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Trading during crisis time
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The current economic crisis has been blamed on many factors – from high street banks to government finance departments, from risky trading to uncontrolled borrowing. FxPro is a company which trades currencies across the world. We asked them for their opinion. FxPro advertises on Euronews and other television channels.

Ali Sheikholeslami:
“How would you say the economic downturn has impacted FxPro’s volumes and its overall performance?”

Charalambos Psimolophities, FxPro:

“I don’t think the downturn plays an important role in FX trading volumes. What is important when trading FX is volatility in the market. The more volatility, the more trading volume you see coming in. In the last six months, the market has been quiet. It has nothing to do with the economic downturn, it’s more to do with the relationship to uncertainty whether euro or the USD will be the dominant currency in the coming years.”

Ali Sheikholeslami:
“Would you say because of the financial crisis your retail clients have been taking more risks, or have they been acting more conservatively?”

Charalambos Psimolophities, FxPro:

“In the FX industry there is change on a daily basis. In general, they have been behaving in a conservative way, however during times of economic uncertainty like all that is happening with the Greek economy and the euro problems it makes the clients’ trading behaviour a bit more aggressive so on one side you see them being more conservative during the month but when there is important news coming you see them acting more aggressively in the market.”

Ali Sheikholeslami:

“FxPro has moved onto an agency model. What does it mean?”

Charalambos Psimolophities, FxPro:

“A magic word: you align your interest with the interest of your clients. The difference with the agency model is that you trade with the client, for the client, as opposed to the market maker that you have an inherent conflict of interest: you make money when your client loses money and you lose money when your client makes money. There is a big difference between the agency model and the market making model.”

Ali Sheikholeslami:

“How sophisticated are your retail clients? Do they have any trading experience? Do you check their backgrounds before opening an account for them?”

Charalambos Psimolophities, FxPro:

“We do check their background. They are becoming much more knowledgeable day by day. We are trying to assist them in every possible way through education, webinars, online libraries that they can read and learn more about FX trading. I think the pattern is that over the coming years the people will become much more knowledgeable. This is the beauty of the agency model. With the agency model you align your interests with your clients’. You want them to trade for a much longer period, you want them to be winning their trades, since they will be staying with you for a much longer period of time. The plan for the next couple of months will be to provide them with much more education, give them much more tools that will make their trading experience much more profitable, provide them with algorithmic trading tools, basically the pattern these days is that computers do everything. Psychology is something that changes constantly. By putting the strategy of trading into an algo trading tool, you remove the psychology from the trading pattern. The client will be much more profitable. The problem is that small clients try to be good traders, but because of all the news happening on a daily basis and so many swings in the currency market, very easily they might make big losses, which we are working very hard in reversing this trend and making our clients much more profitable.”

Ali Sheikholeslami:

“But you will agree that forex market, forex trading is extremely risky and if a person like me, who has no background, I’m probably doomed to lose everything. Is that true?”

Charalambos Psimolophities, FxPro:

“I will totally disagree. It’s not the forex market that is risky, it is the use of leverage. Currency in general is much less volatile than stocks or indices. Because you are using leverage, a 1% move in the currency market by using 100 times leverage will translate to 100% move, either against or for you. It’s the use of leverage that’s making the FX market more risky and not the market as such. If people are able to use the appropriate leverage during different periods of times, let’s say in extreme volatility the lower leverage you use the better, because if the market goes against you by 1% and you are exposed 100 times more than your actual capital, then you will be wiped out with your 1% move, or you might double your money.”

Copyright © 2014 euronews

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