Can anyone explain the FOREX Market to a "layman"

purch

As someone who worked in the FX Markets as a trader for a couple of large Investment Banks for nearly 2 decades....I have refrained from commenting on this question, as I think the type of FOREX market and the systems the OP is referring to and the wholesale market I knew are totally different things, and also I can't comment on the Trading Systems used by the OP's mate.

There is one thing that will be common throughout however, and will add a huge risk to any trading involvement in the FX markets.

The market as a whole will quite easily sustain tight spreads and more than adequate liquidity. However you need to bear in mind that at anytime of 'shock'...be it the release of a major economic indicator...interest rate change or not by a Central Bank etc etc then liquidity will dry up in an instant, and prices will be hard to come by and spreads widen dramatically.

Whatever a trading system or broker promises....there is nothing that can foresee or overcome these frequent instances, and it is during these times that the small private trader (investor) will be most vulnerable and most likely to lose a lot of money.

I have no doubt that in quiet, range bound markets, these trading systems can make investors significant amounts of money, but you should be aware of the numerous and significant risks involved.

Biggles

funkintastic wrote: »

I know what you mean about the "to go to be true" thing, maybe my friend playing down the risk involved, or his broker/ investment manager is extremely confident in his own abilities when it comes to saying he wont loose his initial investment.

Seems more likely that he doesn't understand the risk involved, maybe because the broker isn't telling him all.....

funkintastic

Thanks for the advice, it seems that I need to ask lots more questions!

One thing that I do know however is that my investment would be a very small percentage of the total put in by my friend and his partners (in excess of a couple of million pounds). I know its not a black and white question, but does being involved in such a large investment make it any safer for me. I suppose what I mean is, I am pressuming is if the money is split, then spread across different trades?

meester

funkintastic wrote: »

Thanks for the advice, it seems that I need to ask lots more questions!

One thing that I do know however is that my investment would be a very small percentage of the total put in by my friend and his partners (in excess of a couple of million pounds). I know its not a black and white question, but does being involved in such a large investment make it any safer for me. I suppose what I mean is, I am pressuming is if the money is split, then spread across different trades?

I am not sure why you are even asking the question. Markets are extremely efficient, and if opportunities truly existed to make a lrge real average return (which is not the same as anecdotal tales of making 50% in a week - you can DOUBLE your money on a roulette wheel in 10 seconds, but the real average return is MINUS 2.78%), then they would be quickly seized upon and returns would fall to a normal level.

My suspicion is that they take your money, double it, then ask for lots more money, and you lose the lot.

purch

but does being involved in such a large investment make it any safer for me

No a 'point is a point' whatever the size of the trade !!!

arabianights

If you need to ask then you shouldn't be doing it.

JimmyTheWig

There is no risk, as you are guaranteed your initial money back.
But going on what prudryden has said, it might take 10 years (or more) to get your initial money back. And all you'll get after 10 years is your initial money.
Keep it in savings and your £10k can turn into £20k in 10 years. Do this plan and your £10k might still be £10k in 10 years. That's what you are risking.