Some tips on forex trading

Here's the deal. You pay me $12,800 and I'll send you daily text messages for the next three years telling you when to trade the Aussie and US dollars.

You should be aware that I haven't any formal training in forex trading, nor have I ever had a job trading forex, but I can assure you I've read a lot of books and attended several seminars about it, which has given me some pretty good insights.

And don't worry, this is something anyone can do by following some simple rules which I can show you. So while the pros pore over their fibonacci graphs and their interest rates announcements, you can relax and simply read my text messages which will advise you how to trade.

Well, not advise, because I'm not a financial adviser. It's really just a suggestion which you can choose to follow, or not. It's the ultimate freedom.

Have I sold you on it yet? Probably not, but one man who does a much better sales job on this type of thing is Steven Robertson, director of a company called Harrington Group.

Harrington, previously known as Russell & Brown, markets a product it calls Currency Trader, mainly, it appears, through telesales cold calling.

The words on Harrington's website suggest it has something very special to offer.

"What you are about to read will show you how you can achieve a lucrative income from a small outlay ... the amount of profit may even surprise you!

"It has not previously been possible for the general public to access or make use of this form of investment, as it has so far been only available to the wealthy few. You might believe this form of investment is beyond you ... but it is not!

"You are now being offered the opportunity to utilise the vast knowledge and experience gained by experts over decades. Highly sophisticated, computerised programming was used to glean and assess the most minute pieces of information over many years.

"The final result of this advanced technology is now stored on a single computer disc ... a disc that fits almost any home computer. At this very moment you could be using the Currency Trader programme to achieve what you always wanted in life."

Another bit of blurb says "Start the road to financial freedom with our unique stock market programme Currency Trader."

The pitch suggests an easy path to riches - an appealing idea.

The reality may be less appealing.

I first encountered Robertson four years ago. At the time he was trying to avoid refunding $7900 to an 86-year-old retired farmer who had bought his share trading software called Focus 250, a product that offered the opportunity to earn $50,000 from an input of $2000 and a few minutes a day.

The company he was associated with back then was called Morrison Ross, since liquidated and struck off.

The farmer, I gather, eventually obtained a partial refund.

Since then I've had periodic emails indicating Robertson entities were offering other schemes such as horse betting software called Excel and a share trading product called Precision Trader.

Robertson was reluctant to meet back in 2008, so when I learned his new operation was based in Kumeu, near Auckland, I thought I'd pay a visit.

The premises are at 190 Main Rd, Kumeu, in a small unmarked unit between a cafe and a National Hearing Centre.

Robertson turned out to be aged about 40, of medium height, with thinning hair and the build of a rugby player. Smartly dressed in jeans and a striped business shirt, with his black 2006 Audi Q7 parked outside, he had the appearance of someone in good financial shape.

The forex trading product, he said, was a change of tack for his business because "the share markets are shot, so we thought how can we look at something that would potentially be in the same line and would benefit the client."

Forex was the world's biggest market and could be traded profitably whether markets were going up or down, he said.

Although the Harrington website implies its software is proprietary, Robertson said the service used a trading platform from CMC Markets, a global player in contracts for difference, or CFDs.

"We use the CMC markets platform, yeah," he said. But "they're nothing to do with the recommendations, they're not a recommendation broker."

What Harrington provided were "technically driven alerts" by daily text message, suggesting trades in the Aussie/US dollar exchange market.

The price for three years of text alerts was $12,800, including GST. "It's recently gone up," he said. "It was $7900 plus GST."

The recommendations come from Robertson himself and his expertise was "self taught," he said. "I've been in the markets for a while."

Robertson said he uses technical analysis - the study of graphs and currency trading patterns rather than economic fundamentals - and his recommendations aim to trade in and out of small fluctuations in exchange rates.

Clients would take profits at "10 pips up" and place stop loss orders at 10 down.

Robertson said the past fortnight "hasn't been the best," but "we don't hide that.

"As long as people understand the risk going in ... A more important thing is that they do actually take the stop loss. A one to one stop loss. If you're looking to take 50 pips, you need to take a 50 pip stop loss.

"As long as you do that and the strike rate's in your favour you would be likely to succeed in the bigger picture."

Leaving aside, for now, the question of whether Robsertson's scheme is a good way to make money, it's worth noting how it fits into the new financial adviser laws, which is not at all.

Forex isn't classified as a category one or two financial product under the legislation, which means recommending forex trades isn't financial advice - even if advising clients how to make money trading forex would appear to be financial advice.

So Roberston isn't breaking any financial adviser laws by offering forex trading advice.

Regardless of the merits or otherwise of Robertson's offer, I find it odd that forex is excluded from the legislation. The Financial Markets Authority wasn't able to explain the reasons for it when I asked.

Anyway, returning to the merits of Robertson's offer, there are ways to access forex trading advice without laying out so much up front, which means having more available to trade with.

For example, forex trading advice is available from regulated firms such as OM Financial. OMF director of derivatives and commodities Kevin O'Sullivan says the firm will proactively telephone clients with advice on what trades to do, or will offer advice on the spot if clients ring in.

OMF makes money from the service by charging a fee when clients trade - a $1m trade would cost $300, says O'Sullivan.

That sounds a big trade, but not so much in forex, where trading positions with the likes of CMC and OMF are highly geared - $100 can control a market position of $10,000, for example.

You can also get free tutorials on forex trading from the likes of CMC and IG Markets.

But I have to wonder whether people getting a cold call from Harrington will be given much background on the alternatives, or on whether forex trading is a suitable financial scheme for their circumstances, which, come to think of it, is a form of financial advice.

The way I see it, Harrington's offer is akin to someone standing outside a casino offering, for an upfront fee, tips on how to play your cards at the blackjack table. If you'll buy that, you will probably think the deal is fine.

Personally I'd rather learn to play my own cards.

BusinessDay.co.nz