When the financial crisis broke in 2008, the waves kicked up by the collapse affected every corner of the global economy – and that included the world’s foreign exchange markets. LiteForex, part of the Straighthold Investment Group, has had a ringside seat on the events in forex markets over the past two years, since hundreds of thousands of forex orders are closed by traders using its systems every month. The picture has not always been pretty for the day trader, tossed about sometimes like a solitary rower in a storm-hit ocean. But the calmer waters of 2010 suggest that life is getting a little more predictable again, and the opportunities for making a living from forex trading are getting less risky than they were just a few months ago.
At the end of 2008, according to LiteForex’s analysts, price movements in the forex market were mainly connected with the decline of stock market indexes. Big falls in the prices of large numbers of stocks resulted in higher demand for the dollar, which saw the currency rise in value between August and October 2008.
Trading overall increased, but the main trading participants were the largest global banks, which were buying up American currency to settle their obligations as the revaluation of tangible assets took place. The decline in world energy prices also contributed to currency movements. The jump in financial market volatility resulted in a considerable rise in the potential risks of short-term trade, and times were hard for day traders. from January 2009 LiteForex says, market responses to fundamentals became more volatile. The intraday movements followed the general trends, but the uncertainty of the situation saw investors’ responses to breaking news become more unpredictable. Misinterpreting the way the markets would react to market news resulted in the ruin of many retail investors, who did not have the deep pockets that would enable them to bear strong countermovements, LiteForex says.
A year to remember
This year, fortunately, general trends of the market are more predictable. The average market volatility has decreased, though traded volumes are also down in comparison with the figures seen before the financial crisis began. However, LiteForex says, this decline has not been caused by the migration of investors to other sectors; instead it is down to a general decline in solvency of the smaller market participants. The company’s analysts also point to a continuing decrease in risk tolerance after the storms of the previous 18 months, and a sheer lack of money on the part of investors which, they say, has resulted in a reduction of investment volumes into speculative operations in general and not only in the forex market. It has certainly seen no evidence of a migration of capital owned by private investors into other market sectors.
Still, according to LiteForex, the “classic” forex day trader remains the same as he always was: even-tempered and emotionally restrained, with a mean age varying from 25 to 40 years old. The company’s clients come from all over the world, and LiteForex says it has noticed that more of them than in the past have had prior trading or investment experience before they sign up. The principles of day trading, it says, remain invariable.
The successful day trader always begins with a preliminary analysis of the situation. The decline in the appetite for risk among private investors has seen the amount of money invested in any one transaction fall, as investors follow the golden rule, “don’t put all your eggs in one basket”. However, the overall number of transactions has been increasing. The result is a rise in the average floating on summarised client positions, while the increased predictability of the market in recent months has seen some increases in profits for both private investors and traders. But overall LiteForex says it has seen no change in tactics by the short-term traders in the forex market and the general techniques for determining the points of market entry and exit remain the same.
LiteForex, which has its head office in the Seychelles, and other offices in Russia, Latvia and Ukraine, has more than done its bit for educating would-be forex traders put off by the potential risks of trading in volatile currencies by introducing its “Lite” trading account, which lets beginners start with a minimum deposit of just $1 (and a maximum of $3,000). Though it can also be used by traders who want to test their mechanical trading systems, it was developed for beginners primarily, the company says, simply because if beginners started out using traditional-style accounts, by the time they had accumulated enough experience to survive, they had generally managed to accumulate an unacceptable level of losses. The forex market is unpredictable and dynamic, and rookie traders have to learn how to take in the latest events in economics, politics and elsewhere and calculate what sort of impact the breaking news is going to have on the prices of different currencies. It takes time to acquire the skill to read the market, and when you’re trading yen, euros, dollars and sterling, time is, literally, money. Beginners who gain confidence and experience using LiteForex can then move on to the company’s “RealForex” accounts, with no limit on the amount of money they can stake. “Lite” traders will not make huge profits under the sort of average yields available today, LiteForex says, but what the system does enable people to do is give individual traders the possibility of becoming an experienced professional. Since the company began in 2005, it says, more than 300,000 people have used its “Lite” accounts to try out their hand at forex trading, and quite a number went on to open professional “RealForex” accounts.
Another advantage to the company itself that has arisen from the LiteForex accounts, it says, is the experience it has given the company’s own staff in dealing with a huge number of clients, problem-solving and offering advice and guidance, and in particular analysis, much of which is geared towards the “classic” day trader.
Substantial investing
LiteForex treats all its clients the same, it says, regardless of the trading systems they use, and tries not to give them any advice about their choice of account type, except to underline to them the need to observe the classic rules of money management. Nevertheless, the company says, the statistics show that the best, or to be more precise, the most stable trading results are more probable using systems based on day trading. The profitability available from using day trading systems, according to LiteForex specialists’ research, ranges from 16 percent to 26 percent a month depending on the state of the market. Naturally, news of those kinds of returns gets around. LiteForex’s research data indicates that the number of professional traders whose primary income is trading has doubled over the past year. All the same, LiteForex says, it never promises potential clients speedy enrichment and easy earnings in its advertising or anywhere else: “The road to becoming a prosperous trader is long and hard, and requires investment of efforts and means.”
More than 200 companies worldwide compete in supplying services to forex traders, but LiteForex has one advantage over many of its rivals in being able to offer the “Lite” account, and thus being “first of all a broker for everybody – from beginners to professionals”, with the availability of different types of accounts that can be used by traders as they accumulate practical experience. Indeed, traders can have any number of accounts of both types, “Lite” and “Real”. Alongside this is what the company calls the “universality” of the services it provides. Regardless of the size of the trader’s deposit and the trading tactic used, staff treat all clients with the same high professionalism and provide the same high quality of analytical material. The interests of the clients, it says, are the cornerstone of the company’s operations.
Unlike some providers of brokerage services for forex traders, who use their own proprietorial trading platforms, LiteForex employs the popular “Metatrader-4” trading platform, designed by the specialists at MetaQuotes Software. According to LiteForex’s estimates, Metatrader is used by at least eight out of ten brokers. An updated version, Metatrader-5, is currently undergoing beta testing, and LiteForex says the interface is similar enough to the existing version that traders should have no problems using it. Trading platforms are important: a short while ago, LiteForex says, it saw a mass transfer of traders from one of the large regional brokers because the traders rejected the inhouse trading platform the broker was using.
For the future in the forex market, LiteForex says, “it is difficult to forecast what is likely to happen in our dynamically developing time.” But LiteForex itself, it says, has huge potential to continue being a stable, dynamically developing company, being respected both by the clients and competitors. The main principles laid down in the project by the company’s founders five years ago will remain constant, it says: attention to the client, democratic character, universality, openness, high professionalism among the team, an a thorough understanding of the requirements of the people who use its services.
