The Best Market for Beginning Traders
04/21/2012 10:00 am EST
Surprisingly enough, the forex market is where the highest percentage of traders are profitable, says Hubert Senters, explaining how forex stacks up against stocks and futures.
We’re here with Hubert Senters and we’re going to talk about if you had it to do over again, where would you start?
This is a really common question that I get a lot: If I was starting over, what would I do over again? Right now, probably the best place to start out would be the spot forex market, for a couple of different reasons.
Now, I’m not a big fan of the spot forex market—until they start getting more regulated by the CFTC and the NFA—but they just released a study this past year where they were required to show the net profitability of retail traders, and the numbers came out that 25% of retail forex traders were actually profitable.
Wow, that’s a big number.
Yeah, that’s pretty high. It’s double or quadruple what the industry average is, so that’s a good plus.
The second thing is, you can start up an account with as low as $500. Now, you’re not going to make a ton of money, but you’re not going to lose a ton of money on $500 either.
That’s going to give you the ability to trade a micro account, and then you can build up to a mini account, and then to a standard-lot account.
So instead of trading a demo account—which won’t help you pay the mortgage or a car payment because it’s fantasyland money—that’s just a lot better way to trade real. You’re going to be making anywhere from $20 to $60 a day, which is not a lot of money by any stretch, but at least you’ll actually be trading in a market.
What other things do you see out there for beginners?
A lot of people will start out in the stock market and then you’ve got the daytrading pattern rules, and they’ll try to overtrade that. So a natural progression from that would be going into the futures market.
You don’t have to have as much money and you get a little bit better leverage on your money. But the only thing that will hurt them is that a lot of people who come from the stock market don’t have a really good discipline for using stops.
If you do come into something that’s more leveraged, like futures or forex, just make sure that you’re using stops.
Especially in the futures market. When you’re so leveraged, you get the problem with margin calls when you’re putting up a little against a lot, too.
And you have the fact that you can lose more than you put in.
Exactly. If you’re short something and it goes sky high, you could go debit on your account. The cool thing about E-mini futures is you could put down as little as $500 and you’re controlling $80,000 worth of stuff.
Now, that’s great if you’re on the right side of the market, but if you’re on the wrong side of the market, you’re controlling $80,000 worth of stuff, so it could go badly too.
Yeah. So if you’re going to go that direction, it’s just watching your trades and making sure you’re on top of it, or you’re going to have a costly lesson in trading.
Definitely use a stop loss and have some good trade management.