I want to take an opportunity to discuss with you my thoughts on why I feel it could possibly be one of the most important decisions for anyone, but particularly those in the 21 to 34 year old age bracket, to consider learning how to trade currencies in the world FOREX market.
Yes, I am trying to sell you something. But it's not what you think.
I'm not pitching a course or book at you — though I do have those things if you're interested. My goal instead is to sell you on doing something now to protect yourself from the next economic slam that you'll go through in your life. I'm selling you on a concept, not a thing.
Please read through the entire post so that I can convey to you all of my thoughts on this critical issue. I'm 70 years old and have been able to get through 4 economic collapses in my lifetime. I've lost $1,000,000 net worth twice during the last 40 years, but because I understood the rules of the game was able to come back each time.
However, as we go into this current COVID-19 pandemic I'm out of most of my real estate, and building a base to ready myself to grow my net worth passively through trading currencies on the world FOREX market.
Though the post begins with my story, it's really not about me. Rather, it's about showing you how I protected myself financially during times of duress whereas others were not so successful, and how you can prepare yourself to do the same, but not in real estate, but in learning how to trade currencies on the FOREX market.
So, here's what I have to say —
During the current uncertain times where the entire world economy has come to an abrupt halt due to the COVID-19 pandemic, the U.S. stock markets have reacted violently — losing Trillions of Dollars of value in just days, commercial real estate sales have evaporated, and there has been a huge decline in the residential market. Unemployment hit almost 15% the other day with something like 20,000,000 filing unemployment claims in just weeks.
For me — I'm retired so I had no job to lose or business destroyed. However, my cash life savings in my IRA has been hit pretty hard, taking something like a 30% hit. So far....
That 30% loss is literally years of living money that is gone. To make a 30% loss up will require my account to grow 42%. That is going to take a long, long time to recover — a very long time; just-to-recover....
I'm 70 years old and besides having been an employee as a Senior Software Engineer for 33 year until I retired, I've been in business as well as a real estate investor for over 40 years.
This is the 5th catastrophic economic event that I have experienced: 1973, 1981, 1990, 2008, and now this pandemic of 2020. In addition, I'm well versed in the Depression of 1929 as my parents shared their lives during those times with me.
If this is your fist such event, the only thing I can tell you is that before it gets better, it's going to get worse.
Why do I say that? It's the same as Keynes cautioned in the 1930s: "Markets can stay irrational longer than you can stay solvent." In the case of an economic crisis, if you don't have enough runway, the panic event will last longer than you have the resources to survive — 'runway' being savings specifically to be used to carry you through a certain time period.
I had started a business in 1972, and expanded to a second location in 1973. Great timing....
I lost that second location, and thousands of dollars until I was able to stabilize my situation. I had just graduated from college in 1972, and so my living expenses were minimal — not much more than a cheap studio apartment with a college kids food budget.
But I knew the rules of the game, and by 1974 I had bought my first piece of real estate: a run down small single family house in a not so great area of the city at that time. After 2 months, that real estate was throwing off net cash flow to me.
It wasn't much, but it was positive. I increased that and sold it, bought another property, increased that net cash flow, kept it and bought another investment property, a house for myself in 1975, followed by other investment property purchases.
The reason for this story is to show my progression to what's called 'passive income'. Passive income is money you earn from your money instead of from your work, like a job or business.
So what? Well, I went to the wood during the economic collapse in 1990 losing $1,000,000 net worth. But because I knew the rules of the game, that's all I lost: net worth. I didn't lose the underlying assets that net worth was built upon.
And that enabled me to earn that $1,000,000 back —— just in time to lose $1,000,000 net worth again during the 2008 economic collapse. Terrific....
It took me about 7 years to crawl back from that so I could cash out of most of my real estate, buy my current home for cash, and slip off into retirement to my deckchair as a millionaire again.
I was able to retire not because of my job salary or 401k, but because of my investing. But, I wouldn't do real estate again on a bet.
The economic world has changed, and if you think you'll accumulate enough money by working 40 years at your job, and investing in your 401K, then why is it that even as late as 2019 the average American between the ages of 55 and 65 had only accrued about $104,000 in retirement savings?
Though that may sound like a lot, it really isn't when you realize that would only provide about $300 a month at a safe withdraw rate of between 3% to 4%.
I trade currencies on the world FOREX market and know how I'll be able to make almost as much money in a month as I used to in a year in real estate.
And I won't have to really work at it, either.
After I learned the proper rules and how to implement them, I'm done trading in an hour or so.
I wish I would have known this stuff when I was 25 years old!
The beauty of passive income is that when you make money with your money it can make far more money per unit of time than you can working a job, or running a business. When you work for your money you are totally limited by so many factors that you're not exposed to when you have your money working for you.
Can you lose money trading currencies? Sure. But, that could happen anywhere: Regardless of how good I was at real estate investing, I lost $1,000,000 net worth. Twice! But I had the skill to come back from that.
You may have an accident driving your car, but you take certain precautions to vastly reduce the chances of that happening. You can do the same in trading currencies in the FOREX market, though with the greater benefit of having less risk than real estate — or even driving a car!
There are 7 major reasons that I now trade currencies, and why I said above that I wish I had known this stuff when I was 25 years old. See what you think....
If you're new to the world of finance and investing, then most of that probably doesn't mean much to you. That would be unfortunate, and I'd sincerely encourage you to at least learn the impact of each of those 7 statements.
If you don't know where to start, email me, and we'll set up a time to chat or video call because if you don't understand the significance of those 7 statements, then I'm sorry, but you're screwed as far as your financial survival goes.
There are other issues in addition to those 7 that can drastically erode your financial efforts, but those 7 are specific issues resolved by the FOREX currency market — if you know what you're doing.
I stress those 7 because I've been through the meat grinder because of them. If you're an experienced and successful investor in one of these methods, then that's great. The fact remains, though, that the issues discussed about in each of those 7 alternative methods are more deadly than anything you'll experience in the FOREX currency market — for the reasons I mentioned.
Someone who has not traded foreign currencies on the FOREX market will list out why their method is 'safer' than FOREX trading. One of the most touted reason that is given is the often quoted study released by a major FOREX broker covering 43 Million client transactions that showed 90% of traders lost 90% of their money in 90 days, I refer to as The 90/90/90 Club, and of which I'm embarrassed to admit that I'm a charter member of.
Those statistics are true, but they don't indicate a problem with the FOREX currency market itself, but rather the manner in which folks attempt to trade them. The base truth is that 90% of the people who go into the FOREX market have absolutely no clue as how to stay safe; it's like having no driving lessons at all and then trying to enter The Indy 500.
But why is that? Are there that many stupid people in the world? No, hardly. The problem is the ease of entry into these markets makes folks want to believe that they could run their $200 stake into thousands of dollars a month.
Whoa, there! But you see stuff everywhere about folks who have run a small amount money into huge accounts. Sure, but some of that is just dumb-ass luck, or money made by selling other people a trading system in a multi-level marketing scheme where everyone gets their trading signals from a signal service as opposed to actually knowing how to trade themselves.
Okay, so let's look at this because it's all crap. First: the dumb-ass luck. Fine. That's going to happen. But just because someone successfully runs blindfolded across a mine field in no way indicates that they can teach you how to do that or that they could even do it again.
Second, so many folks are taken advantage of from companies selling signal services. A signal service is simply a company that takes your money and acts as the broker for the trading signals they send to you. Because there are an almost infinite number of dreamers that don't want to do any work, these companies have a never ending source of clients.
Here's how it works: the scammer company sends a 'buy' signal to 50% of their clients, and a 'sell' signal to the other 50%. 50% will lose all their money. The other 50% will double down and bet again against the next 'signal'. 50% will win, and 50% will lose with the added benefit to the company that the 50% who do win during each round will have convinced a whole bunch of their friends to come in with them.
That's the seedy side of the FOREX broker business. But then, most business have the same issues, and the corresponding fools that believe the pitch.
But what about those instances where someone does legitimately run a small account into a huge amount of money? Well, there are 2 ways this happens.
First, you have to know that recently the 'responsible' nations of the world recognized the abuse FOREX brokers were inflicting upon their unsuspecting clients by offering them horrendous leverage — 100 to 1, 200 to 1, even 500 to 1, and banned such practice.
Taking just the 100 to 1 instance as an example would mean that if you wanted to buy a $100,000 house, all you would need to come up with as a down payment would be $1,000 whereas we all know that the your local bank is going to want at least 10%, and quite possibly 20% down for a residential property, and 30% down or more for an investment property.
So, because you'd be buying an investment property you'd have to come up with $30,000 as a down payment on that $100,000 apartment building. If you were going to buy $100,000 worth of stock the best deal you're going to get from your broker is 50% down: $50,000. But the scammer FOREX broker would let you control $100,000 worth of currency for only $1,000, or even better: $100 margin to control a $10,000 currency 'mini lot' position.
With that sort of leverage, even the tiniest little adverse move of just a few pips will wipe that $100 right away. But correspondingly, for those who knew what they were doing and had access to huge leverage before it was banned, that same tiny move in the right direction equates to huge gains.
And this is why the U.S., U.K., Canada, and many, many other countries reduced that leverage dramatically. U.S. Federal law, for example, mandates that to place a currency trade you need 5% margin as a minimum deposit — 20 to 1, though, you can still get 100, 200, and 500 to 1 from many small unregulated nations — if you dare. Be very, very careful with the selection or your broker....
At 5%, 20 to 1 leverage, for example, if the currency pair price is $1.2500, to trade 1 full lot of $125,000 would require margin of $6,250, or $625 to trade a mini lot of $10,000.
Now, even at 20 to 1, you can still build a small account up. But it will obviously take time to do this. But starting with a small account and learning your craft will enable you to take larger accounts to make the same percentage gains but which will translate into huge Dollar gains.
And that leads me to the Second way someone could take a small amount of money and turn it into a lot of money. Because there is a high statistical probability that an active trader will hit 6 to 8 losing trades in a row, it is thus quite logical that a trader could hit 6 to 8 wining trades in a row as well.
For example, starting with a small mini lot account of $1,000 and compounding wins of 10% per day/month/whatever over 8 periods could grow that account tremendously, like to double: $2,143. Say it takes you 8 months to do that, but you start with $100,000 instead. That turns into $214,300.
You say 10% a month is ridiculous? Maybe. But 3% to 5% per month isn't, and that's job replacement income by itself on that $100,000. Of course, you have to have the expertise and a $100,000 account in order to achieve that....
In an interview with BBC News, trading expert Justin Urquhart Stewart, director of Seven Investment Management says betting on movements in foreign exchange rates is notoriously volatile. "It's more complex than stocks," he told 5 live Investigates. "If it was that easy everyone would be doing it. This is very risky electronic roulette and you can get caught out in seconds. If a novice isn't trading with a true expert holding their hand, they're likely to blow the house up."
But note again that it's not the currency market that's deadly anymore so than a gun by itself is deadly. It's how you interact with that market or gun that determines whether the result will be positive or negative. It's the person, not the market that makes or loses money.
If you want to shoot a gun, you'd better get some training. And if you don't want to shoot yourself by trading in the FOREX currency market then you'd likewise better get some training.
To recap a little here, I've given my reasons why I, and many others, see the FOREX currency market to be the best choice to learn techniques and methodologies for financial gain. That was the good stuff.
And then I mentioned some of the ways the FOREX market got a bad reputation from certain kinds of scams, and folks who tout their skills based on the amount of money they made in a short time using currently outlawed leverage.
And finally, I gave a quote from a noted trading expert who clearly identified the dangers untrained people are unaware of that are the primary reasons many become unwitting members of The 90/90/90 Club, i.e. market volatility, and not having a good mentor.
I want to address both of those issues. First, market volatility. Look, market volatility is not a bad thing. It becomes bad when coupled with the misuse of leverage, even if only 5%.
But therein lies the real issue: volatility really has nothing to do with it: it's the leverage that actually creates the volatility not in the market, but rather in the perception of the trader using that leverage without a thorough understanding of how to manage their positions and their risk.
And that brings up the Second issue: the lack of having a qualified mentor to guide you safely around not only the issue of volatility, but of all of the other specific characteristics of the FOREX currency market that make it so appealing on the one hand, but equally deadly on the other.
As I've mentioned before in an example: If you you don't have someone to teach you how to drive a car, then the risk of injury to yourself or to someone else is almost assured, like probably 90%. If you're going to trade in these markets, then you'd better find someone you can trust to guide you.
Trading currencies is simple. Really. It is simple. But for you to figure it out on your own: that's complex, and the chances of losing a lot of money are extremely high. Like 90%
But what happens when you do 'get it'? Is it worth the effort?
Yes. Beyond you're scope of imagination, actually.
And that is not a pie-in-the-sky pitch to get you to buy something. It's a fact.
But if you don't understand a few simple principles, then you'll quickly become a valued member of The 90/90/90 Club.
I talk at length about these few simple principles in my post 3 No Tears FOREX Currency Trading Rules. If you haven't read that, then I suggest that you do so now because otherwise what I have to say from here on won't make any sense to you. It really won't....
Go on.... Click the link. It'll open in another window or tab so you don't lose your place here. I'll wait for you....
This is me waiting.....
Done? Okay, let's move on.
The topic of this post — Importance of Learning FOREX Currency Trading Skills — only provides a meaningful and positive message when taken in context with the other options that enable knowledgeable folks to create passive income streams.
The importance of learning FOREX trading skills, particularly if you're in that 21 to 34 age group has its foundation outlined in my post FOREX Currency Trading For Adults 21 to 34. If you haven't read that post, check it out; it'll open in a separate window/tab as well.
There's more to it than this age group being more open to change and discovery, though. It has to deal with time.
Albert Einstein famously said that compound interest is the most powerful force in the universe. He said, "Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't, pays it." So, the more time you have, the greater the effect compounding will have on the growth of your net worth.
A famous example of this is explained on financial help guru Dave Ramsey's web site, and is explained like this:
Okay. That makes sense, and is thus well worth your time finding something that you can compound your money with.
I listed 7 things that I — and many others — feel are either more complex or more dangerous than the FOREX currency market.
Well, how about the mutual funds or whatever that are used in the example above? 12% gains just sounds a little aggressive for me, even over the long run for funds; maybe more like 8% or 9% would be more palatable to use. But even then, to do that is going to take more expertise than you could muster. Look, the best of the best fund managers have portfolio growth of maybe 25%, so how do you compete with that? Sorry, but you don't.
And what happens when one of those every 10 year or so economic disasters occurs at the wrong time for you — like just 6 years or so into your investment time frame, or right at the end when you're ready to start pulling money out? A 30% hit, which is 'normal' during times like this, will require a 42% gain on the remaining portfolio just to break even. Hummmm.... problematic at best.
Here's the deal with FOREX currency trading — if you know what you're doing:
So, what does it take to "know what you're doing" to make that happen? Simple:
Legendary speculator Jesse Livermore had these two things to say that I think are particularly relevant:
How do you learn those 'rules'? Two ways:
First, do it on your own. Many have done it on their own, myself included. But the time it takes, and the price you have to pay in senseless losses that must be large enough to get your attention, will most likely just cause you to become a valued memeber of The 90/90/90 Club.
Second, find someone you trust that can flush all of this stuff out for you in a simple manner so that it doesn't take you 4 years and thousands of dollars to figure out.
Great... How many f'n times am I going to say that, you ask?
Well, because — as I have taught generations of martial arts students, and as I share with currency trading folks who care to listen to me — in order to effectively solve a problem you must reduce that problem to a binary solution choice: Door A, or Door B. That's it.
Just adding 1 more choice for a total of 3 options creates a complex solution set of 15 permutations, chaotic confusion, and raging hemorrhoids.
My skill as a mentor is all based on my ability, not only for myself, but for others as well, to be able to do just that: to filter out all the noise a problem throws up so that all there is to do is select one response out of 2 possible options.
This is not theory. It's not putting lipstick on a pig. It's fact.
I want to talk a little more about this issue of time — the time it takes to make enough money to satisfy our greed. Key to this is, again, something Livermore said that resonated with me tremendously:
Both of those issues deal with time. Anticipation of a move is wrong whereas patience is required, i.e. my version was to caution not to "create a trade." And the main rule that he broke, from all of the discussions in Reminisces of a Stock Operator by Edwin Lefevre appear to be because he didn't "take an immediate loss."
Another issue with time is that our time to trade is quantified, i.e. until we either go broke or go home to Papa....
For those younger, death is not on the radar, and really neither is the fear of going broke. It's time itself that is the psychological enemy that fuels our greed that makes us not want to follow the rules because they require patience which slows us down from achieving out goal. That's what Livermore is really saying.
Thus, any rule that we develop must take into account the issues that time creates for us.
I have a little bridge troll I call Ed who sits up on my left shoulder when I trade, and tells me to do stupid shit. It's tough not to listen to Ed because he plays at my FOMO, my Fear Of Missing Out, of not catching that trade, or of staying with that bad trade because after all, it's just got to come back....
Ed has cost me more money in my trading than 80% of the world's population make in a year. Ed understands time, and takes advantage of me by whispering stupid shit in my ear. Ed is the Grim Reaper of Time Based Decisions....
If you trade, Ed will find you. He will find you because he will smell your greed and your fear. He will jump up onto your shoulder, and he will tell you to do stupid shit.
Unless you understand what Pogo meant when he said, "We have met the enemy, and he is us," then you will lay the blame for your failures onto Ed, and not take the responsibilities of those failures on yourself.
*** if you're not old enough to know who Pogo is, he was a cartoon character developed by Walt Kelly in 1941, paraphrasing Oliver Hazard Perry's famous War of 1812 cry, "We have met the enemy and they are ours."
Before you can become a successful trader, you have to be willing to take responsibility for your failures. It's only in that way that you will learn how to beat greed, fear, and time in the manner in which Livermore clearly states: "The only way you get a real education in the market is to invest cash, track your trades, and study your mistakes."
What Livermore is saying is that you-will-make-mistakes. But if you can learn from those mistakes, then Livermore says this: "There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win."
Look, it just doesn't get any clearer than that: Practice what you know, recognize that you've made a mistake, and then get-out-of-the-trade!
If you're in that 21 to 34 age group, or you're 50 plus, please understand that other than learning some basic terms and how to operate a trading platform, the process of trading successfully has nothing to do with how much you know but rather your ability to recognize that you've made a mistake, and simply get-out-of-the-trade!
Listen, if that's the only thing you had for a trading system, i.e. to take an immediate loss, you'd be so far ahead of other traders. The wins take care of themselves. All you can control is how much you lose.
If every time you lose, you learn something and don't make that mistake again, then it won't take long for you to become a profitable trader.
And why is this important? Answer this for me: what are you going to do the next time you lose your job? Or how about turning 50 when you start to smell age discrimination.
I know for a fact that during a job search I had to do when I was in my mid 50s that my 'age' caused several — several — human resource resume gate keepers to pass on me.
How do I know this? Because the recruiter I was using had been in the business for a long time, and knew these folks, and they told him not to submit 'older' folks resumes.
That's illegal! Yup. But just what are you going to do about it? I bitched strongly one time, though it didn't do any good because they can come up with perfect other reasons not to hire you.
So, I go to an interview for another job that I was perfectly qualified for as I had application development experience in the space their applications were in. I aced that interview but didn't get the job. You know why? Because the engineering manager called the human resources person I had bitched at about this age thing, and that person said I was "difficult to work with."
So I got turned down for that job. And how did I know what that human resources person told that engineering manager? Because I knew another person in the department that liked me and told me so.
So, if you're 21 to 34 and think this can't or won't happen to you, that's Ed whispering stupid shit in your ear. Toss Ed off your shoulder and talk to a few 50 plus year olds who will give you the straight scoop.
If you're 50 plus, and think you can't do this trading thing, that's Ed whispering stupid shit in your ear. Toss Ed off your shoulder and talk to someone who will give you the straight scoop.
And, if you're out of work or retired, and think you can't do this trading thing, that's Ed whispering stupid shit in your ear. Toss Ed off your shoulder and talk to someone who will give you the straight scoop.
If you don't do something right NOW to build your cash net worth I'm afraid you won't be able to avoid becoming fearful of not being able to meet your living obligations.
You need to realize that whether you're young, if you're just cresting the ridge at 50, or even if you're retired, the FOREX currency market can provide a solution for you — if you can learn what, when, and how to do it.
Trading currencies on the FOREX market is something you should seriously consider.
It's not dangerous unless you refuse to exit a losing trade. That's really all there is to it.
Oh, sure there's some basic stuff to learn, but you can learn all of that by reading 1 book. I recommend one to my students that gives them everything they need to know about all of the plumbing in 50 pages.
From there on, it's just learning how to spot an opportunity to enter a trade, getting out immediately if it doesn't seem to be working, and having a rule as to when to exit a profitable trade. That's it. That's trading. Three stupid simple things to learn:
So, what are you waiting for? Get on with it!
If you're already trading and not finding the success that you had hoped for, start changing the way that you think about your trading. My martial arts Master, S.A. Brock, taught me way back in the mid 1970s that —
If you haven't begun your journey to trading, then whether you're 21 or 51 — or 70 like me — just brush Ed off your shoulder, make a few simple changes to the way that you think, get a little education, and get on with it.
In my mind as an experienced and successful investor, the FOREX currency market is not only the best, but the safest market you could use to build your net worth.
In fact, you might be interested in reading a post that I did that discusses this 'safest market you could use' statement: Why I Think The FOREX Currency Market Is The Safest To Trade.
Time was really the focus of this post, right?
Whatever age you are as you read this, if you understand how to make time your friend by learning just the simplicity of trading through simple rules, then you'll know how to trade the FOREX currency market successfully.