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The World's 10 Most Famous Traders of All Time

(Iknow DAN BLYSTONE HE IS ONE OF THE GOOD GUYS AROUND.. ) https://www.investopedia.com/articles/active-trading/041515/worlds-10-most-famous-traders-all-time.asp

Updated Mar 12, 2019

There are several famous former traders who moved on to different careers, such as John Key (who served as the 38th Prime Minister of New Zealand) and Jimmy Wales (founder of Wikipedia). However, this list is made up of traders famous for being traders. The lives of the world's most famous traders are colored by both triumph and tragedy, with some exploits achieving mythological status within the industry. The list begins with legendary traders of history and progresses to those of the present day.

 

1. Jesse Livermore: Jesse Lauriston Livermore (1877–1940) was an American trader famous for both colossal gains and losses in the market. He successfully shorted the 1929 market crash, building his fortune to $100 million. However, by 1934 he had lost his money and tragically took his own life in 1940.

 

2. William Delbert Gann: WD Gann (1878–1955) was a trader who used market forecasting methods based on geometry, astrology, and ancient mathematics. His mysterious technical tools include Gann angles and the Square of 9. As well as trading, Gann wrote a number of books and courses.

 

3. George Soros: Hungarian-born George Soros (born 1930) is the chairman of Soros Fund Management, one of the most successful firms in the history of the hedge fund industry. He earned the moniker “The Man Who Broke the Bank of England” in 1992 after his short sale of $10 billion worth of pounds, yielding a tidy $1 billion profit. 

 

4. Jim Rogers: James Rogers, Jr. (born 1942) is the Chairman of Rogers Holdings. He co-founded the Quantum Fund along with George Soros in the early 1970s, which gained a staggering 4200% over 10 years. Rogers is renowned for his correct bullish call on commodities in the 1990's and also for his books detailing his adventurous world travels.

 

5. Richard Dennis: Richard J. Dennis (born 1949) made his mark in the trading world as a highly successful Chicago-based commodities trader. He reportedly acquired a $200 million fortune over ten years from his speculating. Along with partner William Eckhardt, Dennis was co-creator of the mythical Turtle Trading experiment. 

 

6. Paul Tudor Jones: Paul Tudor Jones II (born 1954) is the founder of Tudor Investment Corporation, one of the world's leading hedge funds. Tudor Jones gained notoriety after making around $100 million from shorting stocks during the 1987 market crash.

 

7. John Paulson: John Paulson (born 1955), of the hedge fund Paulson & Co., rose to the top of the financial world after making billions of dollars in 2007 by using credit default swaps to effectively sell short the US subprime mortgage lending market.

 

8. Steven Cohen: Steven Cohen (born 1956) founded SAC Capital Advisors, a leading hedge fund focused primarily on trading equities. In 2013, SAC was charged by the Securities and Exchange Commission with failing to prevent insider trading and later agreed to pay a $1.2 billion fine.

 

9. David Tepper: David Tepper (born 1957) is the founder of the wildly successful hedge fund Appaloosa Management. Tepper, a specialist in distressed debt investing, has made several appearances on CNBC where his statements are closely watched by traders.

 

10. Nick Leeson: Nicholas Leeson (born 1967) is the rogue trader who famously caused the collapse of Barings Bank. Leeson served four years in a Singapore jail but later bounced back to become CEO of Irish football club Galway United.

 

The Bottom Line

The dramatic and varied life stories of the world's most famous traders have made compelling material for books and movies. Reminiscences of a Stock Operator, a fictionalized portrayal of Jesse Livermore's life, is widely viewed as a timeless classic and one of the most important books ever written about trading. Rogue Trader (1999), starring Ewan McGregor, is based on the story of Nick Leeson and the collapse of Barings Bank. (For related reading, see "The Most Famous Forex Traders Ever.")

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https://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore

 

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learn from the best

https://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

Learn from the best

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

 

 

Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader.[1] He is considered a pioneer of day trading[2] and was the basis for the main character of Reminiscences of a Stock Operator, a best-selling book by Edwin Lefèvre. At one time, he was one of the richest people in the world; however, at the time of his suicide, he had liabilities greater than his assets.[3]

In a time when accurate financial statements were rarely published, getting current stock quotes required a large operation, and market manipulation was rampant, Livermore used what is now known as technical analysis as the basis for his trades. His principles, including the effects of emotion on trading, continue to be studied.

Some of Livermore's trades, such as taking short positions before the 1906 San Francisco earthquake and just before the Wall Street Crash of 1929, are legendary and have led to his being regarded as the greatest trader who ever lived.

 

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

Learn from the best

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

 

 

Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American stock trader.[1] He is considered a pioneer of day trading[2] and was the basis for the main character of Reminiscences of a Stock Operator, a best-selling book by Edwin Lefèvre. At one time, he was one of the richest people in the world; however, at the time of his suicide, he had liabilities greater than his assets.[3]

In a time when accurate financial statements were rarely published, getting current stock quotes required a large operation, and market manipulation was rampant, Livermore used what is now known as technical analysis as the basis for his trades. His principles, including the effects of emotion on trading, continue to be studied.

Some of Livermore's trades, such as taking short positions before the 1906 San Francisco earthquake and just before the Wall Street Crash of 1929, are legendary and have led to his being regarded as the greatest trader who ever lived.

 

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

Learn from the best

Livermore was born in Shrewsbury, Massachusetts to a poverty-stricken family and moved to Acton, Massachusetts, as a child.[4] Livermore learned to read and write at the age of 3 1/2.[5] At the age of 14, his father pulled him out of school to help with the farm; however, with his mother's blessing, Livermore ran away from home.[5] He then began his career by posting stock quotes at the Paine Webber stockbrokerage in Boston, earning $5 per week.[5]

Career

In 1892, at the age of 15, he bet $5 on Chicago, Burlington and Quincy Railroad at a bucket shop, a type of establishment that took leveraged bets on stock prices but did not buy or sell the stock.[1] He earned $3.12 on the $5 bet.[5]

Livermore was soon earning more trading at the bucket shops than he did at Paine Webber. At the age of 16, he quit his job and began trading full-time.[5] He brought $1,000 home to his mother, who disapproved of his "gambling"; he countered that he was not gambling, but "speculating".[6]

Eventually, he was barred from his local bucket shops because of his consistent winning and would bet in the shops using disguises. He then went to Wall Street with his $10,000 in savings.[5]

While trading on Wall Street, he went bust as the ticker tape was not updated fast enough to make current trading decisions. He then moved to St. Louis, where he made bets at bucket shops.[5]

His first big win came in 1901 at the age of 24 when he bought stock in Northern Pacific Railway. He turned $10,000 into $500,000.[5]

In 1906, he vacationed in Palm Beach, Florida at the club of Edward R. Bradley.[5] While on vacation, at the direction of scalawag Thomas W. Lawson, he took a massive short position in Union Pacific Railroad the day before the 1906 San Francisco earthquake, leading to a $250,000 profit.[7] However, his friend, Edward Francis Hutton, incorrectly convinced Livermore not to close his position, and he wound up losing $40,000.[5]

In the Panic of 1907, Livermore's huge short positions made him $1 million in a single day.[5] However, his mentor, J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, requested him to refrain from further short selling. Livermore agreed and instead, profited from the rebound, boosting his net worth to $3 million.[5]

He bought a $200,000 yacht, a rail car, and an apartment on the Upper West Side. He joined exclusive clubs and had mistresses.[5]

In 1908, he listened to Teddy Price, who told him to buy cotton, while Price secretly sold. He went bankrupt but was able to recover all of his losses.[5]

In 1915, he filed bankruptcy again.[8]

Following the end of World War I, Livermore secretly cornered the market in cotton. It was only interception by President Woodrow Wilson, prompted by a call from the United States Secretary of Agriculture, who asked him to the White House for a discussion that stopped his move. He agreed to sell back the cotton at break-even, thus preventing a troublesome rise in the price of cotton. When asked why he had cornered the cotton market, Livermore replied, "To see if I could, Mr. President."[9]

In 1924-1925, he engaged in market manipulation, making $10 million trading wheat and corn in a battle with Arthur W. Cutten[5] and engineering a short squeeze on the stock of Piggly Wiggly.[6]

In early 1929, he amassed huge short positions, using more than 100 stockbrokers to hide what he was doing. By the spring, he was down over $6 million on paper. However, upon the Wall Street Crash of 1929, he netted approximately $100 million.[5] Following a series of newspaper articles declaring him the "Great Bear of Wall Street", he was blamed for the crash by the public and received death threats, leading him to hire an armed bodyguard.[6]

His second divorce in 1932, the non-fatal shooting of his son by his wife in 1935, and a lawsuit from his Russian mistress led to a decline in his mental health, while the creation of the U.S. Securities and Exchange Commission in 1934 imposed new rules that affected his trading. Although it is unknown exactly how it happened,[9] he eventually lost his fortune and filed bankruptcy for the third time in 1934, listing assets of $84,000 and debts of $2.5 million.[6][5] He was suspended as a member of the Chicago Board of Trade on March 7, 1934.[9]

In 1937, he paid off his $800,000 tax bill.[10]

In 1939, he opened a financial advisory business, selling a technical analysis system.[6]

Personal life

One of Livermore's favorite books was Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay, first published in 1841. That was also a favorite book of Bernard Baruch, a stock trader and close friend of Livermore.[4]

He enjoyed fishing and, in 1937, he caught a 436 pound swordfish.[11]

Marriages

Livermore was married 3 times and had 2 children. He married his first wife, Netit (Nettie) Jordan, of Indianapolis, at the age of 23 in October 1900. They had only known each other a few weeks before they got married.[5] Less than a year later, he went broke after some bad trades; for a new stake, he asked her to pawn the substantial collection of jewelry he had bought her, but she refused, permanently damaging their relationship.[5] They separated soon thereafter and finally divorced in October 1917.[9]

On December 2, 1918, at the age of 40, Livermore married 22-year old Dorothea (Dorothy) Fox Wendt, a 23-year-old former Ziegfeld girl in Ziegfeld Follies.[9] Livermore had affairs with several of the dancers.[5] The couple had two sons: Jesse Livermore II, born in 1919 and Paul, born in 1922.[5] He then bought an expensive house in Great Neck and let his wife spend as much as she wanted on the furnishings.[5] In 1927, he and his wife were robbed at gunpoint in their home.[5] The relationship became strained by Dorothy's drinking habits, Livermore's affairs with other Zigfield girls, and their lavish spending.[5] In 1931, Dorothy Livermore filed for divorce and took up temporary residence in Reno, Nevada, with her new lover, James Walter Longcope. On September 16, 1932, the divorce was granted and she immediately married her boyfriend. She retained custody of their two sons and received a $10 million settlement.[5] Dorothy sold the house in Great Neck, on which Livermore spent $3.5 million, for $222,000. The house was then torn down, depressing Livermore.[5]

On March 28, 1933, 56-year old Livermore married 38-year-old singer and socialite, Harriet Metz Noble, in Geneva, Illinois. They had met in 1931 in Vienna, where Metz Noble was performing and Livermore was in the audience on vacation. Metz Noble was from a prominent Omaha family that had made a fortune in breweries. Livermore was Metz Noble's fifth husband; at least 2 of Metz's previous husbands had committed suicide, including Warren Noble, who hanged himself after the Wall Street Crash of 1929.[12][5]

Publications

In late 1939, Livermore's son, Jesse Jr., suggested to his father that he write a book about trading. The book, How To Trade In Stocks, was published by Duell, Sloan and Pearce in March 1940. The book did not sell well as World War II was underway and the general interest in the stock market was low. His investment methods were controversial at the time, and the book received mixed reviews upon publication.[9]

Suicide

On November 28, 1940, just after 5:30PM, Livermore fatally shot himself with an Automatic Colt Pistol in the cloakroom of the The Sherry-Netherland hotel in Manhattan, a place where he usually had cocktails. Police found a suicide note of 8 small handwritten pages in Livermore's personal, leather bound notebook.[7][13] The note was addressed to Livermore's wife, Harriet (whom Livermore nicknamed "Nina"), and it read, "My dear Nina: Can't help it. Things have been bad with me. I am tired of fighting. Can't carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie".[9]

His son, Jesse Livermore Jr., committed suicide in 1975. His grandson also killed himse

 

 

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    • good news!! It seems you can make good money at forex Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair     Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake David Rodriguez 11-14 minutes We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Reward to Risk ratios play a vital role in capital preservation Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately. Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average Profit/Loss per Winning and Losing Trades per Currency Pair Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades. Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?         Expected Return Gains Choice A 50% chance to Win 1000 50% chance to Win 0 Expect to win $500 over time   Choice B Win 450   Win $450 Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.         Expected Return Losses Choice A 50% chance to Lose 1000 50% chance to Lose 0 Expect to lose $500 over time   Choice B Lose 450   Lose $450 In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time. Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains. It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning. This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor). Managing your risk in this way is a part of what many traders call “money management”. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. dont forget- like subscribe Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com   Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015. Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015. Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan. View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com     View the next articles in the Traits of Successful Series: Trading Leverage - A Real Look at How Traders May Use it Effectively Do the Hours I Trade Matter? Yes - Quite a Bit Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com
    • Waiting for one constructive comment from you guys..anyone dont forget to like and subscribe
    • enjoy.. good profits in forex dont forget to like and subscribe          
    • try again..   1. MakingMoneyin ForexTradingTheForexmarkethasadailyvolumeofover $4trillionper day,dwarfingthevolumeof theequityandfuturesmarketscombined.Thousands ofpeople,allover theworld,are tradingForexandmakingtonsofmoney.Whynotyou?All youneedtostarttradingForexis acomputer andanInternetconnection.Youcan doitfrom thecomfortofyour home,inyour sparetimewithoutleavingyour dayjob. Andyoudon'tneedalargesum ofmoneytostart,youcantradeinitially withaminimal sum,or betteroff,youcanstartpracticingwithademoaccountwithouttheneedto depositanymoney.OnceyouconsiderstartingForextrading,oneofthefirstthings youneedtodois chooseabroker,choosingareliablebroker is thesinglemostcriticalfactor toForex success.We currently trade at eToro platform. After testing several Forex platforms we find this one to be the best. What made the difference is a unique feature that allow us to watch and copy the strategies and trades of the best performing traders on the platform. You can actually see each move the "Guru" traders make. This method works nicely for us. Since we started trading at this broker we noticed an increase of our successful trades and profits when compared to our former brokers. You may want to check them out.Please note that all trading involves risk. Only risk capital you're prepared to lose. Past performance does not guarantee future results. This post is for educational purposes and should not be considered as investment advice.NowIwouldstronglyencourageyoutogoandvisittheabovebroker's siterightnow evenifyouarenotyetdecidedwhether youwanttogointoForextrading.Why? Becauseitprovides tons offreeeducationmaterials,videosandbestofall ademo accountthatallows youtopracticeForextradingforfreewithouttheneedtodeposit anymoney.Simplygotothesite,registerforafreeaccountandstart"trading"-by actuallypracticingandexperiencingitfirsthandyou'll beabletodecidewhether Forex tradingisfor you.Inanycase,beforestartingtotradefor real,itis advisablethatyoupracticewithademo account.Onceyoubuildsomeskill andfeelmorecomfortablewiththesystemyou can starttradinggraduallyfor real money.GotoTo2.WhatisForexTradingForeignexchange,popularlyknownas 'Forex'or 'FX',is thetradeofasinglecurrency for another atadecidedtradepriceontheover-the-counter (OTC)marketplace.Forex is definitelytheworld's mosttradedmarket,havinganaverageturnover ofmorethan US$4trillioneachday.ComparethistotheNewYork Stock Exchange,thathasadailyturnover ofabout US$70billionanditisveryobvious howtheForexmarketisdefinitelythelargest financialmarketontheglobe.Inessence,Forexcurrencytradingis theactofsimultaneouslypurchasingoneforeign currencywhilstsellinganother,mainlyfor thepurposeofspeculation.Foreigncurrency values increase(appreciate) anddrop(depreciate) towards oneanother asaresultof varietyoffactors suchas economics andgeopolitics.ThenormalobjectiveofFXtraders is tomakemoneyfrom thesetypes ofchanges inthevalueofoneforeigncurrency againstanother byactivelyspeculatingonwhichwayforeignexchangerates arelikelytoturninthefuture.Incontrasttothemajorityoffinancialmarkets,theOTC (over-the-counter) currency marketsdoes nothaveanyphysical placeormainexchangeandtrades 24-hours every dayviaaworldwidesystem ofcompanies,financial institutionsandindividuals.Because ofthis,currencyratesarecontinuouslyrisingandfallinginvaluetowards oneanother, providingnumerous tradingchoices.Oneoftheimportantelements regardingForex's popularityis thefactthatcurrency tradingmarkets usuallyareavailable24-hours adayfromSundayeveningrightthrough toFridaynight.Buyingandsellingfollows theclock,beginningonMondaymorningin Wellington,NewZealand,movingontoAsiantradespearheadedfrom Tokyoand Singapore,aheadofgoingtoLondonandconcludingonFridayeveninginNewYork.Thefactthatprices areavailabletodeal 24-hours dailymakes certainthatprice gapping(whenever apriceleapsfrom onelevel toanother withnotradingbetween) is less andmakes surethattraders couldtakeapositioneachtimetheydesire, irrespectiveoftime,eventhoughinrealitythereareparticular 'lull' occasions when volumes tendtobebelowtheir dailyaveragewhichcouldwidenmarketspreads.Forexis aleveraged(or margined) item,whichmeansthatyouaresimplyrequiredto putinasmall percentageofthefull valueofyour positiontosetaforeignexchange trade.Becauseofthis,thechanceofprofit,orloss,fromyour primarymoneyoutlayis considerablygreater thaninconventional trading.Currencies aredesignatedbythreeletter symbols.Thestandardsymbolsfor someof themostcommonlytradedcurrencies are: EUR –EuUSD –UnitedStatesdollar CAD –Canadiandollar GBP–BritishpoundJPY–JapaneseYen AUD –Australiandollar CHF –Swiss francForextransactionsarequotedinpairsbecauseyouarebuyingonecurrencywhile sellinganother.Thefirstcurrencyis thebasecurrencyandthesecondcurrencyis the quotecurrency.Theprice,or rate,thatis quotedistheamountofthesecondcurrencyrequiredto purchaseoneunitofthefirstcurrency.For example,ifEUR/USD has anask priceof1.2327,youcanbuyoneEurofor 1.2327USdollars.Thereareso-calledmajors,for whicharound75%ofallmarketoperations onForexare held:theEUR/USD,GBP/USD,USD/CHF,andUSD/JPY.Aswesee,theUSdollar is representedinall currencypairs,thus,ifacurrencypair contains theUSdollar,this pair is consideredamajorcurrencypair.Pairs whichdonotincludetheUSdollar arecalled cross currencypairs,or cross rates.Thefollowingcross rates arethemostactively traded:EUR/CHF = euro-franc EUR/GBP= euro-sterling EUR/JPY= euro-Yen GBP/JPY= sterling-Yen AUD/JPY= aussie-Yen NZD/JPY= kiwi-YenTogiveyouatasteofwhatis happeningintheForexarenaherearesomehistoricalForexevents.Oneofthemostinterestingmovements intheForexmarketinvolvingtheBritishpound tookplaceintheSeptember16,1992.Thatdayis knownas BlackWednesdaywiththe BritishPoundpostingits biggestfall.Itwas mostlyseenintheGBP/DEM (BritishPound vs.theDeutschemark)andtheGBP/USD (BritishPoundvs.theUSdollar) currency pairs.ThefalloftheBritishpoundagainsttheUSdollar intheperiodfrom November toDecember 1992constituted25%(from2.01to1.51GBThegeneral reasonsfor this "sterlingcrisis"aresaidtobetheparticipationofGreat BritainintheEuropeancurrencysystemwithfixedexchangeratecorridors;recently passedparliamentaryelections;areductionintheBritishindustrialoutput;theBank of Englandeffortstoholdtheparityratefor theDeutschemark,as well as adramatic outflowofinvestors.Atthesametime,duetoaprofitabilityslant,theGermancurrency marketbecamemoreattractivethantheBritishone.All inall,thespeculators were rushingtosellpoundsfor Deutschemarks andfor USdollars.Theconsequencesofthis currencycrisiswereas follows:asharpincreaseintheBritishinterestratefrom 10%to15%,theBritishGovernmenthadtoacceptpounddevaluationandtosecedefrom the EuropeanMonetarySystem.Asaresult,thepoundreturnedtoafloatingexchange rate.Another intriguingcurrencypair is theUSdollar vs.theJapaneseYen(USD/JPY).The USdollar andJapaneseYenis thethirdonthelistofmosttradedcurrencypairs after theEUR/USDandGBP/USD.Itistradedmostactivelyduringsessions inAsia. Movementsofthis pairareusuallysmooth;theUSD/JPYpair quicklyreacts totherisk peakingoffinancialmarkets.From themid80's theYenratings startedrisingactively versus theUSDollar.Intheearly90's aprosperouseconomic developmentturnedinto astandstill inJapan,theunemploymentincreased;earnings andwages slidas well as thelivingstandardsoftheJapanesepopulation.Andfrom thebeginningoftheyear1991,this causedbankruptcies ofnumerousfinancialorganizationsinJapan.As a consequence,thequotes ontheTokyoStockExchangecollapsed,aYendevaluation tookplace,thereafter,anewwaveofbankruptcies amongmanufacturingcompanies began.In1995ahistorical lowoftheUSD/JPYpair was recordedat-79.80.TheabovestartedanAsiancrisis intheyears1997-1998thatledaYencrash.It resultedinatumbleoftheYen-USdollar pair from 115YensforoneUSdollar to150.Theglobaleconomic crisis touchedalmostall fields ofhumanactivities.Forexcurrency marketwas noexception.Though,Forexparticipants (central banks,commercialbanks, investmentbanks,brokers anddealers,pensionfunds,insurancecompaniesand transnational companies) wereinadifficultposition,theForexmarketcontinues to functionsuccessfully,itis astableandprofitableasnever before.Thefinancial crisis of2007has ledtodrasticchanges intheworld's currencies values. Duringthecrisis,theYenstrengthenedmostofall againstall other currencies.Neither theUSdollar,nor theeuro,buttheYenprovedtobethemostreliablecurrency instrumentfor traders.Oneofthereasonsforsuchstrengtheningcanbeattributedto thefactthattraders neededtofindasanctuaryamidamonetarychaos.Askand BidWhentraders wanttoplaceanorder ontheForexmarkettheyshouldbeawareofthe currencypair as well as thepriceofthispair.AForexmarketpriceofacurrencypair is denotedbytwosymbols,Ask andBid,whichhavespecific digitAsk priceis thehighestpriceinthepair’s quotationatwhichatrader buys thecurrency, standingfirstintheabbreviationofthecurrencypair.Consequently,atrader sells the currencystandingsecond.Bidpriceis thelowestpriceinthequotationofthecurrencypair,atwhichatrader sells thecurrencystandingfirstintheabbreviationofthecurrencypair.Respectively,atrader buys thecurrencystandingsecond.Seemcomplicated?here'sanexample:Let's assumethatwehavethecurrencypair ofEUR/USD withthequotationof1.3652/1.3655.Thismeansthatyoucanbuy1eurofor1.3655dollars or tosell1euro for 1.3652dollars.ThedifferencebetweentheBidpriceandtheAsk priceis called spread.Thespreadisactually thecommissionofthebroker.TheSpreadsinForextradingare actuallyverysmall comparedtocurrencyspreads atbanks.Aterm thatyou'll seealotwhiletradingForexis "pip"and"pips"-a“pip” standsfor “PercentageinPoint”.Apipis thesmallestpricemovementofatradedcurrency.Itis alsoreferredtoasa“point”.Itis veryimportantthatyouunderstandwhatapipis inthe Forextradingbecauseyouwill beusingpips incalculatingyour profits andlosses..For mostcurrenciesapipis 0.0001or 1/100ofacent.Whenacurrencymovesfromavalueof1.2911to1.2914,itmoved3pips.Whenapip has avalueof$10,youhavegained$30.Thereis anexceptionfor quotationsfor JapaneseYenagainstothercurrencies.For currencies inrelationtoJapaneseYenapipis 0.01or 1cent.Another termthatyou'll needtounderstandinrelationtoForextradingis “Lots”.Alotis theminimal tradedamountfor eachcurrencytransaction.For regular accounts onelot equals 100,000unitsofthebasecurrency.Howeveryoucanalsoopenminiandmicro accounts thatallowtradinginsmaller lots.Understanding thePip Spread -Thespreadis closelyassociatedwiththepipandhas amajor importanceforyouas atrader.Asmentionedabove,Itis thedifferencebetweenthesellingandthebuyingpriceofacurrencypair.Itis thedifferenceinthebid andask price.Theaskis thepriceatwhichyoubuyandthebidis thepriceatwhichyousell.SupposetheEUR/USDis quotedat1.4502bidand1.4505ask.Inthis casethespread is 3pips.Thepipspreadis your costofdoingbusiness here.Inthecaseaboveitmeans yousustainapaper lossequal to3pips atthemomentyouenter thetrade.Your contracthastoappreciateby3pipsbeforeyoubreakeven.Thelower thepipspreadtheeasier is itfor youtoprofit.Generallythemoreactiveandbigger themarket,thelower thepipspread.Smaller and moreexotic markets tendtohaveahigher spread.Mostbrokers willbeofferingdiffere thats better dont forget to like and subscribe  
    • or how about... 1. MakingMoneyin ForexTradingTheForexmarkethasadailyvolumeofover $4trillionper day,dwarfingthevolumeof theequityandfuturesmarketscombined.Thousands ofpeople,allover theworld,are tradingForexandmakingtonsofmoney.Whynotyou?All youneedtostarttradingForexis acomputer andanInternetconnection.Youcan doitfrom thecomfortofyour home,inyour sparetimewithoutleavingyour dayjob. Andyoudon'tneedalargesum ofmoneytostart,youcantradeinitially withaminimal sum,or betteroff,youcanstartpracticingwithademoaccountwithouttheneedto depositanymoney.OnceyouconsiderstartingForextrading,oneofthefirstthings youneedtodois chooseabroker,choosingareliablebroker is thesinglemostcriticalfactor toForex success.We currently trade at eToro platform. After testing several Forex platforms we find this one to be the best. What made the difference is a unique feature that allow us to watch and copy the strategies and trades of the best performing traders on the platform. You can actually see each move the "Guru" traders make. This method works nicely for us. Since we started trading at this broker we noticed an increase of our successful trades and profits when compared to our former brokers. You may want to check them out.Please note that all trading involves risk. Only risk capital you're prepared to lose. Past performance does not guarantee future results. This post is for educational purposes and should not be considered as investment advice.NowIwouldstronglyencourageyoutogoandvisittheabovebroker's siterightnow evenifyouarenotyetdecidedwhether youwanttogointoForextrading.Why? Becauseitprovides tons offreeeducationmaterials,videosandbestofall ademo accountthatallows youtopracticeForextradingforfreewithouttheneedtodeposit anymoney.Simplygotothesite,registerforafreeaccountandstart"trading"-by actuallypracticingandexperiencingitfirsthandyou'll beabletodecidewhether Forex tradingisfor you.Inanycase,beforestartingtotradefor real,itis advisablethatyoupracticewithademo account.Onceyoubuildsomeskill andfeelmorecomfortablewiththesystemyou can starttradinggraduallyfor real money.GotoTop           2.WhatisForexTradingForeignexchange,popularlyknownas 'Forex'or 'FX',is thetradeofasinglecurrency for another atadecidedtradepriceontheover-the-counter (OTC)marketplace.Forex is definitelytheworld's mosttradedmarket,havinganaverageturnover ofmorethan US$4trillioneachday.ComparethistotheNewYork Stock Exchange,thathasadailyturnover ofabout US$70billionanditisveryobvious howtheForexmarketisdefinitelythelargest financialmarketontheglobe.Inessence,Forexcurrencytradingis theactofsimultaneouslypurchasingoneforeign currencywhilstsellinganother,mainlyfor thepurposeofspeculation.Foreigncurrency values increase(appreciate) anddrop(depreciate) towards oneanother asaresultof varietyoffactors suchas economics andgeopolitics.ThenormalobjectiveofFXtraders is tomakemoneyfrom thesetypes ofchanges inthevalueofoneforeigncurrency againstanother byactivelyspeculatingonwhichwayforeignexchangerates arelikelytoturninthefuture.Incontrasttothemajorityoffinancialmarkets,theOTC (over-the-counter) currency marketsdoes nothaveanyphysical placeormainexchangeandtrades 24-hours every dayviaaworldwidesystem ofcompanies,financial institutionsandindividuals.Because ofthis,currencyratesarecontinuouslyrisingandfallinginvaluetowards oneanother, providingnumerous tradingchoices.Oneoftheimportantelements regardingForex's popularityis thefactthatcurrency tradingmarkets usuallyareavailable24-hours adayfromSundayeveningrightthrough toFridaynight.Buyingandsellingfollows theclock,beginningonMondaymorningin Wellington,NewZealand,movingontoAsiantradespearheadedfrom Tokyoand Singapore,aheadofgoingtoLondonandconcludingonFridayeveninginNewYork.Thefactthatprices areavailabletodeal 24-hours dailymakes certainthatprice gapping(whenever apriceleapsfrom onelevel toanother withnotradingbetween) is less andmakes surethattraders couldtakeapositioneachtimetheydesire, irrespectiveoftime,eventhoughinrealitythereareparticular 'lull' occasions when volumes tendtobebelowtheir dailyaveragewhichcouldwidenmarketspreads.Forexis aleveraged(or margined) item,whichmeansthatyouaresimplyrequiredto putinasmall percentageofthefull valueofyour positiontosetaforeignexchange trade.Becauseofthis,thechanceofprofit,orloss,fromyour primarymoneyoutlayis considerablygreater thaninconventional trading.Currencies aredesignatedbythreeletter symbols.Thestandardsymbolsfor someof themostcommonlytradedcurrencies are: EUR –Euros   USD –UnitedStatesdollar CAD –Canadiandollar GBP–BritishpoundJPY–JapaneseYen AUD –Australiandollar CHF –Swiss francForextransactionsarequotedinpairsbecauseyouarebuyingonecurrencywhile sellinganother.Thefirstcurrencyis thebasecurrencyandthesecondcurrencyis the quotecurrency.Theprice,or rate,thatis quotedistheamountofthesecondcurrencyrequiredto purchaseoneunitofthefirstcurrency.For example,ifEUR/USD has anask priceof1.2327,youcanbuyoneEurofor 1.2327USdollars.Thereareso-calledmajors,for whicharound75%ofallmarketoperations onForexare held:theEUR/USD,GBP/USD,USD/CHF,andUSD/JPY.Aswesee,theUSdollar is representedinall currencypairs,thus,ifacurrencypair contains theUSdollar,this pair is consideredamajorcurrencypair.Pairs whichdonotincludetheUSdollar arecalled cross currencypairs,or cross rates.Thefollowingcross rates arethemostactively traded:EUR/CHF = euro-franc EUR/GBP= euro-sterling EUR/JPY= euro-Yen GBP/JPY= sterling-Yen AUD/JPY= aussie-Yen NZD/JPY= kiwi-YenTogiveyouatasteofwhatis happeningintheForexarenaherearesomehistoricalForexevents.Oneofthemostinterestingmovements intheForexmarketinvolvingtheBritishpound tookplaceintheSeptember16,1992.Thatdayis knownas BlackWednesdaywiththe BritishPoundpostingits biggestfall.Itwas mostlyseenintheGBP/DEM (BritishPound vs.theDeutschemark)andtheGBP/USD (BritishPoundvs.theUSdollar) currency pairs.ThefalloftheBritishpoundagainsttheUSdollar intheperiodfrom November toDecember 1992constituted25%(from2.01to1.51GBP/USD).     Thegeneral reasonsfor this "sterlingcrisis"aresaidtobetheparticipationofGreat BritainintheEuropeancurrencysystemwithfixedexchangeratecorridors;recently passedparliamentaryelections;areductionintheBritishindustrialoutput;theBank of Englandeffortstoholdtheparityratefor theDeutschemark,as well as adramatic outflowofinvestors.Atthesametime,duetoaprofitabilityslant,theGermancurrency marketbecamemoreattractivethantheBritishone.All inall,thespeculators were rushingtosellpoundsfor Deutschemarks andfor USdollars.Theconsequencesofthis currencycrisiswereas follows:asharpincreaseintheBritishinterestratefrom 10%to15%,theBritishGovernmenthadtoacceptpounddevaluationandtosecedefrom the EuropeanMonetarySystem.Asaresult,thepoundreturnedtoafloatingexchange rate.Another intriguingcurrencypair is theUSdollar vs.theJapaneseYen(USD/JPY).The USdollar andJapaneseYenis thethirdonthelistofmosttradedcurrencypairs after theEUR/USDandGBP/USD.Itistradedmostactivelyduringsessions inAsia. Movementsofthis pairareusuallysmooth;theUSD/JPYpair quicklyreacts totherisk peakingoffinancialmarkets.From themid80's theYenratings startedrisingactively versus theUSDollar.Intheearly90's aprosperouseconomic developmentturnedinto astandstill inJapan,theunemploymentincreased;earnings andwages slidas well as thelivingstandardsoftheJapanesepopulation.Andfrom thebeginningoftheyear1991,this causedbankruptcies ofnumerousfinancialorganizationsinJapan.As a consequence,thequotes ontheTokyoStockExchangecollapsed,aYendevaluation tookplace,thereafter,anewwaveofbankruptcies amongmanufacturingcompanies began.In1995ahistorical lowoftheUSD/JPYpair was recordedat-79.80.TheabovestartedanAsiancrisis intheyears1997-1998thatledaYencrash.It resultedinatumbleoftheYen-USdollar pair from 115YensforoneUSdollar to150.Theglobaleconomic crisis touchedalmostall fields ofhumanactivities.Forexcurrency marketwas noexception.Though,Forexparticipants (central banks,commercialbanks, investmentbanks,brokers anddealers,pensionfunds,insurancecompaniesand transnational companies) wereinadifficultposition,theForexmarketcontinues to functionsuccessfully,itis astableandprofitableasnever before.Thefinancial crisis of2007has ledtodrasticchanges intheworld's currencies values. Duringthecrisis,theYenstrengthenedmostofall againstall other currencies.Neither theUSdollar,nor theeuro,buttheYenprovedtobethemostreliablecurrency instrumentfor traders.Oneofthereasonsforsuchstrengtheningcanbeattributedto thefactthattraders neededtofindasanctuaryamidamonetarychaos.Askand BidWhentraders wanttoplaceanorder ontheForexmarkettheyshouldbeawareofthe currencypair as well as thepriceofthispair.AForexmarketpriceofacurrencypair is denotedbytwosymbols,Ask andBid,whichhavespecific digital notations.     Ask priceis thehighestpriceinthepair’s quotationatwhichatrader buys thecurrency, standingfirstintheabbreviationofthecurrencypair.Consequently,atrader sells the currencystandingsecond.Bidpriceis thelowestpriceinthequotationofthecurrencypair,atwhichatrader sells thecurrencystandingfirstintheabbreviationofthecurrencypair.Respectively,atrader buys thecurrencystandingsecond.Seemcomplicated?here'sanexample:Let's assumethatwehavethecurrencypair ofEUR/USD withthequotationof1.3652/1.3655.Thismeansthatyoucanbuy1eurofor1.3655dollars or tosell1euro for 1.3652dollars.ThedifferencebetweentheBidpriceandtheAsk priceis called spread.Thespreadisactually thecommissionofthebroker.TheSpreadsinForextradingare actuallyverysmall comparedtocurrencyspreads atbanks.Aterm thatyou'll seealotwhiletradingForexis "pip"and"pips"-a“pip” standsfor “PercentageinPoint”.Apipis thesmallestpricemovementofatradedcurrency.Itis alsoreferredtoasa“point”.Itis veryimportantthatyouunderstandwhatapipis inthe Forextradingbecauseyouwill beusingpips incalculatingyour profits andlosses..For mostcurrenciesapipis 0.0001or 1/100ofacent.Whenacurrencymovesfromavalueof1.2911to1.2914,itmoved3pips.Whenapip has avalueof$10,youhavegained$30.Thereis anexceptionfor quotationsfor JapaneseYenagainstothercurrencies.For currencies inrelationtoJapaneseYenapipis 0.01or 1cent.Another termthatyou'll needtounderstandinrelationtoForextradingis “Lots”.Alotis theminimal tradedamountfor eachcurrencytransaction.For regular accounts onelot equals 100,000unitsofthebasecurrency.Howeveryoucanalsoopenminiandmicro accounts thatallowtradinginsmaller lots.Understanding thePip Spread -Thespreadis closelyassociatedwiththepipandhas amajor importanceforyouas atrader.Asmentionedabove,Itis thedifferencebetweenthesellingandthebuyingpriceofacurrencypair.Itis thedifferenceinthebid andask price.Theaskis thepriceatwhichyoubuyandthebidis thepriceatwhichyousell.SupposetheEUR/USDis quotedat1.4502bidand1.4505ask.Inthis casethespread is 3pips.Thepipspreadis your costofdoingbusiness here.Inthecaseaboveitmeans yousustainapaper lossequal to3pips atthemomentyouenter thetrade.Your contracthastoappreciateby3pipsbeforeyoubreakeven.Thelower thepipspreadtheeasier is itfor youtoprofit.Generallythemoreactiveandbigger themarket,thelower thepipspread.Smaller and moreexotic markets tendtohaveahigher spread.Mostbrokers willbeofferingdifferent  
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