A Revelation from the Eyes? Understanding the essence of the appeal of FX ~ Misconceptions about leverage ~ [Dr. Iida-tchi]

Profile of IDatchi-sensei

Former instructor at a junior high school for advancement. Loves hot springs and holds a hot springs sommelier qualification; a professional FX trader. Using a method called "Close price trading method," he has trained many excellent traders, and his online study sessions attract many participants from all over the country, from the elderly to the young. The chart analysis method that emphasizes the “close price” is popular among part-time traders as a trading approach that does not require constant focus on the 24-hour market.

Blog:The Big Comeback from 100,000 yen! FX Trader IDatchi BLOG

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※This article is a republished/re-edited version of an article from FX攻略.com July 2020 issue. Please note that the market information written in the text differs from current market conditions.

Misconceptions about Leverage

Hello, this is IDatchi-sensei. Last time I explained why traders who were winning for 2–3 years eventually disappear, from the historical background of FX markets. Even if you earn tens of millions and are touted as a “millionaire trader,” it is meaningless if you exit the market. Nowadays, many traders who gain media attention are rising, but their focus on personalities sometimes makes me question their trading theory.

In FX, there are periods when a method happens to match the prevailing market conditions and you can win steadily. Then you may fall into the illusion that you will continue to win as is. However, when a major market turning point arrives, that method stops working, and you see the phenomenon of "winning methods leading to losses." As a result, many famous traders have left the world of trading.

As always, it is very disappointing that correct market knowledge and lessons are not transmitted, and prejudices and superficial knowledge remain.

The defining characteristic of FX is perhaps “leverage,” right? When FX services first began, the maximum allowable leverage was 200x (now 25x). When IDatchi-sensei started FX, I remember analysts and commentators explaining leverage well on TV. When explaining leverage, commentators usually mention three keywords as shown on the left.

1) Leverage is the principle of leverage

2) A means to operate large funds with a small amount of capital

3) If you overuse leverage, your funds disappear faster

Most people explain with these phrases. You may be familiar with them, too. Personally, I think ① and ② are not wrong, but I would like to challenge ③. After all, these kinds of misunderstandings about leverage lead to misinterpretations and biases, don't they?