I posted a blog yesterday that made almost $900, 200 up-votes, 20 extra followers and a load of positive feedback, however I did have about 3 negative comments & some down-votes.

Today’s blog is will be about risk management, asset allocation, brokers and information on Investing in general.

Feel free to skip ahead, titles are in for your convenience.

Intro

The negative comments & down-votes were concerned with profit factor and the risk involved with trading/investing in Forex (Foreign Exchange). I didn’t really disagree with the negative comments posted on my blog and for good reason, I even up-voted the ones which had a valuable point to readers. Some of these people just had a more realistic approach to investing and were much more aware of the risk involved.

My previous blog

Here is a link to the blog if you want to read it.
“Foriegn Exchange Trading, how I make easy profits”

I not going to try to defend my position as I am satisfied enough with information on my blog as current, if you are going to post something negative/disagree on this blog I only ask you to be put in a way that is beneficial to the reader.

About Me

Goggle+ Verification: ServantOfNone
Gmail: jaycob.bell@gmail.com
FaceBook: Jaycob Bell
Location: Townsville, Queensland, Australia
Blog Credit Source: 100% Original from me (some sources referenced)

Before you even think about it

I have originally did a Barefoot Investor Survival Guide blog. If you are new to investing it’s definitely a good read, don’t even think about touching forex until you have all principles in this guide locked in your mind.

Facts to know about forex trading

• Only 2%-13% of traders are consistently profitable on the forex.ref
• 95% of forex traders lose their Investments in the first 6 months.ref

About forex brokers. ref

There are few types of brokers out there, here I will discuss the difference between a ‘market maker broker’ and an Electronic Communications Network (ECN) broker, I will keep it simple.

Market Maker Broker (down-vote)

They may offer free services like news feeds, demo accounts & charting services. There trading platforms can often be really good and ‘user friendly’ but on the other hand they have a hidden dark side to them which they fail to mention.

Cons

• Presents a clear conflict of interest because they can see your trades and may trades against you.
• They have worse bid/ask prices than you can get from a ECN broker.
• Maket makers love hunting for their clients ‘stop lossess’ they intentionally ‘stop’ you out of your trade so they can make money. They can manipulate the market 10-15 pips away from the current market rate.
• A huge amount of slippage can occur when news is released and their system may also ‘freeze’ during times of market volatility.
• Some market makers don’t even put your funds into the market, they will just assume you will lose it all and keep the money for themselves.
• They can make it very difficult to withdraw your funds, like one of those finance companies which give you the run around when you decide to close your account.

ECN Broker (up-vote)

The ECN broker puts us in same position as a bank or market marker, direct access to the forex market. They make their money of fixed commissions for each transaction. Authentic ECNs do not play any role in making or setting prices therefore the risks of prices manipulation is reduced for retail traders.

Pros

• You can usually get better bid/ask prices.
• Genuine ECN brokers will not trade against you, as they will pass on your orders.
• Prices are more volatile, which are better for scalping purposes.
• Since you can offer a price between bid and ask, you can take the role of a market maker to other traders on the ECN.

Asset Allocation

First of all I would like to say forex is very risky investment and I would never ever put all my money into it expecting to get rich. So let's talk about a reasonable investment percentage for forex which is considered to be safe in relation to total capital.

In pie chart below is representation of I what I called a managed asset allocation.

Breaking it down

GOLD

Physical gold & silver is what I consider to be the world’s safest investment in my opinion, it’s been used for money for over 5,000 years. In a way gold is a sort of accounting to keep the fiat currencies in check for when they get out of control.

We will find when people start to lose confidence in the fiat currencies during market uncertainty like ‘housing bubble’ or the ‘brexit’ people tend to rush back to gold and silver because it has intrinsic value. I prefer to keep my money in the form of silver or gold over fiat currency for the long term, other people may be inclined to hold Bitcoin/Steem over silver/gold just depends on what we are comfortable with.

Mike Maloney has created a 6 part video series on the history of money and how it works today. He discusses the benefits of investing in gold and silver over fiat currencies.

Stocks & Shares

I keep the majority of my capital here, I consider myself a ‘value investor’ at heart, I like to find established companies which have gone through rough patch... say for instances the last 2-3 CEO’s from company XYZ have resigned and everyone is selling the stock. I use advisers to help me with this kind of investment but the decision is still mine in the end. Value investing is similar to Warren Buffett's style, basically you buy into a company and hold it for a long time 5-7 years or more. Trying to find a cheap or ‘value for money’ buy in price is key.

Value Investing Advisor (For Australian ASX) intelligentinvestor.com.au

Pie Charting? Risk vs Reward

We could split up this section up again into another pie chart if we wanted to. Just think about it, we could have a risky ‘oil mining exploration company’ hoping on the verge finding a new supply or on the other hand we could have some stable google shares, may not be making record profits right now but at least we know they will be around for a while.

This risk is up to you, my other friends are not big investors and keep the majority of their money in the bank earning interest, they might only ever invest 5% of their capital into something other than a bank account.

Crypto Investments

To be frank, I don’t really have enough experience about crypto currencies to comment anything significant of great value. My feelings and experience thus so for Bitcoin is maybe it’s becoming a potential alternative to gold and silver investments. It's so much more fungible to exchange and I am starting to see some correlations between fiat market uncertainty and crypto value.

I do know one thing though for sure, steemit is completely risk free at the moment there is no investment in the world that offers the kind of return on Investment. I use a portion of steem payments to fund my bitcoin investments and another portion I put back into steem power. I am still undecided what I will do in the future.

Forex

We are finally here, I hope so far I have put things into perspective for you involving risk with forex. We can see in the chart 5%-10% is the allocated amount for this section. I would not be overly concerned if I blow all of my accounts I have set up for forex, It was a risk I was willing to take for the potential reward.

Forex Investing/Trading is extremely difficulty to be profitable on a consistent basis but it can have some huge rewards too. I live in Australia so the forex market times is probably the worst time for me to trade during the day. All the action starts at 10:00PM (AUS) and stops around (6:00AM) so I miss out on a lot of trading opportunities that US day traders would have.

It’s part of the reason I like to a copy trader platform for day traders and scalpers it’s not for everyone but it something that has been working for me. This is what was my previous blog was about and you can find the link at the top of the page.

How Risky?

Flip a coin...yep u got it but it can be worse than that sometimes you get the feeling that market has one of those 2face batman coins and never lets you win, like it’s watching you and knows every position you take, it’s setting up a picture perfect chart pattern just realise it has done a complete reversal. Sometimes I wonder if I just do the complete opposite I would actually make more profits, it’s a scary thought to have.

Coming back to reality

I did mention using a demo account for a minimum of 2 months and even longer for people who were to new trading. If someone has broken these rules already, they will become another 95% statistic in the trader world, Impulsive traders never do well. This was just for copying professional traders too, I would never suggest to trade forex yourself as a beginner.

Return on Investment

Since there is no gun pointed at my head this time, I won’t give a definitive answer. Some accounts will do really well, others will just completely funk. I don’t suggest leaving all funds in one trading account and let compound for a whole year either. Take some profits out as you go and put that money back into our own pockets or start another less risky investment.

Using the Signal Providers

Be prepared to lose the money you put into forex investing. If you aren’t 156% comfortable with that you SHOULD NOT invest in forex. I started up with 3-4 accounts copying professional traders which I tracked for a long period & evaluated. I have used those profits to fund some additional accounts and done well so far.

Hope this puts the hammer on the head with impulsive, get rich quick investing. This is not the blog I wanted to work on today but I did feel strongly about it when people posted those comments on my last blog.

I felt I had a debt to pay pack to the people who read it and upvoted it. Thanks again for reading!

"If I have seen further it is by standing on the shoulders of Giants." - Newton