How I made 125% in 57 hours and why ‘betting’ on the share market is better than the Melbourne Cup

www.nomoney.com.au

Just an update about the Foreign exchange stuff (see also my first article  www.nomoney.com.au/foreignexchange ). Seems like Foreign Exchange can work.

Maybe it is just beginners luck – but I made 125% on my money in 57 hours (2 and a bit days).

How I did it

So I bought $10,000 of a currency with 2% margin = $200.

(so for example I if I bought AUD/USD I would be buying $10,000 Aussie dollars and selling the equivalent USA dollars)

The price of the currency (relative to the currency) went up by about 20c over 2 and a bit days.

Then my $10,000 was worth $10,250. So I used $200 and made $250.

Is it really 125% return?,

If you calculate profit/margin used the percentage is 125%. Because of the high leverage (as you are controlling 50x the money invested) – it multiplies the % gain.

You made $250 – well that is nice but not heaps

The trade that I put on was one of the smallest trades possible. If you knew what you were doing you would probably bet.. sorry *invest more in the trade. If you added a zero though to the trade – putting $2,000 margin controlling $100,000 currency and making a profit $2,500 – well then you could start to make serious money, considering it happened over a few days.

 Of course you could also lose serious money.

Maybe Foreign Exchange is gambling – but it is better than Melbourne Cup Gambling

Well anyway – I think that even if you do class this sort of trading as gambling or betting, it is better than the Melbourne Cup. Because although you get great odds at the Melbourne cup (even the favourites have odds of 5 or 6 from memory which would pay 500% or 600%), you have a low chance of winning (even if your horse is the best there

Lets unpack that for a second.

Great Odds – The favorites have odds of 5 or 6 and the other horses have much more 13, 50, etc.

So if you win you win 500% (or 5x) your money with a favorite and maybe 13x your money with another horse.

Low Chance of winning

If all horses were equal (which of course they are not) you would have a chance/total horses running of winning (i.e. a 1/21 chance of winning).

Even if your horse is the best thing since sliced bread, there are approximately 20 or so other horses.

Foreign Exchange Gambling

So to compare with the Melbourne Cup –if you are ‘gambling’ on currency.

Benefits

  1. You can put a stop loss so you only lose a certain amount of your capital (see also Neg#1 -although with foreign exchange you might be prepared to lose 2x your amount if you know you will win 3x on the next trade)
  2. You control how long the ‘race’ lasts (if you could pause the Melb cup when your horse was in front and take your winnings there would be a lot more winners out there!)
  3. There are only 3 possibilities – it goes up, it goes down or it stays the same. Whereas with Melbourne cup there are 21 possibilities – which horse will win.
  4. Factors like interest rates drive the foreign exchange market (as opposed to factors like rain before the Melbourne Cup which only give an inkling which horse might perform better).

Negatives

  1. If you don’t put on a stop loss – you could lose multiples of your initial investment (if you are using 2% margin then every 1% movement will have 50% effect on your investment).
  2. You pay brokerage (or spread where you pay a premium of a few cents when you buy)
  3. If you do win at Melbourne cup – you can win big (particularly if you win with a horse who wasn’t a favourite)

Things that Horse Betting and Foreign Exchange might have in common

  1. You can win money, then lose it by reinvesting it into another trade
  2. You can lose money because you thought it was a ‘sure thing’.
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