Regulation and its Impact
A lot of people were asking me about the regulations. What it means and what have I seen in my past after 20 years on Wall Street? Why do I say that it never works out for the benefit of a little guy?
Very simple. I’ve seen this dance before. So I’ve seen exactly the same thing happen during Forex introduction to retail in the early 2000s. When all the brokerages used to do exactly the same thing, there were a lot of reputable ones but also a lot of bad apples, and eventually, bad apples get squeezed out of business.
Kind of what, well, I can’t say what happened to “My Forex Funds,” but something like that. All right, and when regulations came in 2008, it wasn’t because of the Forex industry. It actually happened because Wall Street messed up, right with the MBS and the mortgage-backed security, and we all know what happened.
You can watch the movie Big Short and Margin Call. Margin Call is actually an excellent movie. Everybody should watch it. Anyway, what I mean by when I say in my previous articles that when regulations come, a little guy gets squeezed out.
The Impact of Regulations on Trading
Back in the day, before the 2008 crash, which had nothing to do with the Forex brokers, you could put down $1,000 and you would have 1:500 leverage. Then in the United States, it was 1:100. After regulations came, you couldn’t trade CFDs like indices or gold or oil. You would have to use futures accounts. Now you have to have two separate accounts, and obviously, if you don’t have enough money, if you only have a thousand, two thousand dollars, you can’t even trade futures.
All these regulations did was protect inexperienced people. Basically, they said, all right, if you want to trade in the markets, you have to put up a lot of money to trade. If you’re actually skilled at what you do, this is detrimental.
And I think the same thing will happen eventually with pro firms where now you can put up $1,000 and get a $100,000 account, right? And then turn that $100,000 account, you make 10% in a month, you get a $10,000 payout from $1,000.
You just made $10,000, which is incredible. Sooner or later, regulations will come, and what it will mean is they will increase compliance. And compliance means the costs will go up. Once the costs go up, eventually companies will just pass on those costs to the consumer, meaning you.
And in order for you to trade a $100,000 account, you will have to put up $20,000 or something like $30,000 or $50,000. Or if you want to trade a $10,000 account, you’ll have to put up $3,000 or $5,000, which may make it not worth your while, especially for people who don’t have that type of capital.
So that’s what I mean by regulations. They’re not there to protect you. They’re just there as a protective measure. So big players stay big, and little guys go to the office, do 9-5, which is actually 7-7.
They make their $75,000 and unfortunately, that's it. Until those regulations come, there are plenty of reputable firms. I was actually doing a Twitter space with Maven, CEO, Hunter, an excellent guy, and we were discussing that every 5 years, 3 years there comes an opportunity for a little guy to make a lot of money.
Balancing Regulation and Opportunity
And fortunately, because there’s a dual factor working here. There are bad companies that take advantage of naive people, and then there are naive people who don’t want to learn and become excellent at trading too.
So the government steps in and has to protect the naive, but when you are somebody who’s excellent and you’ve dedicated a year or two of your life learning how to trade and you’re actually excellent, it becomes detrimental to you.
So if you are somebody who has the tenacity, who has the chutzpah to go through the adversity and learn this business, and this is a very tough business, this is a very rewarding business. I don’t know anything which at this point will turn $500 or $1000 into 10 grand within a week or two or a month.
You know everybody’s asking about the firms, how do you find a good firm, a bad firm? Well, listen, do your due diligence. If you have a firm with a 20-year-old CEO who has knights and swords and other nonsense as the main theme of their prop firm, well, perhaps, you know, make your own judgment.
Would you trust a bank which is run by a 20-year-old? Probably not. You need a certain life experience in order for you to run a big business, and the same goes for prop firms. So like I said, for the next year, I don’t think any regulation will be coming anytime soon.
It takes time as it’s written by very old people, but once it does, this window of opportunity will be shut down. Now you have a year, maybe more, maybe less, I don’t know. If you dedicate six months of your life, 12 hours a day, cut out everything else from your life.
You’re not hanging out, you’re not picking up girls, you’re not going to clubs, just throw it all out. 12 hours a day, you study the markets. After six months to a year, you will become profitable.
And after that, you know, you can do whatever you want. If you still want to go out and do whatever you want, please do so. As this hat says.