FX Concepts Winds Down

FX Concepts LLC was once the world’s largest Forex hedge fund that at its peak managed more than 14 billion in assets.

As of September 26, that number has declined to $661 million.

Founded in 1981, FX Concepts has suffered significant losses in the past few years and is now liquidating its fund programs and laying off most of its employees.

This has been mainly due to the weak performance of their flagship fund, Global Currency Program, that is down 13.9% for the year (as of August). At the same time, another fund, the Multi-Strategy Program has declined 10.96%.

Robert Savage, the chief strategist at FX Concepts wrote in an email to Bloomberg, “FX as an asset-class business has been difficult this year.”

And they aren’t the only ones who are suffering. Here’s a list of the top trend-following managed futures funds and their performance in August:

(source: Au Tra Sy)

As you can see, this is indeed a difficult time for institutional traders and hedge funds.

But if even the professionals are having trouble turning a profit, what about the retail traders?

Can You Out Swim A Shark?

What many people don’t realize is that professional traders are an altogether different animal compared to retail traders.

They have superior research teams, technological capabilities and industry contacts. They control hundreds of millions of dollars and have teams of analysts who monitor the markets at all times.

Retail traders like us don’t stand a hair of a chance if we’re trying to beat them at their game. It’s like trying to out-swim a shark.

So unless we choose to play a different game from the professionals, we’ll not just lose, but lose terribly.

If we tried to trade like they did during these times, we’d do a LOT worse.

The Retail Traders’ Edge

Thankfully, the retail trading industry is structured in a way that benefits patient trading.

Instead of competing with hedge funds at their own game, we can carefully choose our battles and stay out of the market otherwise.

Flexibility is another key advantage to retail traders. We can switch strategies in an instant and adapt almost immediately to major shifts in the market.

These are just some of the advantages of being a retail trader, but few people seem to understand how to use them effectively.

Beginner Scalpers = Fish Food

This is why it’s so common to see people in forums talk about scalping the 1-minute and 5-minute charts – they’re trying to swim like a shark when it’s actually a huge disadvantage to do so.

I’ve just visited one popular Forex forum and came across the results of a scalper:

This is what typically happens – if you’re lucky, you can quickly grow your capital but all it takes is a couple of bad trades to wipe you out.

It’s a classic example of a retail trader who attacks the market without a proper plan.

Unless you understand your operating environment and trade according to it, the odds are stacked against you.

But this is not what new traders want to hear. They like to be told that all it takes is a few technical indicators to make money scalping.

Ah… if it were only that easy.

By |2019-03-07T09:40:15+00:00February 24th, 2019|General|7 Comments

7 Comments

  1. andrew October 8, 2013 at 7:48 am - Reply

    Thx Chris

    Valuable info re managed funds.

  2. velanandan October 8, 2013 at 8:19 am - Reply

    Hi Chris,

    Can you recommend a decent forex broker who will not hunt one’s stop loss entries.also.your views on this please.
    Thanks.

    Velu.

    • Chris Lee October 8, 2013 at 8:20 am - Reply

      Hi Velanandan,

      Any broker that offers straight-through processing (STP) should not be able to hunt for your stops. You can simply search for this in Google and you’ll get plenty of options.

      However, do note that true STP brokers do not offer guaranteed execution and the slippage and spreads can vary widely over different periods of time.

  3. Marc October 8, 2013 at 10:00 pm - Reply

    The main reason why the hedge funds are performing very poorly is the lack of movement in the markets over the past year or so. If you look at the movement of the EUR/USD it is basically confined to a 1000 pip range for the past 18 months. Most of this range has been established in an 800 pip range. If you are trading large funds you cannot get in or out without losses. It is that simple. Look at how the EUR/USD ranges these days. There is maybe one mediocre move once a week. The markets are in a very tight range with very little volatility and this makes stop hunting the only targets. The STP’s may not stop hunt you persoanlly but their liquidity providers will. You have to be smart enough to see the set ups or you will be stopped out like the rest of the herd. All the best.

    • Chris Lee October 9, 2013 at 2:59 am - Reply

      Hi Marc,

      I’ve noticed this, with the ATR of various pairs decreasing significantly since the beginning of the year.

      Because of this, one of my trading methods that was once profitable is now performing near breakeven and I had to shut it down for now.

  4. K.K. October 16, 2013 at 3:12 am - Reply

    Hi Chris – when you say “one of my trading methods that was once profitable is now performing near break even”, are you referring to either of “Icarus” or “Planting Pips” ?

    Thanks.
    K.K.

    • Chris Lee October 17, 2013 at 1:37 am - Reply

      Hi K.K.,

      Planting Pips was affected by it.

      Icarus trades on the longer term (bigger picture) and is not affected.

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