Can Anyone Trade the Forex Market ? We’ll see !

Through the whole time I have traded the forex market and particularly more during this year I have been puzzled by the ever lasting question… Can anyone trade the forex market profitably ? Well, the answer seems to be no, but the opinion seems to be yes. Evidence suggests that the majority of retail traders lose their money. However for some reason people tend to believe that everyone can trade a forex account with a profit. Can this be done ? Can anyone trade the forex market profitably ?

Of course, I am not the first person to ask this question and this has already been answered by Richard Dennis, in the 70s when he traded his turtle traders to get massive amounts of money from the market. However, the turtle experiment has some very particular characteristics that make it hard to apply to the current situation in the foreign exchange market. For example, Richard Dennis gave his traders two million dollars to invest, they traded a rigid system with fixed rules and they traded futures and stocks, not forex.

So Richard Dennis did in fact show that “anyone” could make money in trading, that is, anyone who can follow a rigid set of instructions and execute them without judgment to obtain a given result. He in fact demonstrated the basic premise that allows automated trading systems to make money, the execution of a rigid given set of rules that take advantage of a market inefficiency will generate profit in the long run. However, my point goes a little bit deeper.

I want to know if anyone can make money in the market, understanding the market. Can anyone design a trading system to take advantage of inefficiencies in the foreign exchange market ? Can people with no trading in economics or finances make money trading ? Here is where my little experiment will start.

In order to know if people are able to make money trading with absolutely no knowledge whatsoever I have decided to start a small project that will have as an aim to achieve the sustained profitability of two trading accounts managed by two people who don’t have the slightest idea about forex trading. In order to do this I have selected two friends, one of my best friends, who is an electronic engineer and a friend from my little sister who is currently studying for a major in biology. These two people are ideal for this study as they have had no contact with the financial markets and they lack any understanding of how macroeconomics or currency trading works.

My plan for them is actually a 4 month plan which will have a carefully developed agenda to “guarantee” their success in forex trading as much as I can. I will try to teach techniques based solely on price action so that they get a grip of the fundamental forces behind market movements. This is the outline of how they will trade :

  • Month 1 : I will teach them the basics of the market (what a pip is, what a pair is, etc, all the basics). They will start a daily journal in which they will write their opinions about the EUR/USD each day. These opinions will be fairly simple and will only answer the question “do you think the pair will close tomorrow higher or lower than today, why ?”
  • Month 2 : I will start to trade with them on a paper account. I will sit with them one hour each day and we will discuss the market and enter a trade randomly each day, they will decide the targets of the trade and apply money management techniques we learned in month one. We will also do extensive simulations in which we will execute the same technique.
  • Month 3 : We will start to trade on a 200 USD real account. I will coach them during the trades but they will ultimately decide whether or not to enter trades, how much to trade and when to exit the trades.
  • Month 4 : They will start live trading by themselves and we will see if they can apply all the knowledge they adquired during the first 3 months.
They will have to keep trading journals of all the trades and they will also have to reflect upon them and analyze what went wrong in each trade and what could have been done to better exit/manage the trade. My objective is to have them dedicate between one and two hours each day to currency trading and I believe that after these four months I may be able to get some interesting results.

Of course, chances are that after four months of riguruous trading they will still wipe their accounts but I want to do the experiment to learn as much as I can about beginner trader psycology and what the real mistakes new traders make are. More importanly, this will let me analyze exaclty what can be done to help new traders and what particular trading techniques work better for people who are just starting forex trading. Obviously this will also tell me how easy or hard it is for “anyone” to learn to trade the foreign exchange market. As they progress and I find out more about the trading learning process I will write more posts, new posts on this subject will be under the tag “ECT Proyect”, ECT being short for “Everyone Can Trade”.

When we arrive at the later stages of the proyect I will post their accounts via ftp so that you can all have an updated view on their account progress and the mistakes/successes they are getting. Of course, if you have liked this article and you would like to learn more about automated trading and how you can become profitable trading with expert advisors that have realistic profit and risk targets please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

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