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The 10x FX Challenge

by Rafael Rosa on July 30, 2010

Challenge The 10x FX Challenge

Leverage is pretty popular in the currency trading world. Regulations typically allow traders to leverage themselves up to 50:1 or 100:1. Sometimes, there are online brokers that allow accounts to reach 400:1. In general, these capabilities only work to make you lose money as traders stack up on leverage and wipe out their accounts, fast.

When I first started trading FX, I had my fair share of $25 and $50 dollar deposits. Overall, $50 would become $150, but only to be followed by a $8.94 account balance. Additional to the leverage, I had no idea what I was doing. I started trading as a requirement for an International Finance course I was taking at the time. As with anything, trial and error, time, and effort showed me that all those articles I read saying “don’t use too much leverage” was right.

I never thought they were exactly wrong, but I probably thought, as other people do, that maybe I could be in the tail of the probability distribution and be able to double my account a few times before reducing the leverage. I definitely learned my lesson.

Now, to le challenge. Starting on Monday, August 2, 2010, I will be doing live trading sessions through UStream or TinyChat. I will be broadcasting a designated account with a starting balance of $1,000 American dollars. This account will be fully public with display of exact entries, limits, stops, lot size, and P&L. Until right now, it seems like nothing too different from my usual disclosure (except for lot size and P&L) at Stocktwits and Twitter.

The trick for the challenge is leverage. I typically cap my account leverage at 10x and average at around 5-6x. At times, I do wonder to 20x on very, very rare, short-term occasions with defined risk.

For the 10x FX challenge, the goal is to turn $1,000 American dollars into $10,000 American dollars (i.e. increasing account by 10 times, 10x) with the ability to leverage the account up to 40-50x (but trying to average 15-25x). There is no defined time horizon, but fast is something to keep in mind. I know, crazy.

Remember, it’s an experiment. Something different. On an account with lower leverage, my trading has worked well; however, will the same outcome happen with high levels of leverage?

This adventure will serve to address one of two things: 1) Either we show that money can be made with high levels of leverage or 2) We show in a detailed, tracked manner, just how leverage can destroy your account. This way, you don’t have to be doubtful and wipe your account multiple times before learning.

Lastly, if the account does make money, some fun things will be happening. Part of the gains will either be given to a charity, distributed to the traders interacting in the live trading room, or both.

The times I’ll be available in the liveĀ  trading will likely change, especially in the beginning before a rhythm is set. However, everything that is done on the account out of the trading room will be made public through other mediumsĀ  (i.e. StockTwits and Twitter) immediately. I will try to make a somewhat consistent schedule. The room will stream audio and a screen shot, with text communication also possible.

$1,000 American dollars, lots of leverage, and probably one or two people watching, here it comes. The 10x FX Challenge. Get excited.

Technorati Tags: 10x fx challenge, Currency Trading, day trading, fx live trading rooms, fx trading, leverage, live trading rooms

{ 1 comment… read it below or add one }

fxretracer 07.30.10 at 5:50 pm

Awesome, cant wait, will follow as closely as I am able too…with all the other things going on it will tough. But definitely an exciting challenge!

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