A resurgence in good quality retail trading is happening in highly respected areas of Europe. FinanceFeeds heads to Utrecht, Holland, where 150 astute traders met industry professionals to discuss the future of FX trading. Here is the full report
There is a distinct and very welcome revolution taking place in the retail FX industry at the moment, and perhaps the most encouraging part of it is that it is a totally self-directed revolution, led by participants in various aspects of the retail FX sector itself.
One of the key tenets of such a new initiative is the very encouraging focus on important and established regions which have far more potential for good quality electronic trading business, in particular, northern Europe.
Today, in Utrecht, Holland, FinanceFeeds attended the Elite Currensea Forex Seminar at the distinguished De Zalen Van Zeven venue, a converted Dutch church which in itself makes a distinct diversion from many retail FX seminars in other regions with a less analytical client base which are often extremely garish, thus the fitting image at De Zalen Van Zeven articulated the quality of Holland’s trading community.
Unlike other parts of Europe, Holland is home to a well established array of professional and proprietary trading companies, wealth managers and hedge funds, many of which have defined the electronic trading environment in Holland since the mid 1980s, hence this is a very good quality region for brokerages wishing to further their client base in a sustainable way, and for Dutch traders to be able to gain access to good ancillary services and brokerages.
Hosted and produced by Elite Currensea, a specialist FX and CFD trading systems, charting, analytics and education company operated by FX trading veterans Chris Scorvak, himself from Holland, and colleague Nenad Kerkez, who has for many years published the results of his trading on public forums for the viewing of all traders worldwide.
The 150 attendees were able to network, share trading experiences and gain potential partnerships during the course of the event.
Today’s event was evenly attended by women and men, many of which had a degree of understanding in terms of trading technologies and analytics. In Holland’s technological hub, Utrecht, there is a high level society with a good university and a young and diverse, educated population with most of the city’s inhabitants being under 45.
Most traders are attentive and astute, with a genuine interest in FX and not in affiliate-based schemes and revenue sharing that is prevelant and somewhat damaging in other regions with less developed financial markets economies, which makes Holland an ideal market for good quality brokerages and service providers. It was clear by the standard of the 150 attendees that business for brokers and traders would be a stable and secure environment.
Mr Kerkez began by introducing his background, stating that he continues to share his trading results publicly. Mr Kerkez founded Elite Currensea a few years ago and the main audience is Europe, with smaller audiences in Canada.
“I have encountered a lot of traders who will give full information on their trading, however this should be done in a more comprehensive way than simply going to a mentor and giving information via PDF files. I believe a real and comprehensive education is essential. It is important to bring live trading to people on a face to face basis, and to show real results” said Mr Kerkez.
“Currently, we have our partnership with FXStreet, which is a major FX trading information source. I think information and transparent trading histories are vital for providing past performance and market information to retail traders” said Mr Kerkez. “Competition for awards in trading is always very strong, however we have never competed in trading against others, because if you want to trade successfully you need to know risk limits, therefore most of those events and competitions which pit traders against each other are completely promotional and often feature demo accounts which makes them lack value” he said.
“I started with Forex Factory as a main contributor, and when I started full time trading I sent signals to these forums and in the first two years I had 4.4 million views and was in the top 10 traders for Forex Factory before I was moved to their commercial section” said Mr Kerkez.
“Our product range is around unique indicators and focus on price analysis. Many traders search from system to system to search for the best solution, but this is not the best way. I believe the holy grail is to know how to manage risk, therefore moving from system to system will not be a long term solution. We of course realize that it is human nature to want to make money quickly but that leads us to the factors that make us lose more” explained Mr Kerkez.
“Nobody in the industry has ever asked me how I became a good trader, but of course losses and market hits have taught me a lot. I have my own system which Ive been using for 6 to 7 years, and for me the point of FX trading is to sensibly use the right resources ot make money” said Mr Kerkez.
“I find the greatest advantage is the ability to trade around active major sessions, specifically, New York, London and Tokyo. Even if you trade outside these, and are located outside these, you can still make money. There are other factors too, as the FX market is also moved by equities and stock markets, so you can watch the local stock markets in areas with major currencies as their sovereign currency, such as NYSE, Tokyo Stock Exchange or DAX because these relate to risk, and the risk on and risk off currencies are dollar and yen which many of these stock and equity transactions are settled in” he said.
“It is human nature to rush and react to small changes. For example, it is too easy to get bogged down, and not realize that one of the best things about FX trading is freedom. It is the modern economy and enables self empowerment especially in these days of automation and high technology. If you have your own vision of how you will develop, then its hard to be constrained, and opportunities are lacking in the traditional workplaces in many regions of the world today” said Mr Kerkez.
Mr Kerkez believes that there is a correlation between buying FX and stock, and that being able to buy and sell the same currency at the same time represents a large advantage in spot FX trading these days. “In FX, history always seems to repeat itself, therefore news events and price trends are very easily analyzed. Of course, its not possible to win every trade, but it is overall very much in equilibrium and is a spot market therefore if navigated well is a very accessible asset” – Nenad Kerkez, CEO, Elite Currensea
With regard to recent changes in the structure of the FX business in Europe, Mr Kerkez began to look at leverage and the treatment of trading conditions by European authorities. “Due to the new ESMA rules, much has changed however as a global market, you can be a professional client and use higher leverage, or if you are a retail client, you should probably not be using any leverage at all, hence the rules are actually in the better interest of retail clients. Professional traders can access leverage of up to 1:400 in some cases, however retail brokers can only offer traders 1:30 if they operate within the European Union, but I think traders should trade with their own money and not rely on leverage. This is how the market should go really, encourage educated traders to make good sensible decisions and to use their own money as margin rather than endanger themselves with leverage” said Mr Kerkez.
Quite right too. It is clear that most firms offering high leverage are onboarding clients offshore and are not providing a correct set of terms, hence companies that do this will never engage the higher end traders and therefore will not have a sustainable business.
“ESMA dropped leverage for retail traders to 1:30, which we see as a good thing. A lot of bad businesses that ran their firms illegally have now dropped out from regulated jurisdictions in Europe, hence a lot of ‘bucket shops’ will close or go offshore. Therefore, this turned out to be a good change, as only quality firms can operate” said Mr Kerkez.
“In terms of risk management, I think that it is important not to focus on how much you may earn, but on the percentage per month, therefore meaning it is return on investment that counts. If you can make 2 to 10% per month then it’s a good result. Banks give 1% interest to investors, so therefore looked purely as a self-directed trading enterprise rather than an investment, you can make more than that but need to focus on sensible monthly ROI. Risk management hterefore is the single most important thing when making self-directed trading decisions” explained Mr Kerkez.
“For example, I aim to make 2 to 10% per month however with some good charting and market analytics this can appreciate the returns” he said.
“I think that if you trade commodities like Gold, then the pip count on certain portals like myFXbook can show that you lost thousands of pips and forums like that are too small to conduct more R&D to fix this. If you look at this chart, it looks like we made 53% however this is a bug and a bug that is specific to outside the FX market and relates to commodities, therefore this must be borne in mind and these should be a general guide rather than an absolute reference point” said Mr Kerkez.
“My expertise is largely based on day trading, and I tend to trade depending on the pip count, sometimes closing a trade in 20 minutes but if I am sure of the market, I sometimes leave trades open overnight but most of my trades are opened and closed within the same day. Scalping is a fast method of trading, but I don’t do that because its like taking 5 to 7 pips and then closing a trade, which is not my thing and is in some cases can be frowned upon by genuine brokers” he said.
“When I started trading, I worked for a big UK based firm, managing accounts. One of my friends at the time was also into trading, and we started a hedge fund and I saw him make a profit from an initial 30,000 GBP, which rose to 70,000 GBP in 15 min because of very specific trades. I told him to stop, but he couldn’t and the account dropped by 15000 GBP within 15 minutes. I think the best traders aren’t economists but are people that are into psychology, and those who recognize when its a good time not to trade by being able to understand the risk and reward gratification and thought processes that surround trading” said Mr Kerkez.
“This way, the obvious disadvantages that hamper novice retail traders can be mitigated, such as addiction, gambling , using too much leverage and relying on other factors to stop volatility. The SNB crisis in January 2015 proved that banks will eat you in a split second. Many firms lost a fortune and some traders lost 3 years of profits in Europe. We saw the brokerage losses and in some cases collapses, all because of a sudden decision by a national bank” said Mr Kerkez.
“Traders that do not have their own mindset are exposed and rely on perceived protection from banks and outside factors. I think that major banks and large institutions can drop traders into a huge problem in a split second. On the other hand, I think it is wise to beware of brokers that appear to allow profit but won’t pay. This still exists. I can remember around 10 years ago, many retail brokers made excuses to me when I wanted a withdrawal, including inferring that I was using arbitrage or unauthorized robots. Most of these ‘bucket shops’ had terms and conditions that allowed them to do this and of course most of the time they disappear in the end before any significant noise can be made about refusing withdrawals” said Mr Kerkez.
“Today’s environment is much more secure, and much better for retail traders than it was in 2010. We are seeing a larger number of high net worth investors who don’t need to use leverage as they have enough margin, especially here in Holland and neighboring northern European countries” he said.
“We want freedom to act how we want and to be impartial and looked for brokers that will support our vision” concluded Mr Kerkez, at which time senior executives from XM explained that they concur with our and Mr Kerkez opinion that partnerships in the retail FX industry need total overhaul. “Holland is the ideal venue for partnerships as there are good quality professional trading houses, proprietary shops and an analytical retail sector. The reason why we are here is that we support the vision of Elite Currensea’s drive toward empowering European traders” explained XM’s executive.
XM’s representative agreed that retail clients should not really need leverage. “It is better to trade with your own money. This signals a move toward the more stable era of clients putting up more margin and less dependency on accelerated leverage which is exactly what many major markets are trying to stop.”
One of the major points of interest that was discussed at the seminar surrounded the interest by delegates in cybersecurity, demonstrating that Holland’s cross section of investors holds the infrastructure and banking systems of brokerages to a high expectation-orientated standard, thus showing clearly that retail trading in northern Europe is at an advanced standard, and mentions of spreads and bonuses were non-existent.
The general dialog among traders and IBs in this regard was that most reputable brokerages with good secure systems will never issue emails or requests to traders asking for password changes or for continual confirmation of personal details, therefore the overview is that requests by brokers for personal details of existing clients is usually harmful.
“In 2010 many brokers from some eastern nations were bucket shops and nobody cared, not even the traders who had been onboarded by lead acquisition campaigns and were often the redundant lead lists of entities outside our sector such as gaming or adult entertainment. This should never be the case in financial markets. Thankfully everything has changed now” said Mr Kerkez.
It was very clear from the attendance that the Dutch audience across the spectrum is very inquisitive and highly knowledgeable about the framework of electronic trading, understanding everything from withdrawal procedure among brokers to bank processing and trade clearing. Unlike other regions that have been saturated by sales campaigns by many small to medium sized MetaTrader brokers, this is an astute, well read audience.
Continuing on the technical trading theme, Elite Currensea’s Chris Svorcik, a trader with 10 years experience looked at analysis and how he views the FX ecosystem in the 2020s.
“I think trading is important for the future. We need to look at how trading is key in the next century. I think there will be a lot of unknown factors in the next few decades ahead, many of which will change society, some of which are rapid technological advancements. If you go back to 500 years ago, each generation, for good or bad would be sure of what structure they had waiting and what was waiting for them in their life. If you are born this year, however, things are totally different so its a bit more difficult to prepare for the future” said Mr Svorcik.
“We have AI, automation and robotics well and truly integrated in the workplace which is good for progress but extends other challenges. We are not reliant on an older model where we get our full income for 50 years from one employer, so now we are effectively our own brand and our own unique personality, that we have to promote so being more dynamic is important. Trading allows people to be less dependent on one employer or if there is a recession going on. Thus, it is better to actively prepare than passively wait for change and be affected by it” Chris Svorcik, Partner & co-founder, Elite Currensea
“A recent Citibank study showed 50% of many traditional jobs may well be under pressure over the next 10 years, so nobody knows what to forecast or predict, hence trading gives the opportunity to be ready for that and as a result we need to ensure that traders have the right framework to conduct their business properly” he said.
“It is very clear that efficient markets are random. The world is becoming far more financially orientated, and capital is becoming far more important whereas traditional labor is potentially losing its edge. Creative work is now more important” said Mr Svorcik.
“Technical analytics have become far more accessible to retail traders recently, and this is very important” said Mr Svorcik. “Looking at price is a lot simpler, as a number of factors that can be aggregated by using the right technology affect price so by understanding price, it makes it more efficient as you do not need to crunch through huge data. Banks have teams to do this, which is why it is very difficult for a solitary trader with the resources of a retail trader to do” he said.
“I think using fundamental analysis is a good method for long term traders, largely due to interest rates for import/export for example, but for short term, where data doesn’t change every minute, analyzing the technical aspects of the market is suitable. When trading on a short term day trading basis as many retail traders do, there is a lot of price movement that cannot be explained by long term events such as interest rises or ongoing politics but news can affect prices during the day” said Mr Svorcik.
Thus, we need to ensure that all traders are equipped with the right access to information on an ongoing basis as the retail sector continues to refine itself.
Here is a full montage of the seminar in Utrecht.