Forex Tips for Passive Investors by Andrew Mitchem, Patrick Grimes & Steven Primo

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#598: Forex Tips for Passive Investors by Andrew Mitchem, Patrick Grimes & Steven Primo

In this video:
00:25 – Top trading strategies for passive investors. 
05:50 – Why I choose to trade the FX market. 
11:47 – The ability to Buy and Sell.    
15:03 – How much time do you need to trade daily?
25:00 – Why so many retail traders lose money.
41:40 – Do you want to invest in your trading education?

Patrick Grimes:

Right. This is Patrick Grimes and I’m really excited to be here today with some awesome people to talk about a completely new alternative investing strategy we have not dug into to this level before.

Top trading strategies for passive investors. 

Two heavy hitters to talk about it. And that is top currency trading strategies for passive investors, also known as Forex. What is that? How does it work? What are the risks? We’re going to dig into all that today. How to be successful at it. Is it passive, is it not? These are all really cool things, and I’m excited to learn about it along with you. I haven’t done this, and this is one of the passion projects. This is my passion project here. This is our Alternative Investing Mastery series and put on by Passive Investing Mastery and myself.

And why are we doing this? We’re doing this because we want to educate investors to achieve mastery in the art of passive alternative investing strategies. So you keep your life back. You can be passive, but you get into alternatives. You’re just all about the stock market, this is not the right event for you or the right series for you because we’re about non-correlated investments outside of the stock market. Ones that don’t rise and fall together.

Now, we educate here. It’s important for us. I’m on over a hundred podcasts and books. I’ve written articles and forums and others. It’s all on my website. I actually give away a couple of bestselling books for free on our website, if you’re interested. I actually sign them and send them out, help inspire people along their journey. And we have this bi-weekly webinar series, which seems to have turned into a weekly webinar series, always featuring a Blue Ocean approach of different alternative strategies.

Now, we’re doing this because we believe financial security happens through a lot of different allocations into different markets, which can only be achieved into these very unique kind of novel alt strategies. And we want you to get to that point where you have true, not just independence, but security, and the abundance, the financial abundance you need for the causes you care about most. That’s our mission here. We do that through education and through sponsoring best-in-class alternative investments, which you can check it on our website.

The next event, before we go any further, make sure you jump in there, one week from today, Venture Capital for Passive Investors: Syndication Strategies That Works. I don’t do a lot of venture capital. It’s not really my bag, but a lot of people do. And a couple friends of mine that I’m in large, very large real estate deals with that have invested huge and were some partners in some of these deals. Isaac Bennett works for a venture capital firm. I’m in some Masterminds with him. And he is doing real estate and venture capital. Trey Taylor is a family office. He manages his own and all of his relatives, his extended family’s funds, and he also does angel and venture. So we’re going to talk about it. He’s going to be there as well. It’s going to be a fascinating conversation. Known both these guys for some time. And what are the different funding options and venture capital risk rewards? How to leverage syndications? What are angel investments and family office and high growth startups? What are these things that allow you to really build that true resilient portfolio?

So we’ll go through all of that today. But today, currency trading strategies. Really excited about this. So let’s go to our panelists right now. We have Andrew Mitchem. It’s tomorrow for him. He’s in New Zealand right now, so I appreciate you jumping across the pond virtually for us, Andrew.

Andrew Mitchem:

Lovely to be here, Patrick.

Patrick Grimes:

And by the way, Forex is not like real estate. It is global. You’re trading global currencies. So these educators is over 108 countries he’s trading in right now. It doesn’t matter where this expert is, if he’s somewhere on the planet Earth and he’s got something relevant to say for you and America about Forex trading. So he’s a full-time currency trader and investor since 2003, founder of the Forex Trading Coach, providing training to traders in over 108 countries. Pretty awesome. Developed a profitable trading system after initial challenges. I would love to hear more about that. Advocates for the flexibility and freedom offered by currency trading. Really excited to have you here, Andrew.

And on the other side of the Pacific Ocean, where I’m kind of sitting in the middle, is Steven Primo. Primo is the Oracle here I think on the call. Is it okay if I call you that, Primo?

Steven Primo:

That’s fine. Everyone calls me that as well. That’s fine.

Patrick Grimes:

Well, I’m glad, because it made sense. 48 years as of this year, he’s been trading. He has been trading for 48 years, starting in 1977 as a floor reporter on the Pacific Stock Exchange. Former stock exchange specialist for Donaldson, Lufkin & Jenrette, managing markets in over 50 stocks. Co-developer of the PTS Primo Charting Platform focused on trading education. Once again, perfect. Glad to have you here. Featured in Stocks & Commodities magazine, he’s contributor for contributor for TradingMarkets and the FX Street and Trader Expo. His proprietary methods for trading are used in over a hundred countries.

This is a global strategy. Couldn’t ask for a better group of guys. Let’s start with Andrew and then go to Steven, and I’d like to hear why are you excited to be here today educating us on currency trading strategies? Go ahead, Andrew.

Why I choose to trade the FX market. 

Andrew Mitchem:

Hey there, Patrick. Hi everybody. I’m here today because I absolutely love trading in Forex market, and it’s just completely changed my life over the last 20 years, and the more that I can help do that to other people, the better. It’s an awesome market to trade.

Patrick Grimes:

And Steven.

Steven Primo:

Hello everyone. Thanks for inviting me today. And similar to what Andrew said, I’ve been trading for 48 years, but roughly about 20 years ago I really wanted to start sharing what I had learned, because you can only go so far if you’re just sitting in a room trading by yourself, but to a point you have to share with other people and that extends your next level of trading. So I started teaching and I’m excited to teach people. It really is a lot. It gives you a lot more satisfaction than just sitting alone in a room trading by yourself.

Patrick Grimes:

All right. So here we go. We’re going to dive into the discussion, but first I want to make sure that we see have a lot of people here participating in the chat. David, Amital, Bill, Kenneth, Anise, thank you so much for already jumping in there and starting to participate. Keep your questions coming. We’re going to have lots of questions during this event, probably 40, 60. We’re going to answer questions as they’re relevant to the current topics that we’re talking about. I may punt on some questions and then towards the end when we reach those topics, weave those into the conversation. If we miss one, that’s our bad, but we’re going to go back through it after the 45-minute mark and go through a very laser-focused Q&A. Do our best to get through all of those questions. But keep them coming. We usually have 40 plus, 60 plus questions, so it’s a very lively discussion. Looking forward to this today.

So without any further ado, let’s jump into the discussion. So, what is currency trading? It’s what we’re going to start out with, and we’re going to break it down in very simple terms. I like to say that so that my grandmother’s knitting circle can understand. So let’s break that jargon down very simply. Andrew, what is currency trading? How does it work?

Andrew Mitchem:

Yeah, Patrick, so to break it down real simply, currency trading, when you trade currencies, you’re actually trading what’s called a pair. So you don’t just trade one stock or one thing, you trade something against something else. So as an example, the Euro/US Dollar. It’s traded as the Euro/US Dollar, as a currency pair. And when we look at it, we can either buy or sell that currency pair. So if the Euro/US Dollar looks like it’s moving up, effectively we’re looking at strength in the euro, weakness in the US dollar. If it looks like the Euro/US is falling, that means we’re effectively looking for selling euro and buying US dollar. So they’re all traded together as currency pairs.

There are eight main currencies that we look at, and that would be the Euro/US Dollar, Swiss franc, Canadian dollar, Australian dollar, New Zealand dollar, Japanese yen, and the British pound. So it makes it really easy because it’s mainly just eight currencies to look at.

Patrick Grimes:

So Yuan, the Chinese Yuan is not on that list.

Andrew Mitchem:

We do have those as well. But for people that are wanting to start this as something new, I would probably focus on those main eight currencies. They’re the most traded. The cost of doing the trading is very small in terms of the spread, the liquidity’s fantastic, and what we do when we start looking at technical trading, it has the highest reliability. Yes, you can trade the Mexican, the Swedish krona and lead on to other currencies and other markets, but I would focus for someone new especially on those main eight currencies.

Patrick Grimes:

Amital is saying, “What is Forex?”

Andrew Mitchem:

Yeah, so Forex is foreign exchange currencies. It’s just short for foreign exchange. It’s basically currency trading, Forex, it’s the same thing.

Patrick Grimes:

We wanted to call it currency trading instead of Forex, so it didn’t sound so foreign. And so it is, yeah, one and the same. Here, Steven, let’s hear your thoughts.

Steven Primo:

Yeah, I ditto exactly everything, the same thing Andrew said. The main thing is that the trading is actually simple, because I’ve noticed from my experience in trading currency pairs is that when they run, when they go in a certain direction, they really go. I mean, these are some of the best trending markets available. And since we feel that the best way to become a consistent trader is to be in sync with the trend, I think there’s a real advantage to trading currency pairs. If you’re able to find out through price behavior what the trend is and get on board, you can really have some nice gains and really have some nice profits.

Patrick Grimes:

So this is interesting to me. So I did some research in advance. About 24%, you talk about the pairs, 24% of the trades are between the euro and the US dollar. That’s fascinating. And I think it said 66% are in those nine most common currencies overall. So the majority of it is in those top currencies. So you’re really talking about trading between, call it nine or 10 different currencies for the majority of it, and then a quarter of that or the majority of that is actually the US dollar and the euro. Is that right?

Andrew Mitchem:

That would be exactly right. And that is exactly what I would focus on for those reasons, given the quality of the trade setups, the cost of doing it. It’s so much better just focusing on that. And the beauty of Forex trading is you don’t need to know about a hundred different companies or anything like that. It’s just eight currencies and what moves them. And as Steven said, the moves that you can get are huge.

The ability to Buy and Sell.    

The other beauty is you can of course buy and sell. So you’re not just buying something and kind of hoping it’s moving up. You can make exactly the same return by selling, let’s say the Euro/US Dollar and getting a profitable trade when that market falls as you can when you buy it. You just need to be on the right side of the market.

Steven Primo:

Right. And what we had talked about before in terms of keeping it simple, I think a lot of, especially beginners, can really get overwhelmed deciding what market to trade. The great thing about currency pairs, as we’ve stated, if you stick with those select numbers, those basic ones, it keeps it a lot simpler, especially when you’re learning how to do it. So you’re not going through 5,000 stocks or tons of crypto that you don’t understand where they are, you’re just focusing on this small number. It makes it lot easier to get involved.

Patrick Grimes:

So Anise here, who follows you, said that Primo makes it simple. A great educator. So David’s saying, “Share, baby, share.” So, very excited about that. And we’re hearing a little bit about Mitchem’s humble beginnings in the chat. So you guys have got a great following here, much more exposed to my audience than I originally understood. This is great.

So let’s talk about how active and passive is this, because this is actually a Passive and Alternative Investing Mastery strategy session. A lot of the investors are like myself. I was a hardworking professional, successful at what I did, I was good enough to be able do what I did to be able to make some money to be able to invest. But I’m busy on my day-today. So how do you talk to investors about evaluating the active and passive methods by which you go about investing in this? Why don’t we start with Steven?

Steven Primo:

My opinion is I don’t think everyone or traders should be one or the other. In other words, you shouldn’t be totally active in something involved and just staring at every PIP or tick. You shouldn’t be totally passive either. I teach my students that they should be actually involved and part of the process, because that’s how you’re going to really become consistent. I think no two traders should ever trade alike. Some traders have a larger account. Some are new. Some have been trading 30 years. Everyone has different risk parameters. So that will determine how active you are, how passive you are. Another determination is thinking of what timeframe. If you’re going to be intraday trading, you have to be a lot more actively involved as opposed to someone who’s looking at weekly or monthly bars and you can pretty much set your parameters and then sit back and watch. So it all depends.

The first step I believe that traders and students of mine have to make is you have to determine what type of trader you are. Are you the type that wants 20 trades a day or you want one trade every couple of months? And then you can decide how active or how passive you should be. But I don’t think it should be a hundred percent one side or the other. That’s just my philosophy.

Patrick Grimes:

Andrew, you have a take on that?

How much time do you need to trade daily?

Andrew Mitchem:

Yeah, sure. Look, I completely agree with Steven. The beauty of currency trading is we have the option to look at various timeframe charts. And the way that I believe that we both trade, myself and Steven, is it kind of doesn’t matter what currency pair we’re trading and what time frame chart.

So to talk about how much time you need. I always say to people, once you know what you’re doing, you could quite easily trade in 30 minutes a day, probably less. But also, you could trade on weekly charts or monthly charts like Steven said, and just look at your charts once or twice a week or a month. It depends what you want to do. But I still think you need to have some involvement in what’s happening. You can’t just sort of put something on and then forget about it. I still think while you’re learning, especially, you need to understand how the market works, what you’re looking for in terms of price action and candle patterns. But it certainly isn’t something that you get that perception online that you have to be there at certain times of the day, where you have to sit watching every PIP of movement, like Steven said. A lot of people start like that and they fall into the trap of doing that because people think that you have to trade more to do well. The reality is trading less is better and just having higher quality trade setups.

Patrick Grimes:

So when it comes to passive investing, it’s either you’re just, like you pointed out, you need to be active. So you don’t want to just buy something and forget about it, right? You’re not necessarily going to be a long-term holder when it comes to just a Forex investment is kind of what I’m hearing.

The other way investors can be passive, and I’d love to dig into this a little bit because I know somebody who I rub shoulders with occasionally and they put together a Forex trading strategy. And when I think the Japanese, it was the Japanese bond inverted and that it caused a big challenge for their strategy. Their strategy was a bot, it was the way to make it passive, and they lost some money. They lost some money for two reasons, one was because it was leveraged and two was because it actually traded negatively into kind of a down cycle on the end.

And I guess these algorithmic tradings, the strategies, they kind of account for 70% of the daily trading volume. And daily trading volume is massive. And then there’s a bunch of them that are using these bots and some are using AI bots now. And I’m actually… These people are out there AI trading Bitcoin right now as well. But let’s hear your guys’ thoughts on these algorithmic trading methods, these bots, these ways that people are trying to make these things passive, hear what your thoughts on that.

Steven Primo:

Well, right off the bat, I can tell you I’m totally against it, and it’s only because… I mean, a lot of people think I’m old school because I’ve been trading so long, but as I stated earlier, you have to be a part of the process. I think one of the main reasons why traders fail in any market, currency pair, if you’re an investor or whatever, is when you take yourself out of the game. Now that can be either having a fund where someone does it for you or relying too much on an indicator telling you whether to buy or sell, but you have to be a part of the process. And so I’ve had a number of students I’ve educated before that said, “Well, why don’t you just have algorithmic trading or just something just spits out buys and sells.” It goes against my philosophy where you would not be a part of the process. It’s just something that I’ve learned through the years.

And to tell you the truth, when I left the floor, I was hired to manage money and also to teach systematic trading at a number of firms. And I taught these systems, which were very similar to what’s going on now with AI, but they were all systematic. You just had to put in the numbers and they spit out the buy and sells. And they had fantastic research going back 10, 20 years, 80% wins. It was just unbelievable the different markets. And then when 2008 hit, they all crashed. Everything went down. And what happened to all the research? What happened to all the great 10, 20 years of fantastic numbers? It all goes out the window. So it was because you have to make adjustments. You have to be able to go with the ebb and flow of the market. And that involves what we were talking about. It can’t be just passive. You have to be a part of the process.

Andrew Mitchem:

Yeah, absolutely.

Patrick Grimes:

So you taught algorithmic trading, sorry, but you are no longer a believer in it after the 2008 because you feel like you actually need to be there having that human judgment, seeing something like in 2008 and interfering with the algorithms. Right? Is that what I’m hearing?

Steven Primo:

Exactly. The simplest way I could say is that I’m not even a big football fan, but I know in football, the quarterback can come up in a line of scrimmage and have a play already and everyone knows what the play is, but then he sees that the defense has shifted. It’s different. So he’ll yell out what’s called an audible, telling the rest of the team that we’re kind of changing and editing things a bit because the defense has shifted, so the play won’t be able to run the original way. It’s no different when trading. You see that, wow, you have to be a part of the process because maybe there’s more volatility today. Maybe there’s no volatility today. Maybe your risk is larger. Maybe it’s less. So you’d be able to change ebb and flow with what the market’s showing you.

Patrick Grimes:

We’re addressing some of Bill’s questions here about how do you know what moves around in the currencies. And also Michael, “Is it manual or algorithmic?” It sounds like it’s a little bit of a combination between the two, but you’ve got to be ready to do the audible. The engineer in me really struggles with this, because I was an automation and robotics engineer and I think of things as systems and processes, but having that human audible is necessary and why we don’t have robots everywhere on every manufacturing floor right now. Andrew, let’s hear your thoughts.

Andrew Mitchem:

I couldn’t agree more with what Steven said. Maybe we’re both old school, but I think he’s absolutely right, and I can tell you from a of personal experience that I’ve tried every bit of AI, every trading robot, every algorithm there ever was, bought them, tried to create them, and they just don’t work. I think a lot of people run into that pitfall of they see something that has been back-tested that looks really good in hindsight and it goes live and it just doesn’t work.

I really cannot stress enough from personal experience how much human common sense and seeing something and reacting to it will massively help you not only in your results but also in that actual knowledge that you have of being able to do this for yourself. Whereas even if you had a system that you got from somebody, how do you know when that stops working if you don’t have that knowledge of how the markets work? How do you know when the market’s changed and you need to adjust the parameters? Just buying something, leaving it to run with your money, your hard-earned money sat there, it’s a huge gamble. And I personally, I love the fact that I have the knowledge of what to do, when to do it or when not to do it.

Steven Primo:

That system usually stops working the minute we start trading it. That’s when it usually stops working.

Andrew Mitchem:

Really. And we’ve all done it. So the issue is that people see online and YouTube and other play TikTok and things that all these [inaudible 00:22:07]. Because someone’s generally trying to sell something, and I promise you it doesn’t work.

Steven Primo:

Right.

Patrick Grimes:

Let’s talk about this… Give me a [inaudible 00:22:20]. So it sounds like it’s a lot of book smart, or there’s a book smart component to it, then there’s a street smart component to it, and then there’s the science and technique, and then there’s the art. Are we talking it is the arts the audible, is it 50% art or is it 10% art and 90% algorithm and science and technique here? What do you guys think?

Steven Primo:

Well, for me personally, I put about 25 to 30% rule-based pattern recognition or just looking at price behavior. And it’s rule-based. It’s not systematic. And then I would put basically… Or I should say, I’m sorry, sorry everyone. I mean 70% rule-based. And then 30% I leave for intuition, for experience, for audibles calling, being part of the process. So 70% rule-based and 30% I leave for making my own process and decisions.

Patrick Grimes:

I love how you could answer that question. Andrew, what are your thoughts?

Andrew Mitchem:

If I had to go first, I would’ve said exactly the same. This is quite spooky. Because it’s the way that I suppose that over years, you have trial and error and you figure out what works. And yes, when I see a trade setup, I have rules for my entry and exit levels based on the way that I trade, but there is certainly a little bit of discretion in what I look at on the charts as well. But it’s like anything, it’s like any skill that once you can do it, you can kind of do it. It’s like watching a kid ride a bicycle. It’s very complicated to start with and then when you know how to do it, you just jump on the bicycle and go. And I believe that kind of art form of trading is very, very similar. You have things you have to do and then you have other things that you kind of just get over time.

Patrick Grimes:

The art form of trading, right? And we like to say the mastery in the art of passive alternative investing here. And so there’s an art to it. So let’s dig in a little bit more. What are the actual ways that people would engage? I’d say you’ve got to go learn something, you’ve got to go educate yourself, and then you’ve got to go practice. And again, the education, you’ve got 70% rule-based, you got to practice to get the 30% intuition. You got to be out in the field actually doing this.

Why so many retail traders lose money.

How have you investors learn, how long does it take to actually gain the confidence necessary that you see for them to be successful at this? I mean, I’ve seen some numbers out there. We were Googling around trying to figure out, it says between 72 and 84% of online Forex traders lose money.

Andrew Mitchem:

It’s higher.

Steven Primo:

I was going to say same thing. I think it’s higher.

Patrick Grimes:

And 29% of retail Forex traders achieve capital gains, meaning they actually get a gain. So those are not numbers that I’m typically seeing in real estate investments. So help us understand how do you educate to beat those numbers, to beat those statistics, to get over that book knowledge, rule intake, and then to learn the art for your students to be successful. What’s that process?

Steven Primo:

I’ll let you go, Andrew.

Andrew Mitchem:

Okay, so for me it’s finding a strategy that suits you as an individual person. That’s what it comes down to. And look, it took me four years of going round in circles and buying things and beating my head against a brick wall. I’m not a sort of person that gives up, but I kind of got very close. For me personally, I then realized that the system that I had to trade meant I wasn’t looking at charts all day, and I had to actually have some logic behind it. Because when you start as a new trader, you can get demo accounts, like free virtual money accounts. And the downside is that people get inundated with indicators and all these lines crossing over everywhere and arrows and dots and things. It looks really cool, but the trouble is they fail to look at what’s actually happening in the price and they fail to understand the things that the big players look at, like support and resistance and news events and things like that.

And so for me it’s about someone needs to use the demo account, treat it like it’s real money. The danger is they’re going to start off with a 100,000 demo account and they go, “Fantastic. I’m making all this money,” by just guessing what they’re doing. And of course, when you go live, you’re probably unlikely to go to a hundred grand live account. So I tell people to start with maybe a 10,000 demo. Treat it like it’s real. Make the mistakes that you’re going to have with your risk management going wrong and your lot sizes incorrect and things like that, that everybody will do. But treat it like it’s real and develop a strategy and a system that you understand that you have confidence in, that you trade professionally on a demo account before you even think about going live.

Patrick Grimes:

Is that a year? How long-

Andrew Mitchem:

It could be. It could be. If you’re doing it for yourself with no help, absolutely. Like I said, I took four years. And it’s very tempting to get to those stages where you go, “Oh, this is not working,” so you try to reinvent the wheel again or you buy another indicator or robot, like I just talked about, and you’re kind of very easy to get distracted in today’s world online. So it’s about stripping all that down from… If you’re doing it yourself, if you’re doing it yourself from scratch, it’s about picking the best of different things and working out what’s going to suit you as an individual person.

Patrick Grimes:

Steven, let’s hear your approach. It’s a great answer, Andrew. How do people get in there in this world where the majority of people are losing money? They want to get into this asset class, they know they need to educate themselves not only just on the books and the rules, but they got to build that intuition, they got to get that art of it down to make those audibles. How does somebody just starting out get in there and how long does it take them before they could go live and actually start winning?

Steven Primo:

Well, I believe that that statistic is actually higher. I believe upwards of 85 to 90% of all first-time traders lose money, and when they say lose, it means that they actually lose everything, not just to have a bad month. They give all their little nest egg away. So I remember myself when I first started trading on the floor, I had a terrible time. For the first year and a half, I couldn’t make a dime. And I was lucky to have some mentors who saw what I was doing, and I remember what they said. They said, “Steve, your trading just is far too complicated. You have too many indicators, you’re watching far too many things, you’re in too many systems, everything.” And then they said it’s the easiest thing in the world to over-complicate your trading, but it’s the most difficult thing in the world to simplify it.

But once I started to simplify things, that’s when I started to become consistent little by little. So I think regardless if you’ve been trading 20 years, 30 years, 50 years or a couple of weeks, you have to keep it simple.

Now, having said that, I think you have to find a good mentor or a good teacher, Andrew I think would be perfect. Just listening to him, he’s the type of person I would want to go to if I was trying to learn how to trade Forex. And you want to take everything from them but also get your hands on everything, books, periodicals. And then you have to practice. There isn’t any other profession in the world where you don’t have some form of practice or paper training. Think of an athlete. They have a practice before the game or even they have the sessions before the actual season starts. An actor has rehearsals. It’s the same way with trading.

I liked, in fact, I loved Andrew’s idea of instead of using the $100,000 demo account, which I know everyone does, I’ve done before in the past, you start with a 5 or 10,000. That’s a great idea. Start with that, because that’s closer to reality, what you’ll be doing. And the thing is I tell my students, “Ask me questions. Whatever you want and whenever you want. And when you finally get to the point where you stop asking questions, that’s when you can start actually trading with real capital but keep it as small as possible.” So with some people it’s maybe takes a couple of weeks to get to that point. Other it may take six months or a year. It’s different for everyone.

Patrick Grimes:

This is great. And what’s the payoff? The payoff of actually getting good at this is huge, right? Because people are making money in it. The industry has grown 432% between 2019. That’s huge. Right now in the US alone it’s 1.9 trillion daily average turnover. So there’s a lot of trading going on daily. And I think somebody threw in the chat here that there’s 6 trillion per day overall in Forex. I don’t know that one, but we’re talking like… And then I saw some other numbers that professional Forex traders typically achieve monthly returns ranging in five to 15%. Now is that what you hear? Because those numbers seem mind-blowing. And monthly returns, and that annualized. To be really good at what you… Once you can get at this, you’re a couple of years in, you’ve done this, we’ve gone through, had a mentor, you’ve got good at it. Answering the questions. We got a couple questions from Anise, Robert, Michael. What are these returns? What’s the payoff? What’s the expectations that people should think about for a Forex trading?

Andrew Mitchem:

Well, Patrick, I knew you were probably going to ask that question or somebody was, and you probably can’t see it in front of here on my camera, but I’ve said on here, I’ve written it down just to make sure that I quoted this right, and I said, of course it depends on your risk. How much risk you take depends on your return. But we are massive advocates of incredibly low risk for trade.

But considering that, we would like to suggest that you’re probably, once you know what you’re doing, going to make between 5 and 10% return per month on your account. Just last week we had a 3.6% gain. We’re going to do 3.6 gain in the week, but I’m trading only a quarter of 1% of my account risk for trades. A really, really tiny risk. So a very low drawdowns. Are we going to do 3.6% every single week? No, we’re not. Some weeks will be more, some will be less of course. But I’d very confidently say that once you know what you’re doing, with very low risk for trade, there’s no reason why you can’t make 5 to 10% on average per month.

Patrick Grimes:

So let me just understand. So you said hypothetically you have a hundred grand in your account, you said you’re only trading maybe three grand of it, and then of that three grand, you got a 3% on one year, or what was that? What was the numbers? You’re not trading it all all the time.

Andrew Mitchem:

No, no, no. So if you’re on a $100,000 account and you’re on a 0.25% risk per trade, the most I’m risking is $250 on a trade on a 100,000 account. Very, very tiny. That’s just me personally because I trade on things called prop firms as well. I said to my clients I would never risk more than half of 1%, so a $500 risk on a $100,000 account. Per trade.

Patrick Grimes:

Per trade, and that trade is once a week?

Andrew Mitchem:

So if a trade goes against me, I lose half of 1% of my account size.

Patrick Grimes:

Okay, got it.

Steven Primo:

I have to commend you, Andrew, because I usually am 1%. But wow, a quarter. That’s amazing. That’s great.

Patrick Grimes:

And you’re getting 5 to 10%.

Andrew Mitchem:

Well, I think keeping your drawdowns low is key.

Steven Primo:

I’m sorry?

Andrew Mitchem:

I think keeping your drawdowns low is key in trading in currencies, because there’s two things that, like probably with all the people you deal with, Patrick, is your head and your heart and you have to control, because it’s emotions and it’s money. So I like to say to people, get those two under control. How are you going to do that? Have a strategy that you have confidence in, but also make sure that your losses are very small, but when you have gains they are several times your risk.

Patrick Grimes:

So we’re answering Kenneth’s question here about the returns and the risks and how that is. So you did say, and the audio is a little bit hard for me to hear sometimes, Andrew, so 5 to 10%, is that right? You said? And that was-

Andrew Mitchem:

Between 5 and 10% on that per month.

Patrick Grimes:

Per month. Oh my gosh. So the statistic I saw was monthly 5 to 15 and my mind was blown. You’re actually saying you’re seeing, a seasoned investor, you’re getting 5 to 10, and of course there’s a huge bit of volatility, but you’re also able to mitigate your downside risk to a quarter of a percent. And I just heard Steven say he’s doing 1%. Steven, let’s hear your take on what would people, they’re out there, they’ve been doing this a while, what do you think is reasonable under your tutelage, your guidance after they’ve gotten good at this to be able to achieve in terms of returns?

Steven Primo:

Well see, my take is a little bit different. I don’t feel that you can quantify it by saying this is what you can averagely make, what a student can make after trading for so long or learning. I think everyone’s different. I have some students that have been trading and students of mine for a couple of years and they make phenomenal, and other students in the same courses are basically breaking even, and then there’s others that are making 20 or 30%. Everyone comes in with different parameters. And there’s nothing wrong with that.

I really think what we try to do as traders, we try to make trading into a nine to five job. Like, okay, well if I get this, I’ll make 60 grand a month, or if I take this job and learn this skill, I’ll make a 100,000. Trading is not like that. Trading results are directly proportioned to how much work you put in, what you’re controlling with your risk, what your account is, and how much you use that 30% of intuitive reaction. So I don’t think you can… I always tell my students it’s not the type of thing where you say, “I’m going to make $500 a week.” You can’t do that. Because what happens if one week you don’t make 500? Well then the next week you have to make 1,000 to get back on track. And then if you lose 300 that week, then you’re really in the hole. Then you really dug yourself lower, and mentally, psychologically, you really dug yourself a hole.

So I think the best thing to do, the best thing a trader could do is, once again, practice and learn. And being able to trade another day is the best result you can get. That’s what you want. Because so many traders, that 80, 95% level, wherever, they’re gone. They can’t come back anymore. So you just want to be able to come back again, because that will ensure longevity. And in my opinion, longevity is really success.

Patrick Grimes:

Correct, and we talk about that a lot, capital preservation and keeping your risk low. And what we talk about is if you invest $100 and you lose half, you’ve only got 50 left. It takes a hundred percent return on that to get to break even. But if you lose all of it. It’s an infinite return required to get back to your 100. It’s impossible. It’s asymptotic the more you lose. And so you may be out of the game. That’s what Steven’s talking about. Live to go another day. Don’t risk it all.

That actually brings me back to what I haven’t heard you say, and that’s leverage. One of the things that freaks me out about Forex and Bitcoin trading and everything, the reason why I don’t get involved, because I’m actually a lot about low leverage. 2009 I was highly leveraged on a pre-development and I lost my ass when that market took a swing and it dragged me through the coals for years. I learned a lot about leverage. In Forex, they’ll do sometimes a hundred to one. That means you put $1 in and now you’re trading $100. And that could collapse you much more than your principal. Tell me a little bit about how you guys think about leverage, and these are just these frightening numbers to me, and why I should be a little more comfortable with it, with Forex trading.

Andrew Mitchem:

Because I’m outside the US, you have a lot more restrictions over there with your brokers, but outside the US, you can trade up to 400 to one. I’ve always traded at 100 to one, personally. It makes no difference to me. Leverage is a double-edged sword, of course. It can be your friend or it can kill you, depending on if you don’t know what you’re doing and if your risk is not sensible. But if you keep your risk very low, the leverage isn’t really an issue for me. I’ve never had a… Because I’m only risking a certain percentage per trade, it doesn’t matter what the trade is, what the direction, what the currency is, what