In each of the last four quarters, more than 70% of FXCM’s U.S. accounts were unprofitable for those trading them. As a broker, FXCM earns money each time customers trade, so there is no upside in seeing them end up in the red. Why so many losing hands? The answer may lie in the large amount of leverage that FXCM customers can employ. Limits vary by country, but FXCM offers leverage of up to 50 to 1. That means a customer with only $20,000 could take $1 million in exposure. In such a trade, a modest market move could quickly wipe out all of an account’s equity.
via Heard on the Street: The Customer Is Too Often Wrong at FXCM – WSJ.com.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.
Don’t you get tired of a self professed “expert” telling you about the perils of leverage? I do!WSJ used to be a trusted financial daily. Now it’s a media hack like most of the others.