THE ORIGIN OF FOREX
Forex was not created by a couple of guys in a garage with $2,000 trying to figure out how to turn it into
$3,000. NO. It was developed by large corporations, investment funds, banks, and the major financial
institutions that make up global capital markets.
The underlying idea is simple: if one million people each lose $10 in a day, someone else makes $10 million that same day. That’s essentially how the system works. When you visit the website of almost any broker, you will always see a notice — required by law — stating that around 70% of people who trade lose their money.
In reality, the number is often closer to 80%, but the wording is usually softened. What they don’t tell you is
who makes up the 20% that actually wins. In most cases, those consistent winners are large institutions
corporations, investment funds, banks, and other major financial players.
Now, there are some training courses where, if you follow the system very strictly, you might manage to
earn 100 or 200 per month while spending four to six hours a day trading. Beyond that, however, most
approaches do not produce meaningful results.
If you do the math, working five hours a day equals about 100 hours a month. If that produces 200, that’s
about 2 per hour. And that’s assuming you don’t lose money after paying for an expensive course.
Frankly, my young daughter earns more babysitting.
From this point forward, for simplicity, we’ll refer to these large institutional market participants collectively
as major market players.
Any capital equal to or greater than 100 million can be considered a major institutional market player.
(You’ll see why shortly.) In Forex, the competition is not individual people. It comes from machines —
powerful computers running sophisticated algorithms designed to generate a small percentage of profit
each day.
That daily percentage is not very large. It usually falls somewhere between 0.5% and 1% per day.
If you only have a trading account of 3,000, that level of return would not really be worthwhile. Your profit
might be around 10 per day (about 200 per month), which would never cover the cost of developing or
running such advanced algorithms.
This is one of the reasons many people invest their money in investment funds. The funds aim to achieve
these types of returns while charging a management fee. Because they pool capital from thousands of
smaller investors, they are able to operate with hundreds of millions in capital and run large scale
algorithmic trading strategies.
