So there we were thinking about my brothers making at least 5% every month from this guy in Arkansas who was trading forex. We did the math and saw that this was definitely worth investigating. If we put in $50,000 and made just 5% a month, at the end of a year (based on compounding), we'd have about $90,000. That would be an 80% annualized return and we'd never heard of anything that would give these kinds of returns. At the end of 2 years, that would be $161,000. We kept doing the math and saw that at the end of 5 years, our $50,000 would have turned into a million dollars. You can see why we were definitely interested in investing with this forex trader.
We went online and read the little bit of information about forex that was then available. We ordered the only two books that were listed on Amazon about forex trading, both very poorly written. One was a new release from Raghee Horner and we couldn't wait to get it. The other book was forgettable - it had no valuable information in it other than stating that forex was a risky venture and it was easy to lose a lot of money doing it. Raghee's book, clearly a first edition, was also pathetic. It had more spelling mistakes than I've ever seen in a published book. It would tell you to see Diagram 7A for an explanation, but that diagram was nowhere to be found. The page numbers were all mixed up and we regretted spending the overpriced $75 on it. It was frustrating trying to get through it but we were good students and we managed to read the whole thing.
Believe it or not, that's all that was available in 2005 because forex trading was still relatively new to individual traders. It had previously been restricted to large financial institutions only and it wasn't until the late 1990s when forex trading platforms were developed online that it became more accessible to retail traders. Before that time when a bank traded 1 Lot, they were trading what today we call 10 standard lots or 1 bank lot - a volume way to large for the average individual trader. Brokers came in and acted as middle-men between the banks and the individual traders and because they held large positions, they could let individual traders buy and sell small portions of their larger position and just charge them a fee for doing so. It's a tremendous service that the brokers offer us. By breaking a bank lot into 10 standard lots, it made it possible for the average guy to get into the market. Initially there were not many brokers that even offered mini lots, let alone micros or nanos. It was the introduction of the smaller position sizes that really attracted the large audience of all of us.
Did you know that the foreign exchange market is the largest financial market in the world! When we started trading in 2005, the average turnover in global forex markets was about $2 trillion dollars a day (today it is nearly $4 trillion dollars a day). Have a look on Amazon to see over 1700 books that are available now on forex trading not to mention the 163 million website hits devoted to forex. To be continued…
Here are direct links to the other four parts of this series:
Confessions and Revelations of a Forex Trader – Part 1 of 5
Confessions and Revelations of a Forex Trader – Part 3 of 5
Confessions and Revelations of a Forex Trader – Part 4 of 5
Confessions and Revelations of a Forex Trader – Part 5 of 5