate is 4.25%. Since bank rate is essentially a loan interest rate like repo rate, it affects the market in similar ways.
- Marginal Cost of Funds based Lending Rate (MCLR)
This is the minimum rate below which the banks are not allowed to lend. Raising this rate, makes loans more expensive, drying up liquidity, affecting the market in a negative way. Similarly, lower MCLR rates will bring in high liquidity, affecting the market in a positive way.
MCLR is a varying lending rate instead of a single rate according to the kind of loans. Currently, the MCLR rate is between 6.65% - 7.15%
- Marginal Standing facility
Marginal Standing Facility is the interest rate at which a depository institution (generally banks) lends or borrows funds with another depository institution in the overnight market. Overnight market is the part of financial market which offers the shortest term loans. These loans have to be repaid the next day.
MSF can be used by a bank after it exhausts its eligible security holdings for borrowing under other options like the Liquidity adjustment facilities.
The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio.
The current rate stands at 4.25%. The effect it has on the market is synonymous with the other lending rates such as repo rate & bank rate.
- Loan to value ratio
The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher risk loans.
Basically, if a companies preferred form of collateral rises in value and leads the market (growing faster than the market), then the company will see the loans that it signed with higher LTV suddenly reduce (but the interest rate remains the same).
Let’s consider an example of gold as a collateral. Consider a loan was approved with gold as collateral. The market price for gold is Rs 2000/g, and for each g, a loan of Rs 1500 was given. (The numbers are simplified for understanding). This would put LTV of the loan at 1500/2000 = 0.75. Since it is a substantial LTV, say the company priced the loan at 20% interest rate.
Now the next year, the price of gold rose to Rs 3000/kg. This would mean that the LTV of the current loan has changed to 0.5 but the company is not obligated to change the interest rate. This means that even if the company sees a lot of defaults, it is fairly protected by the unexpected surge in the underlying asset. Moreover, since the underlying asset is more valuable, default rates for the loans goes down as people are more protective of the collateral they have placed.
The same scenario for gold is happening right now and is the reason for gold backed loan providers like MUTHOOT to hit ATHs as gold is leading the economy right now. Also, these in these scenarios, it also enables companies to offer additional loan on same gold for those who are interested Instead of keeping the loan amount same most of the gold loan companies.
Based on above, we can see that as RBI changes LTV for certain assets, we are in a position to identify potential institutions that could get a good Quarterly result and try to enter it early.
Conclusion
The above rates contain the ways in the Central Bank manages the monetary policy, growth and inflation in the country.
Its impact on Stock market is often seen when these rates are changed, they act as triggers for the intraday positions on that day. But overall, the outlook is always maintained on how the RBI sees the country is doing, and knee jerk reactions are limited to intraday positions. The long term stance is always well within the limits of the outlook the big players in the market are expecting.
The important thing to keep in mind is that the problems facing the economy needn’t be uni-dimensional. Problems with inflation, growth, liquidity, currency depreciation all can come together, for which the RBI will have to play a balancing role with all it powers to change these rates and the forex reserve. So the effect on the market needs to be given more thought than simply extrapolated as ‘rates go low, markets go up’.
But understanding these individual effects of these rates allows you to start putting together the puzzle of how and where the market and the economy could go.
submitted by crackedminds333 to IndianStreetBets [link] [comments]

Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)

Hello, dummies
It's your old pal, Fuzzy.
As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great.
What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. I do my bit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post.
That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way.
We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps.
Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy.
TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle.
Ready? Let's get started.
1. The Tao of Risk: Hedging as a Way of Life
The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows:
Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself.
Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part.
You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus.
That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it.
Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets?
2. A Hedging Taxonomy
The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now.
(i) Swaps
A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one.
Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered.
The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game.
I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging.
There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested.
Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure).
(ii) Forwards
A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me.
Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways.
People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances.
These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them.
(iii) Collars
No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray!
To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts.
(3) All About ISDAs, CDS and Synthetic CDOs
You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years.
First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA.
Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire.
Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking?
Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama.
Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details.
I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here.
Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post.
*EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
submitted by fuzzyblankeet to wallstreetbets [link] [comments]

Gold and Silver rocket ride - 110k in 1 month

Gold and Silver rocket ride - 110k in 1 month
IMPORTANT: OVER 75% OF PEOPLE LOSE MONEY WITH CFD TRADING. IF YOU'RE A NOOB, DON'T EVEN THINK OF OPENING A CFD ACCOUNT. TRY MAKING CONSISTENT MONEY SWING TRADING ASX STONKS FIRST. THEN KEEP DOING THAT UNTIL YOU GET BORED AND WANT TO LOSE BIG MONEY VERY QUICKLY. ONLY THEN YOU MAY HAVE WHAT IT TAKES TO TRADE WITH LEVERAGE.
You most likely don't have my discipline and pain tolerance. Or my feel for risk/reward math. On top of this you need markets to play nice and a bit of luck.
I'm no wiz, but I know my strengths and weaknesses. I smell a good setup and prepare accordingly.
Hope you all nail your big opportunity when it shows up. If not, that's okay too. You'll keep getting chances. Be patient. Focus on small wins. Plus there's far more important things in life than being loaded.
------
How I lost 5k trading CFDs then turned it around
Back in April, I was playing with CFDs and nearly blew up my account. Started with $5k and dropped to almost zero because trading forex with leverage is a very stupid game. This is why IG gives you a demo account. But instead of using the demo account to learn how not to fuck up massively, I was using it to place giant YOLO shorts on US markets.
By being a bit less retarded on the forex trades I clawed back some losses then topped up the account with another $2.5k before starting to open small positions in gold. From 3 to 10 contracts depending on how confident I felt. Then smelling a massive opportunity, I ramped up the leverage by going with much larger positions.
Day 5
https://preview.redd.it/oqd955abwak51.png?width=1080&format=png&auto=webp&s=84aa309284c22117630899e39b8b1bfb89c670f3
Entering the silver trade
It was only after making decent profits in gold that I dared venture into silver. I wanted to enter silver around $18 but missed the boat after waiting too long for a dip. $20 was still great. Tons of upside left.
Silver is one nasty motherfucker to trade. It's a much smaller market than gold so the swings can be wild. Silver will play along nicely then suddenly fuck you really hard. If you use too much leverage you're basically waiting for your account to blow up. Stop losses will save you, but they can also kill your best trades. I didn't bother with stops for most of the ride because I'm an ASX_bets retard but also because I had ultra high conviction in the $25-27 price target.
Started with 25 contracts. I very nearly missed out on this mini pump. Some might call it luck.
Day 18
https://preview.redd.it/de8jozlexak51.png?width=1080&format=png&auto=webp&s=79d174c67a86754c7d9fd78aa594f88282c08834
Adding to my silver positions
Increased my position size once I had a profit buffer to protect against sharp drops. It's WAY easier to blow up a CFD account than it appears. When trades are going well you feel like you can keep adding leverage and make millions. But even small swings will kill you if your positions are too big. Discipline is key.
Buying 50 contracts in silver is not the same as 50 contracts in gold because silver moves are 2-4 times bigger. When gold moves 100 points, expect a 200-400 points move in silver. Having an equal mix of gold an silver contracts helped lower the overall volatility of my account.
Anything over 10 contracts in silver is big. You can lose hundreds within minutes. Buy 50 contracts, the price drops $1 and you're $5000 in the hole. I knew when to push and when to hold back. This was EXTREMELY important. I did not get greedy. I was happy to let price moves do most of the lifting.
Started the day with 3k profits. Went to bed that night with big beautiful bhags. 17k
https://preview.redd.it/qcbeoxvnxak51.png?width=1080&format=png&auto=webp&s=4228593b9d86cc5f0460f44af06c7292ea644625
Day 19
Woke up the next morning with even bigger bhags. 30k
https://preview.redd.it/9b439y5qxak51.png?width=1080&format=png&auto=webp&s=19e3ad27d7237bc88fdeb329ebcd113e11349554
Day 24
More pump. I added 50 silver contracts that day after a decent drop. Profits now up to around 41k.
Held through the big swings...
Like a proper bitch, Silver dropped another 5% soon after I added those 50 contracts and my 41k profit became 20k very suddenly. But no stop loss and I held firmly. What's a 21k drop when you've been down 35k on BBOZ before. Metals bounced back hard later that evening. Still not selling. High conviction made all the difference here.
Five days later and I was up to 50k profit.
At that point, I felt safe enough to add another 50 contracts.
https://preview.redd.it/j2at0n95zck51.png?width=1080&format=png&auto=webp&s=4a0ea2fabe6a245807fb9ee8a8d0bc4ce854ba3a
And it paid off BIG
Both gold and silver keep pumping. Profit now 86k.
Day 28
https://preview.redd.it/f3pz0an8zck51.png?width=1080&format=png&auto=webp&s=0ca765b6cad423786dee33a1366c70d324e39b8d
Why sell now?
Not selling yet. GV's silver target was $25-27 so I was confident holding through some wild swings.
GV = Gold Ventures https://twitter.com/thelastdegree
A turbo chad from Belgium who made a massive fortune trading options during 2008-2011 when silver went from $9 to $50 before crashing hard. GV is a certified wizard when it comes to timing the gold and silver cycles. Started with his wife's 32k savings and is now worth 18 million EUR or USD, I'm not sure and who cares. GV is pretty low key but commands plenty of respect from other metal traders on Twitter.
Meanwhile GV was on holiday but still shitting money.
https://preview.redd.it/ixsxwjx30dk51.png?width=1080&format=png&auto=webp&s=9fd5741634a7a5b0f913f5ea12edf05722f9fddf
GV also has a junior miner portfolio worth several millions. I believe it's true. I went deep into his Twitter history. He was buying heavily into the March crash and some of his picks like AbraPlata have since made 10x. Junior miners are like call options on metal prices with no expiry date but you still need to pick winners and enteexit at the right time.
Magical Six Figure Milestone
Not long after... BOOM! Hit 100k in profit.
When starting, I knew there was potentially 40k-50k to be made from this setup even without playing it perfectly. I would have been okay with 20k.
Day 32
https://preview.redd.it/oy8sqsgz1dk51.png?width=1080&format=png&auto=webp&s=a8c628670578b81d72b9a41bd9d2307a27a2fbf7
Start taking profits
Silver was still going strong but I felt it was time to de-risk.
So I started taking profits on both gold and silver around that time.
https://preview.redd.it/gvdqs67a2dk51.png?width=1080&format=png&auto=webp&s=64a77d3ccca86fe6e29eb43e0c2eaf096f68867c
Okay I'm out
The way silver kept pumping, I knew a big correction was imminent. By 12pm I was completely out with over 110k profit. Home and dry.
I went on with my daily work routine, a bit more relaxed and not checking charts every 5 minutes.
And then metals dumped hard.
There was money to be made on the short side but there was also a strong possibility of shorts being squeezed. So I didn't bother.
https://preview.redd.it/opoio79i2dk51.png?width=1080&format=png&auto=webp&s=80187384d37e03eec8d01814248bbe4c5a48cc4f
After the dump, I had no appetite to get back in with big positions. In hindsight I could have made tons more if I held to $29 but the ride from $24 to $29 is far more risky than $20 to $26. I'm quite okay with my 40x performance. Plus I needed to reset mentally after this rocket ride. More often than not, the best thing to do after a huge trading win is to take a break. Wisdom gained from the BBOZ days :)
Withdrew my initial capital and 90% of the profits from IG. Left around 6k on the account to keep playing.
https://preview.redd.it/1djdhz1m2dk51.jpg?width=1080&format=pjpg&auto=webp&s=c028a06d4e0cf73bfb80f8ac48dd18e333b791d4
Feels good to have extra funds to invest with but I also need to set some aside for the monster tax bill next year. You're welcome Australia, and all the JobSeekeJobKeeper leeches.
Hey everyone, check out my insane stats!
That 85% win rate though...
  • IG MARKETS - TRADE ANALYTICS - 29 JUNE TO 29 JULY
https://preview.redd.it/slkmhrlq2dk51.png?width=1272&format=png&auto=webp&s=b15b261144d3cd55c1d28530a80efd30c49f3125
Less impressive when zooming out to include the forex train wreck in April and my more recent metal trades.
  • IG MARKETS - TRADE ANALYTICS - 1 JANUARY TO 17 AUGUST
https://preview.redd.it/jam28zau2dk51.png?width=1272&format=png&auto=webp&s=99fd332c319984f1de28d1ec7e6a58df2754946d
-----
Credits to:
https://twitter.com/thelastdegree - already covered above
https://twitter.com/DaveHcontrarian - called the metals and S&P500 bull runs
https://twitter.com/AdamMancini4 - simple yet powerful charts
https://twitter.com/badcharts1 - advanced silver charts
https://twitter.com/graddhybpc - advanced gold and silver charts
https://twitter.com/Northst18363337 - another master of charts
https://twitter.com/bhagdip143 - ultimate master of monster position and making bhags
BTW fuck Facebook groups, you'll hardly learn anything there. Full of losers. Twitter is where the elite traders and big dick fund managers bounce ideas. A solid Twitter list is worth thousands if not millions in the right hands.
submitted by _HeyHeyHeyyy_ to u/_HeyHeyHeyyy_ [link] [comments]

ASIC Regulation Thread - Regarding the proposed changes ( Australians effected the most )

I'm hopeless at formatting text, so if you think you can structure this post better take everything i write and put it into an easy to digest way. I'm just going to type out everything i know in text as fast as possible. I'm not a legal expert, I'm not somehow who understands every bit of information in the PDF's below, but i know I'm a retail trader that uses leverage to make profit which is why I'm posting this, in the hope that someone who can run a charge better than me, will.
Some of you are already aware of what might be happening, this is just a post to educate retail traders on changes that might be coming to certain brokers. This effects Australian Customers the most, but also effects those living in other countries that use Australian brokers, such as Pepperstone and others.
Last year in August 2019, ASIC ( Australian Securities and Investments Commission ) was concerned about retail traders going into Forex and Binary options without understanding these instruments properly and started sticking their noses in for tough regulation.
ASIC asked brokers and anyone with interest in the industry to write to them and explain what should and should not change from the changes they proposed, some of the proposed changes are very misguided and come from a lack of understanding exactly how OTC derivatives actually work.
I will provide the link to the paper further down so you can read it yourself and i will provide a link to all the submission made by all parties that sent submissions to ASIC, however the 2 main points of debate are:
1, To reduce the overall leverage available to retail traders to either 20:1 or 30:1. This means people who currently use leverage such as 100:1 to 500:1 and everything in between will be effected the most, even more so are those traders with relatively small accounts, meaning in order to get your foot in the door to trading you will need more capital for it to be viable.
^^ This point above is very important.
2, The removing of Binary options trading, which basically includes products like "Bet if gold will rise to this price in the next 30 seconds" This sort of stuff. So far from all the submissions from brokers and individuals nobody really cares if this changes as far as i know, though if you have concerns about this i would start voicing your disapproval. Though i would not waste your time here, all is pointing to this being eradicated completely with brokers also supporting the changes, I've never used such a product and know very little about them.
^^ This point above isn't very important and will probably be enforced in the future.
Still to this day i see retail traders not understanding leverage, they think of it as "dangerous and scary", it's not, position size is the real danger, not leverage. So ASIC is aiming to limit retail traders access to high leverage, they are claiming it is a way to protect traders who don't really understand what they are getting into by attacking leverage and not the real problem which is position size relative to your capital.
If it was truly about protecting retail traders from blowing up their accounts, they would look for ways to educate traders on "understanding position sizes and why it's important" rather than attacking leverage, but their goal is misguided or has an ulterior motive . I will give you a small example below.
EXAMPLE - We will use 2 demo accounts for demonstration purposes. If you don't understand my example, i suggest you try it for yourself. - Skip if not interested in examples.
Lets say we open 2 demo accounts with $1000 in both, one with 20:1 leverage and one with 500:1 leverage and we open an identical position on both accounts ( say a micro lot '0.01' on EURUSD ). You are safer on the 500:1 account as you don't need to put up as much margin as collateral as you would on the 20:1. If the trade we just opened goes against us and continues against us, the account with 20:1 leverage will run out of free margin a lot faster than the 500:1 account. In this simple example is shows you that leverage is not dangerous but safer and gives you a lot more breathing room. This trade was a small micro lot, so it would take hundreds of pips movements to get margin called and blow up that $1000 on each account. Lets now use a different position size to truly understand why retail traders blow up accounts and is the reason why trading can be dangerous.
This time instead of opening a micro lot of '0.01' on our $1000 dollar demo accounts, lets open a position size much larger, 5 lots. Remember we only have $1000 and we are about to open a position much larger relative to our capital ( which we should never do because we can't afford to do that ) the 20:1 probably wont even let you place that trade if you don't have enough margin as collateral or if you could open the position you would have a very tiny amount of free margin left over, meaning a small pip movement against you will instantly blow up your $1000 account. On the 500:1 account you wouldn't need to put up as much margin as collateral with more free margin if the trade goes bad, but again a small movement could blow up your account. In this example, both accounts were dangerous because the lack of understanding position sizes, opening a position you can't afford to open. This is what the true danger is, not the leverage.
Even in the second example, the higher leverage would "margin call" you out later. So i would go as far to say that lower leverage is more dangerous for you because it margin calls you out faster and just by having a lower leverage doesn't stop you from opening big positions that can blow you up in a 5 pip movement anymore, any leverage size is dangerous if you're opening positions you can't afford to open. This is also taking into consideration that no risk management is being used, with risk management higher leverage is even more powerful.
ASIC believes lowering leverage will stop people opening positions that they can't afford. When the reality is no matter how much capital you have $500, $1000, $5000, $50,000, $500,000, $5,000,000. You don't open position sizes that will blow that capital up completely with small movements. The same thing can happen on a 20:1 or 500:1 account.
Leverage is a tool, use it, if your on a lower leverage already such as 20:1, 30:1 it means your country has been regulated and you already have harder trading conditions. Just remember higher leverage allows you to open larger position sizes in total for the amount of money you own, but the issue is NOT that your using the higher leverage but because you are opening positions you can't afford, for what ever reason that is, the only fix for this is education and will not be fixed by simply lowing leverage, since you can just as easy blow up your account on low leverage just as fast or if not faster.
So what is going on?
There might ( get your tinfoil hats on ) be more that is involved here, deeper than you think, other agendas to try and stop small time retail traders from making money via OTC products, theories such as governments not wanting their citizens to be traders, rather would prefer you to get out there and work a 9 to 5 instead. Effective ways to do this would be making conditions harder with a much larger barrier of entry and the best way to increase the barrier of entry for retail traders is to limit leverage, lower leverage means you need to put up more money, less breathing room for trades, lower potential. They are limiting your upside potential and the downside stays the same, a blown account is a blow account.
Think of leverage as a weapon, a person wielding a butchers knife can probably destroy a person wielding a steak knife, but both knifes can prove fatal. They want to make sure your holding the butter knife then tell you to butcher a cow with it. 30:1 leverage is still workable and can still be profitable, but not as profitable as 500:1 accounts. This is why they are allowing professionals to use high leverage, this gives them another edge over successful retail traders who will still be trying to butcher a cow with a butter knife, while they are slaying limbs off the cow with machetes.
It's a way to hamstring you and keep you away rather than trying to "protect" you. The real danger is not leverage, they are barking up the wrong tree, how convenient to be barking up the very tree most retail traders don't fully understand ( leverage) , pass legislation to make trading conditions harder and at the same time push the narrative that trading is dangerous by making it even harder. A full circle strategy to make your trading conditions worse, so you don't succeed.
Listen carefully especially if you trade with any of the brokers that have provided their submissions to ASIC. Brokers want to seem like they are on your side and so far some of the submissions ( i haven't read them all ) have brokers willing to drop their leverage down to 30:1 because they know by dropping the leverage down it will start margin calling out their clients at a much faster rate, causing more blown up accounts / abandoned accounts with residual margin called funds, but they also know that if they make trading environments too hard less people will trade or even worse move their funds elsewhere offshore to unregulated brokers that offer higher leverage.
Right now it's all just a proposal, but as governments expand and continue to gain more control over it's citizens, it's just a matter of time till it's law, it's up to you to be vocal about it, let your broker know that if they drop their leverage, you're out, force them to fight for you.
If you have any more information related to this, or have anything to add, post below. I'm not an expert at this technical law talk, i know that i do well with 500:1 leverage and turn profits with it, it would be harder for me to do on a lower leverage, this is the reason for my post.
All related documents HERE
CP-322 ( Consultation paper 322 ) & Submissions from brokers and others.
https://asic.gov.au/regulatory-resources/find-a-document/consultation-papers/cp-322-product-intervention-otc-binary-options-and-cfds/
submitted by southpaw_destroyer to Forex [link] [comments]

I had a bit of fun today

A friend of mine was contacted via Linkedin by a member of PROCRYPTOFX!!!!!!! I decided to investigate a bit and... Well, this happened.

Welcome to our site, if you need help simply reply to this message, we are online and ready to help.
hey there, I would like to know a bit more about the company
It seems this tool is not working as intended
is it?
Hello
Your name please
why do you need my name though?
no offense, but I find you asking for my name straight away a bit weird
I am not registered in your website yet
We need to know who we chatting with
isn't a potential customer enough for you?
You welcome
So how can we be of help to you please
so I've seen you've been running since 2013 but I've never heard of you before
and I've seen you're registered in the UK
is that correct?
Yes that's correct
do you offer both cryptocurrency trading and forex trading?
Yes
any guarantee on my funds?
if I ever deposit?
Sure
We have an Auxiliary trading decoder we connect to our clients trading account
what does Auxiliary trading decoder mean?
It's a software used in trading
how does that software protect me in case the platform goes bankrupt?
I am asking since I read a lot about exit scams
That software prevent your account from losing trade
kind of a stop loss?
I am not talking about that kind of protection here
Yes
I am asking about the company liability
I mean
I understand
And your funds is 100% safe and guaranteed
Okay
I expected a more detailed answer here, no offense
I have provided you the answers you need
What other questions did you ask please?
as a customer worried about how the funds are guaranteed, this answer makes it look like you deliberately don't want to go into detail on the matter
again no offense, it is a big red flag to me
don't you think so?
We are the trading company and you don't expect us to give you our secrets of how we make our profit
I have never asked for that, and it's obvious how trading companies make profit
All you need to be worried about is your profit
I am asking which authority guarantees my funds
it's not that much of a deal, is it?
additionally, the question is answered in your regulation tab, something that you should be aware of to begin with
It's our duty to always protect our clients and their profit
Okay
your duty should be to provide customers with accurate information, and in this case the information I asked for is disclosed in your own website (red flag n2)
now my follow up question, if you don't mind
the FCA (yes, the answer I was looking for) is an UK authority, and I am an European citizen
how would Brexit affect my protection?
I am a bit worried since you are registered in the UK, and you state "As an investment firm authorised by a regulator of an EU Member State, Procryptofx Limited is allowed to offer its services on a cross border basis to the EU Member States that permit the provision of our services in their jurisdictions and we are duly registered with their respective competent authorities"
if I am not mistaken, no deal has been reached yet between the UK and the EU on the matter
could you guarantee the safety of my funds in the event of a hard Brexit?
hello?
are you there sir?
Yes
Your funds is safe
Talking about the UK and the EU
If they have any issues that does not mean it would affect your funds in the company
Okay
I see you are skeptical about this
skeptical? don't you thing these concerns are legit?
ok, I'm taking your word
one last question if you don't mind
are you actively recruiting?
I might have been contacted via Linkedin by a supposed procryptofx recruiter
What's the name of the person who referred you to us?
hold the line pls
Am waiting
Are you there
yes sir
trying to get the conversation
it looks like it vanished
just gimme a minute
she was a woman speaking on behalf of your company
but I am trying to get the name
Am waiting
thanks for your patience
We are always here to give you the best
her name is XXXXXXX
I see
She's one of our account manager
I see
thanks for letting me know
no more questions from my side
You welcome
So when do you intend to get started with us?
I'll create an account on the weekend!
submitted by WH4T15P0RN to Buttcoin [link] [comments]

Im a growing trader and i have a question, any help would be appreciated

I'm still a fairly new trader, I've with known about the markets for a few years but i only started lately with about approximately 6 months of consistently educating myself and teaching myself on all the different parts of trading, some parts I feel confident with while others might not be the best that I can be YET.
a list of things i can say i understand would be
fundamental analysis, technical analysis...to a certain extent (always room for improvement) indicators and various tools like the macd, momentum indicators, rsi, stochastic indicators, bollinger bands, etc, risk managment and protecting capital the meaning of certain candelstick patterns, diffrent markets like stocks, forex, commodities and dividend stock. i also learnt how not to fall for stupid internet scams.
ive been trading with a demo account for the most of my learning period but i have traded with a live account too.
I took a liking to the 4 hour timeframe and built my own trading plan from there onwards , i guess i just feel like my personality matches the 4h charts, but i use 1D 1H 30M also.
I just want to be a succesful trader and improve my standard of life, buy myself a cozy house, fall in love, help my mother pay her bills, these regular things.
I'm working on making enough money to fund my account since im only 19
With all i have already taught myself I cant help but feel like theres someting important that i am missing and have not stumbled into yet to teach myself or learn. Like what is the next step in my growth?
i feel like i dont have all the pieces of the puzzle.
what do you think it might be?
submitted by starrbeats to Forex [link] [comments]

The rough guide to the Islamic Investment world (in South Africa)

So this is my rough guide to Islamic investments within the South African Universe (it can apply globally, except my examples is all South African based). Hope it is informative and encourages halal investing.
Suggestions welcome
Section 1: Investment Universe 
  1. Islamic Bank fixed deposits
About: Invest your money for a fixed period (1 month up to 5 years). Get profit when period is completed
Pros: Reliable profit , Low financial risk, low Islamic risk : covered by a board of Shariah scholars
Cons: Low profit rates.

  1. Unit trusts
About: Collective investment - managed by investment company, protected by SA law, typically invests in equities, sukuks and property
Pros: Plenty of choice, Provided by registered Financial Service Providers, Sharia Boards , diversification
Cons: Typically High fees, .

  1. ETF
About: Collective investment
Pros: low fees, Provided by registered Financial Service Providers, Sharia Boards , diversification
Cons: only one option in SA, heavily weighted on Resources

  1. Shares
About: Pick your own stocks off the exchange
Pros: High profit potential,
Cons: Very Risky, No Islamic oversight (hence need to do your own screening)

  1. Property
About: Tried and test property
Pros: Stable Asset, Tangible, Straightforward, Zakah benefits,
Cons: High capital outlay, expensive legal costs (transfebond registration) , Not very liquid,
  1. Custom Wealth Solutions
About: Customized Wealth management and investments
Pros: Professional advice, custom solution
Cons: Available exclusively to high net worth individuals, Investment advise appears to be fee based

Section 2: Definitely not halal 
  1. Margin based investing: Margin = interest = haram. Also very risky
  2. Futures contracts: Shorting, going long, all CFD's and futures contracts are impermissible. Because a condition for a halal investment is that the underlying asset must be owned
  3. Forex: Or at least forex based on CFD's and margins. Buying dollars to travel should be perfectly fine.
  4. Stocks/Equities that primarily deal in haram activities: Gambling, pork, etc

Section 3: Grey Areas 
  1. Crypto ( Bitcoin ,etc) : In theory these should be more "halal" than fiat currency (what all money in the world is) however there are differences of opinion.
  2. Shares : There are grey areas : Most companies has an element of haram income (interest, etc). Scholars have devised ratios to to filter out "islamic stocks" from haram stocks (30-33% max debt, max 5% haram income, liquid ratios, etc). It is for this reason these stocks requires dividend purification.
However you should be aware of this before venturing into to stocks as you might not be comfortable with that thought (This also affects EFTs, Unit trusts, etc).
3 Easy Equities: Easy equities makes it cheap and easy to own equities. However I would at all times buy/sell only whole shares and not fractional shares. Fractional shares are done as a CFD (a bit different from a forex CFD). You get all the benefits of ownership such as dividends and capital gains on a pro rate basis. But you do not actually own the CFD until you buy enough CFD to get a real whole share. That being said, it is still grey, best to avoid fractional shares entirely
4. Halal Forex Accounts: Somehow these are marketed that way. Here's a link to (Islamic Finance Guru) who has a bit more knowledge on this. (Note: I am not affiliated in any way or get any benefit)
Section 4: Conclusion 
I sincerely hope this helps , and encourages to invest in the Islamic world.
Any ideas, inputs and suggestions welcome.


Disclaimer 1 : Corrections welcome, I am not a learned scholar, this is not financial advice, you bear the responsibility & consequences of your own decisions/investments
Disclaimer 2 : At some point FNB Sharia board quit , they subsequently hired a new board. They don't however make it easy to find who is in the board from their website. However the information can be found in news websites.
submitted by Flying_Koeksister to IslamicFinance [link] [comments]

With Bitcoin Suddenly Surging, Canaan Stock Is Also Going Up Today

With Bitcoin Suddenly Surging, Canaan Stock Is Also Going Up Today



By signing up, you may receive emails concerning CoinDesk products and you agree to our terms & conditions and privacy policSTER ON THE SITE
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https://preview.redd.it/e63kae9rz9j51.png?width=3116&format=png&auto=webp&s=eeb8869dbccb0fca7c64d3c91f83cebcdb446e84
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https://preview.redd.it/6i2yjm7sz9j51.jpg?width=1280&format=pjpg&auto=webp&s=b94d3dd01aaff2d7d4230f81176913586c729aef
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perior over different cryptocurrencies?
LATESTBITCOINETHEREUMALTCOINSTECHNOLOGYADOPTIONBLOCKCHAINEVENTSCONTACT
PRESS RELEASEWhy is Bitcoin superior over different cryptocurrencies?Akshay KSPublished a pair of weeks agoon August 12, 2020By Akshay KS
Source: Pixabay
During this technical world, bitcoin is the foremost used digital currency all over the world. However the main question then arises within the minds of the many folks is why bitcoin is considered the foremost superior over other cryptocurrenc Bitcoin Freedom
Bitcoin is that the one method of creating transactions daily as alternative currencies. But it's its options and uniqueness that make it superior. Bitcoin and different currencies are based mostly on the cryptographic algorithms or mathematics that are encrypted, with that the user becomes the owner of the currency. Bitcoin currencies are easily accessible at Bitcoin ATM and online exchange
The main feature of the bitcoin, which makes it superior is that it is the safest option for digital transactions. These will be used for on-line searching and transfer of money too.
There are many alternative blessings to using bitcoin. A number of them are mentioned below
Decentralized and digital
Bitcoin offers the freedom of exchanging the price without representatives that proves helpful in controlling the lower fees and high funds. Bitcoin is that the faster method of transaction than others. It is secure as it is free from theft and frauds and is constant. The main advantage is that bitcoin has its homeowners whereas the bank controls the money.
Makes online looking
Normally, bitcoin will be used for on-line shopping too. Bitcoin is the opposite face of e-wallet, that is created by blockchain technology that is used to store money and will easily pay everywhere digitally. For this reason, it also makes your searching easy by which you'll be able to look from your home solely

Bitcoin is accepted globally at each corner of the planet, which makes it less volatile than local currencies or cash. This feature makes it superior because it enables us to form transactions on-line and across the boundaries
Bitcoin unable the means of tracking cash

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Bitcoin is created by blockchain technology. Blockchain is the sole technology which will either make it or break it. There are many computers which are used to keep up a permanent record of each bitcoin transactions with the help of cryptographic technique. In this approach, it becomes a lot of valuable together with the tracking of the payment. At the same time, there's no method of tracking the cash

While not any transformation method, it will be used over the entire world. It provides the simplest platform for the investment as it is free from the restrictions of governments or banks. It provides an open market and combines the simplest of gold and money.

Bitcoin provides the power to access the balance of the users with a password which is named a personal key. It additionally permits the exchange of values through the web without any middle person. Thus, bitcoin becomes safer, stuffed with privacy, and open to everyone
Unlike cash, it is not possible to form the duplicate quite bitcoin that makes it more efficient. It's protected with the technology of blockchain. Even if anyone tries to form a replica of bitcoin to use it, then the system will automatically reject it as the system recognize it as unknown

Bitcoin Freedom failed to allow two persons to transact on the one price. Once the bitcoin is transferred, its possession is also transferred. So this is the simple approach of maintaining records for any tax functions. It conjointly makes it a easy and healthier metho

Bitcoin is the foremost reliable manner of online transactions. Many questions arise in folks’s minds that are solved on websites like bitcoin revolution. One in all them was the above-mentioned question. Bitcoin provides many facilities, and it comes with more and a lot of blessings which makes it distinctive and special over different cryptocurrencies. It can be preferred as the simplest digital platform for transac


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I have a question

I'm still a fairly new trader, I've know about it for a few years but i only really started properly with about 6 months of consistently educating myself and teaching myself on all the different parts of trading, some I feel confident with while others might not be the best that I can be YET.
a list of things i can say i understand would be
fundamental analysis, technical analysis...(to a certain extent)always room for growth... indicators and various tools like the macd, momentum indicators, rsi, stochastic indicators, bollinger bands, etc, risk managment and protecting capital the meaning of certain candelstick patterns, different markets like stocks, forex, commodities and dividend stocks. i also learnt how not to fall for stupid internet scams.
ive been trading with a demo account for the most of my learning period but i have traded with a live account too. Doubling my small accounts of about $40
I took a liking to the 4 hour timeframe and built my own trading plan from there onwards , i guess i just feel like my personality matches the 4h charts, although i use D1, H1, 30M also in my analysis
I just want to be a succesful trader and inprove my standard of life, buy myself a cozy house, fall in love, help my mother pay her bills, these regular things.
I'm working on making enouph money to fund my account since im only 19
With all i have already taught myself I cant help but feel like theres someting important that i am missing and have not stumbled into yet to teach myself or learn. Like what is the next step in my growth?
i just feel like i dont have all the pieces of the puzzle.
what do you think it might be?
submitted by starrbeats to Trading [link] [comments]

XAU/USD forecast: Gold market will face a turmoil

XAU/USD forecast: Gold market will face a turmoil

Fundamental gold price forecast for today

Coronavirus vaccines will hold XAU/USD bulls back

Mass gold sell-offs in the mid-August discouraged the gold bulls. However, a quick rebound above $2000 per ounce allowed large banks to resume their recommendations to buy. According to Credit Suisse forecasts, gold prices will grow to $2500 in 2021. Standard Chartered Bank believes investors will use any price decline to open long positions amid the weak dollar, low bond rates, and substantial fiscal stimuli. There are enough bulls in the gold market, and this fact alone raises concerns in the extended rally of the XAU/USD. Can there be turmoil?
Many bullish factors have already been priced in the XAUUSD, and there are not so many growth drivers left. I mean the long-term dollar weakness and the Fed’s willingness to put up with the inflation above its 2% target for as long as it is necessary. The problem is whether consumer prices will grow. The inflation level, expected by the bond market, returned to the January level in five years; but it is still below the Fed’s target. Inflation-adjusted five-year options suggest a little chance that the indicator will be above 3%. It is more likely to slide below 1%. The story of 2009-2011 can repeat in the gold market. Then, the gold price, having reached its all-time high, crashed, as investors didn’t nay more believe that the fiscal stimulus could accelerate the PCE.
In my opinion, the bond market can give a clue on the future gold trends. Gold price correlates with the Treasury Inflation-Protected Securities (TIPS). The increase in the TIPS yields on August 11-12 triggered an XAU/USD correction.

Dynamics of gold and TIPS yields



Source: Wall Street Journal
The gold rally takes place ahead of auctions and amid talks about the Russian vaccine. The more is fiscal stimulus, the more money needs Treasury. The initial public offering makes investors sell securities in the secondary market, which pushes up the yields. Taking into account vast scales of the state funding, such a situation could repeat, which increases the risks of instability in the gold market.
Still, the most significant danger for the gold buyers could result from good news about the COVID-19 vaccine. The Treasury yields are quite responsive to the pandemic. Positive information about vaccines will support the economy, but, at the same time, it will weigh on gold. Purchasing managers think the glass is half-full, and the continuous rally of the US PMI must support the growth of the global bond market rates.

Dynamics of US PMI and Treasury yields



Source: Nordea Markets
Therefore, gold bulls still have two big advantages. They are the greenback weakness and the Fed’s willingness to put up with a high inflation rate. Nonetheless, unless the consumer price growth accelerates and the USD crashes, the XAU/USD will hardly continue to rally. On the contrary, an increase in the Treasury yields looks more likely, which suggests the relevance of the gold sales on the rise to $2050-2055 and $2130-2135.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/xauusd-forecast-gold-market-will-face-a-turmoil/?uid=285861726&cid=79634
submitted by Maxvelgus to Finance_analytics [link] [comments]

Top 16 Forex Trading Tips You Should Know

Top 16 Forex Trading Tips You Should Know
This article will breakdown the top 16 trading tips you should consider , ranging from how you should trade, the risks you need to be aware of, how learning about trading can improve your trading performance, and much more!

https://preview.redd.it/5mtfgzf58u951.jpg?width=750&format=pjpg&auto=webp&s=d03de717ed7528061472e763cfcb4cf34771fbef
1. Create Your Own Strategy
No list of currency trading tips is complete if it doesn't mention strategies. One of the most common mistakes beginner traders make is not creating an action plan. Figure out what you want to get out of trading. Having a clear end goal in mind will help with your trading discipline.
2. Learn Step-by-Step
As with every new practical learning activity, trading requires you to start with the basics, and move slowly until you understand the playing field. Start by investing small sums of money, and keep in mind the old adage 'slow but steady wins the race'.
3. Take Control of Your Emotions
Don't let your emotions carry you away. It can be very difficult at times, especially after you've experienced a losing streak. But keeping a level head will help you stay rational, so you can make competent choices. Whenever you let your emotions get the better of you, you expose yourself to unnecessary risks. Exercising risk management within your trading will help you to minimise the risks.
4. Stress Less
This is one Forex tip that sounds really obvious – because it really is. But guess what? Trading under stress generally leads to irrational decisions, and in live trading, that will cost you money. Therefore, identify the source of your stress and try to eliminate it, or at least limit its influence on you. Take a deep breath and focus on something else. Every person has their own way of overcoming stress – some listen to classical music, while others exercise. Listen to your mental health and learn what works best for you.
5. Practice Makes Perfect
Of all the Forex tricks and tips for beginners, this is the most important. You are unlikely to succeed at anything on your first try. Only constant trading practice can yield consistently top results. But you probably don't want to lose money while learning the basics, right?
6. Psychology is Key
Every trader is a psychologist at heart. When you're planning your next move, you have to analyse market movements and review your own psychology. You need to ask yourself questions such as:
  • Did I show signs of confirmation bias?
  • Did I make a trade out of frustration?
  • What made me choose that particular currency pair?
Mastering your psychology will protect you from many losses along the trading development path.
7. No Risk, No Success
Not even Forex trading tips and tricks can guarantee you success. When you decide to become a trader, you should have already accepted the possibility of failure. In case you didn't – here's a reality check. You won't make profitable trades 100% of the time. Don't let false advertisements get in your head, either. Instead, be realistic about your Forex trading methods and goals.
8. Patience is a Virtue
When it comes to trading, this old saying is not just a cliché. True success is never instantaneous. It's the result of consistent work and planning. Many beginner traders look for an easy, fast path to profit. Don't bother – it doesn't exist!
9. Continuous Education
Each day you trade, there's a new lesson to be learned. Look closely at the Forex market and keep all the tips you have learnt in mind. Start analysing news, trends, and financial processes, and don't neglect the Forex basics. Most importantly, study, then practise and then study some more. Repeat this process often, and you will be well on your way to fully understanding the markets.
Studying will require a lot of time and effort, but it will pay off in the long run. For starters, Admiral Markets offers the opportunity for traders to benefit from a free education centre that offers Forex tips, as well as, a range of articles and tutorials offering tips, tricks, strategies, and more, for all kinds of trading.
10. Trends are Good for You
One particularly important Forex market tip to follow is to learn about trends. The ability to spot trends is a valuable one. While we don't recommend jumping on the trend bandwagon every time, but outright ignoring the trend is a recipe for disaster. Trends can show you what is coming, so you can pro-actively adjust your trading, rather than reacting when it's too late.
11. Seek Competitive Conditions
It's important to choose top-notch service conditions and get favourable spreads. If you're considering trading with Admiral Markets, there are a range of different options available. Why not read more about them in our account types section?
12. Plan in Advance
Forex trading is not a gamble – it's a strategic game. Carefully calculate your next move before you act. You can begin formulating a plan by asking yourself some challenging questions such as:
  • Have I accounted for the possibility that I may lose?
  • What's my plan B for the different types of scenarios that may arise?
To be successful at Forex trading, you have to expect the unexpected.
13. Know the Charts
You will be trading on many different markets and will need to quickly understand the information you analyse for each trade. There are numerous tools available to traders that make trading easier, but nothing is more time-efficient than charts. Charts provide you with fast access to numerically-heavy data in the form of a simple visual, so you don't have to scroll through it.
14. Don't Run out of Chances
Eagerness is good, but there is a limit to everything. If you trade too much, you are probably harming your chances of achieving success. Why? Because overtrading usually leads to weakened focus and careless trades. As you develop your trading plan, indicate the maximum amount of trades you will make per day or week.
15. Greediness Leads to Risks
Greediness can make you take unnecessary risks as well. Set the maximum loss and desired profit within your trading plan. When you hit this level, stop and don't go for another trade. When it comes to fund management, this is one of the most important Forex tips and tricks to follow.
16. Use Stop-Losses
Our Forex daily tips don't just focus on general recommendations. We also want to mention valuable tools, such as the highly rated stop-loss. Not setting a stop-loss is basically giving you an excuse to keep a bad position open (because you're hoping that the situation improves). But bad situations rarely improve, and neither will your capital if you don't wise up fast.
A correctly placed stop-loss eliminates the risk of losing all of your money on a single bad trade. The stop-loss is especially beneficial when you don't have the ability to close positions manually.

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EQIBank: Global Digital Bank

EQIBank, established in 2015, provides global digital banking for corporations and High Net Worth clients – such as entrepreneurs and disruptive industries. We aim to provide more products, more countries, more currencies than any other digital bank, redefining the boundaries of banking.
Our vision is a bank the world can use. We empower our clients through an open banking platform. While most digital banks serve a select group of jurisdictions, we bank more than 180 countries. With the infrastructure to serve businesses in need of more complex banking services, we offer innovative, disruptive banking on a global and sustainable scale to the offshore sector – previously underserved by digital banks. There are many reasons to bank with EQIBank:
We provide the following Corporate and Personal banking services to clients:
EQIBank clients enjoy instant transfers, quick onboarding, and 24/7 banking.

Digital Asset Custody

We provide full-range global custody services. Financial institutions, hedge funds, investment sponsors, RIAs, family offices, endowments, foundations, and private investment partnerships see the value in holding their digital assets with a bank. As a qualified custodian, our segregated cold storage has provided secure custody for nearly a decade.
With EQIBank, their digital assets are insured by a syndicate of Lloyd’s of London. We provide insurance for private keys owned by the Insured, for which the Insured has accepted legal liability, and for which the Insured has accepted responsibility for the care, custody, and control.
All original documents evidencing ownership are housed in our secure storage facility, and digital copies of each document are stored on our main server. Duplicate electronic copies are stored on a second server, off-site, for disaster recovery purposes
We balance the security of private keys and cold storage with easy access to digital networks. Your digital assets are kept offline and away from local networks.
Biometric access to devices ensures that all transactions and transfers can be independently reviewed by our insurance provider to ensure the highest standards of procedural compliance.
Our custody clients benefit from both security and asset documentation, as well as access to our banking platform, including premier accounts, OTC services, business, and personal debit and credit cards, APIs, and many other benefits available when you hold your digital assets with our bank.
And, as with the whole of EQIBank, phone and teleconferencing support is available during business hours, and email and text support are available 24/7.
Together with our partners, we are providing world-class financial technology and services through a suite of innovative state-of-the-art products that put our clients in control of their assets.
If you’d like to speak with any one of the many C-Level banking experts at EQIBank, please email [email protected] today and we can schedule an interview.
EQIBank: Elite banking, card services, and digital asset custody – all on one platform.
The Founders
EQIBank was founded by former HSBC, Credit Suisse, Bank of New York and UBS bankers with over 240 years of combined experience in banking, financial services, exchanges, asset management and blockchain technology. Accounts are open and we are currently taking customer applications.
Frustrated by the lack of digital innovation, personalized services, and offerings tailored for HNWIs and big companies at existing banks, our team decided to build a truly global bank for corporate and private clients. We designed EQIBank to be a client-centric and digital-first global financial ecosystem that’s available to clients anywhere, anytime and from the convenience of one app.

Jason Blick

DIRECTOR AND CHIEF EXECUTIVE OFFICER
Jason qualified as a UK attorney and served as the nationwide manager of BerrmansLace Mawer, who specialise in financial services. He went on to manage legal and compliance in over 90 countries for Sun Microsystems, overseeing over €1.5 billion per year in transactions.
He later became the CEO of Financial Partners Bank, with over 12,000 clients and $1.2 billion AUA. He is the founder of Cayman Enterprise City, the Cayman Commodities and Derivative Exchange, and he served on the board of the Cayman Islands Government Special Economic Zone Authority.
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[LONG] My Story of Disillusionment with and Disappointment in the World and Myself

Intro.
This might be a long one. I hope someone reads the thing, I put like 3 hours into writing it. A brief story of my life and how it all led up to this moment, where I am disillusioned with my self-image, my life choices, and certain aspects of the world, and have no idea what to do next. Warning: this whole thing might be a little depressing to read.
Childhood.
I am a 20yo Russian male. During my childhood, I was made to believe that I am capable of doing something great and doing better than anyone. At the same time I developed a very non-conformist life stance and very often rejected things and ideas simply because they were too popular for my taste, and I couldn't feel special whilst enjoying them. Of course, in turn, society rejected me, as it does with anyone who doesn't play by the rules. Oh well.
My only redeeming quality was that I considered myself pretty smart. Which is even easier to assume, when at the same time you think that you're different from everyone else. Now, I know that to some extent, I was indeed smarter than most people in certain areas. Unlike most people I knew back then, often with bare minimum efforts I was able to maintain near perfect grades at school. I was also enjoying learning new things and reading more than an average person. So, let's just say, I had a basis to assume I was a smart dude.
I wasn't happy and content with my life, though. I never had real friends, because I only hung out with people when they were my classmates/roommates/co-workers, and after we parted ways, I rarely if ever contacted them afterwards. I always enjoyed doing things you usually do in solitude more, because when I was alone, I wouldn't be afraid that someone could hurt me for being different. Because of that, I was never in a romantic relationship.
High School.
Still, life was going okay. By the end of school, I kind of accepted my social deficiency and I wanted to focus on improving the world and become a successful person - for myself. I was facing a dilemma, though. Despite the fact that I was doing great in school, the idea of having to invest four years of my time into studying something really specific, and then having to work another 20-30 years on the same job was terrifying, because I had no idea what I liked to do! Nothing seemed interesting to me, I didn't have a passion for doing anything... Thanks to my video game addiction, which made me lazy as fuck, probably. I also needed to meet my criteria for success with my future job, which included being financially successful. I grew up in top 1% income family, so... I always felt the pressure to outperform or at least match my parents' income.
Enter trading. My dad discovered investing several years ago (we don't live in US, so most of the people aren't as financially savvy, so he never thought about investing before then). I was always curious about financial independence and markets, but now I was seeing it all done in front of me, I realized that it might be a good opportunity to make a lot of money and become successful without being socially adept, which is something absolutely required in business or politics. So, I asked my father to open a brokerage account for me in the US, and started swing trading (trading in weekly/monthly time frames). I could only trade slow and small because of the trade restrictions put on accounts <$25k and <21yo in the US. Still, it was going well, but in hindsight I was just lucky to be there during a great bull market.
Even before I thought trading and more importantly investing were the ways smart people make money. I thought simply because I was conventionally smart, I had a talent or an innate ability to pick innovative stocks and do venture investing when I grow some capital. I truly believed in that long before I was introduced to financial markets, I believed that my surface level understanding of multiple areas of cutting edge and emerging technology would give me an edge compared to all the other investors.
US Community College and Return Back.
In the end, I've decided I want to go to a US community college and study finance and become a trader and later an investor, but I didn't want to work for a fund or something like that (lazy ass). I wanted to use my knowledge and skill and my own money to grow my net worth and make a living. I didn't really like the process of trading, I just needed the money to live by while I was trying to figure out what else to do with my life. Because I thought I were smart, I thought this would come easily to me. Boy was I wrong. From the nicest of conditions in my hometown, I was suddenly moved into a foreign setting, on the other side of the planet away form my family and mates, with a video game addiction and laziness that ruined my daily routine and studying as well. The fact that I didn't like my major was not helping. My grades fell from A- in the first quarter to C+ in the last. I gained +30% from my normal weight. I was stressed out, not going outside and sitting at my computer desk for days at a time, skipping all the classes I could if they were not absolutely essential for my grades, living on prepared foods. I never got out of my shell and barely talked to anyone in English, all of my friends were Russian speaking. I wasted an opportunity to improve my speaking, although aside from that my English skills satisfy me.
By the end of community college, last summer, I was left with B grades that wouldn't let me transfer anywhere decent, and the extreme stress that I put myself through started taking a toll on my mental health. I was planning to take a break and go back to Russia for several months, and transfer back to a US uni this winter. Needless to say, you can't run from yourself. It didn't really become much better after a few months in Russia. I didn't want to study finance anymore, because it was boring and I was exhausted. I still had the video game addiction, still was lazy and gained some more extra pounds of weight. I was not sleeping at all, extremely sleep deprived for months. Because of this and lack of mental stimulation I started to become dumber. And all that was happening where I didn't really have to do anything: not study or work, just sit around the house and do whatever I wanted. Turns out, these conditions didn't help me to get out of the incoming depression.
Finally, around November, when I already sent out all of my transfer applications and already got some positive answers from several universities, I knew I didn't have much time left at home, and I had to leave soon. But I really, really didn't want to go back. It was scarier than the first time. I was afraid of new changes, I just wanted for the time to stop and letting me relax, heal... I was having suicidal thoughts and talked about it with my family and my therapist. They were all supportive and helped me as much as they could. But I was the only person who could really help myself. If I wanted to breathe freely, I had to admit defeat and not go back to the US to continue my education. It was extremely hard at first, but then I just let go. I decided to find a temporary job as an English tutor and give myself time to think. Then I remembered that I had a bunch of money in my trading account. I still thought that I was pretty smart, despite failing college, so I figured, why not try move it to Russian brokers who don't have trading restrictions, and do it full time? Which is exactly what I did. And I started to study trading all by myself at a fast pace. I was now trading full time and it was going sideways: +10% in December, -20% in January. Then, something incredible happened. I was already in a shitty place in life, but I still had some hope for my future. Things were about to get much worse. I'm in the late January, and I discovered for myself that the whole financial industry of the world was a fraud.
Brief Explanation of My Discoveries.
In the image of the financial industry, there are several levels of perceived credibility.
In the bottom tier, there is pure gambling. In my country, there were periods when binary options trading and unreliable Forex brokers were popular among common folk, but these were obvious and unsophisticated fraudsters who were one step away from being prosecuted. There are also cryptocurrencies that don't hold any value and are also used only for speculation/redistribution of wealth. There is also a wonderful gambling subreddit wallstreetbets where most users don't even try to hide the fact that what they are doing is pure gambling. I love it. But the thing is, this is trading/investing for the people who have no idea what it is, and most people discredit it as a fraud, which it, indeed, is. These examples are 99% marketing/public image and 1% finance. But these offer x10-1000 returns in the shortest time span. Typical get-rich-quick schemes, but they attract attention.
Then, there is trading tier. You can have multiple sub levels here, in the bottom of this tier we would probably have complex technical analysis (indicators) and daily trading/scalping. I was doing this in the DecembeJanuary. At the top would be people who do fundamental analysis (study financial reports) and position trade (monthly time frames). Now, there is constant debate in the trading community whether technical analysis or fundamental analysis is better. I have a solid answer to the question. They work in the same way. Or rather, they don't work at all.
You'd ask: "Why you didn't discover this earlier? You were in this financial thing for several years now!" Well, you see, unlike on the previous level, here millions of people say that they actually believe trading works and there is a way to use the available tools to have great returns. Some of these people actually know that trading doesn't work, but they benefit from other traders believing in it, because they can sell them courses or take brokerage fees from them. Still, when there are millions around you telling you that it works, even a non-conformist like me would budge. Not that many people actually participate in the markets, so I thought that by being in this minority made me smart and protected from fraudsters. Lol. All it took for me to discover the truth is to accidentally discover that some technical indicators give random results, do a few google searches, reach some scientific studies which are freely available and prove that technical and fundamental analysis don't work. It was always in front of me, but the fucking trading community plugged my ears and closed my eyes shut so I wasn't able to see it. Trading usually promises 3-15% gain a month.
A huge shock, but surely there was still a way for me to work this out? Active investing it is!
The next level, active investing, is different from trading. You aim for 15-50% yearly returns, but you don't have to do as much work. You hold on to stocks of your choice for years at a time, once in a while you study the markets, re balance your portfolio, etc. Or you invest your money in a fund, that will select the stocks of their choice and manage their and your portfolio for you. For a small fee of course. All of these actions are aimed at trying to outperform the gain the market made as a whole, and so called index funds, which invest in basically everything and follow the market returns - about 7-10% a year. And if I ever had any doubts in trading, I firmly believed that active investing works since I was a little kid (yes I knew about it back then). And this is where the real fraud comes in.
The whole Wall Street and every broker, every stock exchange in the world are a part of a big fraud. Only about 10-20% of professional fund managers outperform the market in any 15 year period. If you take 30 years, this dwindles to almost nothing, which means that no one can predict the markets. These people have no idea what they are doing. Jim Cramer is pure show-business and has no idea what's going on. Warren Buffet gained his fortune with pure luck, and for every Buffet there are some people who made only a million bucks and countless folks who lost everything.
Wall Street. They have trillions of dollars and use all that money and power and marketing to convince you that there is a way to predict where the stocks are going without being a legal insider or somehow abusing the law. They will make you think you can somehow learn from them where to invest your money on your own or they will make you believe that you should just give it to them and they will manage it for you, because they know how everything works and they can predict the future using past data.
They won't. They don't. They can't. There are studies and statistics to prove it countless times over the span of a 100 years. But they will still charge you exchange fees, brokerage fees and management fees anyway. And they also manipulate certain studies, lobby where and when they need it, and spread misinformation on an unprecedented scale, creating a positive image of themselves. And everyone falls for that. Billions of people around the globe still think it's all legit.
Passive index investing is the last level. You just put your money in the market and wait. Markets will go up at a predetermined rate. If there's a crisis, in 10 years no one will even remember. Markets always go up in the end. But passive index investing can only give you only 7% inflation-adjusted returns a year. Not enough to stop working or even retire early, unless you have a high-paying job in a first-world country. I don't.
Despite all that, to put it simply, this is the only type of investing that works and doesn't involve any kind of fraud or gambling. It's the type of investing that will give you the most money. If you want to know why it is like that and how to do it, just go to financialindependence. They know this stuff better than any other sub. Better than investing, trading or any other sub where non-passive-index investing is still discussed as viable strategy.
Back to me.
My whole being was fucked over, my hopes and dreams and understanding of success and how this world works were shattered. I realized, I had no future in financial industry, because only middlemen make money in there, and I quit college needed to get there. Frankly, I wouldn't want to work there even if I had the opportunity. The pay is good, but the job is boring and I wouldn't want to be a part of this giant scheme anyway. But even if I wanted to go back, I also couldn't. Russia is in a worsening crisis and my parents could no longer afford a US university and now with coronavirus it's even worse. Good thing I quit before it all happened. I learned a valuable lesson and didn't lose that much money for it (only about 10% of my savings). God knows where it would lead me if I continued to be delusional. But now that my last temporary plans for the future were scrapped, I had no idea what to do next.
The future.
With the reality hitting me, I would lie if I say it didn't all come full circle and connect to my past. I realized that I was stupid and not intelligent, because I was living in a made-up world for years now. But even if I were intelligent, pure wit would not give me the success and fortune that I was craving, because trading and active investing were a no-go for me, and business/politics require a very different, extroverted mindset, different education and interest from my own. My only redeeming quality in a hopeless introvert world, my perceived intelligence was taken away from me and rendered useless at the same time.
Besides, failing at that one thing made me insecure about everything and now I think of myself as an average individual. So, if 8 out of 10 businesses fail, I shouldn't start one because I will probably fail. And if most politicians don't get anywhere, why should I bother? If average salary in my country is X, I shouldn't hope for more. I stopped believing in my ability to achieve something. First, I failed at education and now I failed... Professionally? I don't know how to describe it, but my life recently was just an emotional roller coaster. I just feel like a very old person and all I want calmness and stability in my life. I was very lazy before just because, but now I feel like I also don't want to do anything because I feel I would just fail. It feels better now I don't have to worry about trading anymore and I got rid of that load... But I am still miserable and perhaps worse than ever, maybe I just don't understand and feel it because I've become slow and numb. The only positive thing that happened to me recently, is that I finally started losing weight and about 1/4 of the way back to my normal weight.
As for my future, am looking at several possibilities here. So far the parents are allowing my miserable life to continue and they let me live with them and buy me food. I don't need anything else right now. But it can't go on like this forever. The thought of having a mundane low-paying job in this shithole of a country depresses me. I will probably temporarily do English tutoring if there's demand for such work. My old school friends want me to help them in their business and my dad wants me to help him in his, I and probably should, but I feel useless, pathetic and incapable of doing anything of value. And business just seems boring, difficult and too stressful for me right now. Just not my cup of tea.
I am also looking at creative work. I love video games, music, films and other forms of art. I love the games most though, so I am looking into game dev. I don't really like programming, I have learned some during school years, but the pay would probably be higher for a programmer than an creator of any kind of art. However, I think I would enjoy art creation much more, but I don't have any experience in drawing and only some limited experience in music production. And I am not one of these kids who always had a scrapbook with them at school. Having to make another life choice paralyzes me. I am leaning towards art. I don't feel confident in my ability to learn this skill from scratch, but I think it's my best shot at finding a job that would make me happy.
So perhaps, when this whole pandemic is over, I'll go to Europe and get my degree, get a job there and stay. American Dream is dead to me, and Europe is cheaper, closer, safe and comfortable. Just the thing for a person who feels like they are thrice their real age.
Outro.
Thanks for coming to my TED Talk. Special thanks if you read the whole thing, it means a whole lot to me, an internet stranger. But even if no one reads it, feels good to get this off my chest. I actually cried during writing some parts. Holy shit, this might be the longest and smartest looking thing my dumbed down head could manage to generate since college. I hope that you're having a great day. Stay healthy and be careful during this fucking pandemic. All the best.
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