10 Reasons Why You Should (and Shouldn't) Forex - My ...

I don't understand why people say it's impossible to become rich in short time with forex.
Let's assume we have a strategy that has a winrate of 50% with a r of 1:1.25 (not so strong or impossible, right?). We are daytrading it and we can open 60 operations per month. We risk 2% (a conservative approach) per trade of initial capital of the year, starting with 5000. With these numbers we are gaining 15% each month, let's lower that down to 10% because yes. Within a year we can make 120% of initial capital! Let's lower that down to 100% because, again, yes.
After 8 years we would be more than millionaire.
If we could bring up that r to 1:1.5 we would be millionaire in 5 years (and billionaire in 12!!!!).
I don't understand why this is wrong, why people keep saying that trading isn't the Holy Grail. 1:1.25, 50% winrate is the lowest working strategy I could imagine and still would be extraordinary even though I've lowered that down even more.
What's wrong with this? What am I missing?
P.s I'm backtesting a strategy that is doing 45% winrate with 1:2 r and 80+ possible operations per month. I feel like I'm going to eat golden nuggets in few years! Please roast me!

From the forex content I have seen, the gains and swings seem pretty small and slow when compared to volatile stocks.
My question is why forex?
Why not scalp/candle trade/swing trade stocks?
(Not an attack on the forex community, I am just curious as to what information I might be missing)

The aim of this post is to show how the current federal funds rate operation differs from its pre-crisis model and how it is important to Forex traders.

Before 2008

When things were simple (before 2008), the Federal Reserve set its target federal funds rate (FFR) as a single number and made sure that the effective federal funds rate (EFFR) is at the target level by performing open market operations (OMO). Those OMO normally included repurchase agreements (repo or RP) to temporarily increase the reserves supply in the federal funds market (FFM) (and thus reduce the demand and the EFFR) and reverse repurchase agreements (RRP) to temporarily decrease the supply of reserves and drive the EFFR up. It worked very well because the total size of bank reserves was rather small ($15 billion) in pre-crisis times.

Our times

Nowadays, when the Fed is holding $2.27 trillion in reserve balances (as of March 27, 2017), the old scheme would not fare so well. There is no scarcity of reserve balances at all. To create it, the Fed would need to sell a big share of its securities to shrink the total reserves to manageable size. But that would create some problems — it would drive down the prices of those securities and would launch a series of unpredictable market feedback loops. Instead, what the Fed is doing since 2008 is setting a target FFR as a range between two interest rates. For example, it is 0.75%-1.00% as of today while the EFFR, measured as volume-weighted median, was at 0.91% during the last 3 days.

Ceiling rate

The Fed makes sure that the FFM respects the target bounds by setting the interest on excess reserves (IOER) to the top boundary rate. When 95% of the reserve balances are the excess balances (balances exceeding the required level), the IOER rate paid by the Fed to the banks for holding these reserves serves as the ceiling for the rate corridor. It may sound counter-intuitive, because IOER would have been a floor level if only the FFM was composed only of the banks. However, it is not the case. The government-sponsored enterprises (GSE), such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks, comprise the bulk of the FFM. GSEs do not earn IOER on reserve balances kept at the Fed. This creates an arbitrage opportunity for banks to borrow from GSEs and allocate the funds with the Fed to earn IOER. Consequently, the interest rate of GSE's loans to banks should be below IOER.

Floor rate

And how about the floor of the rate range (the 0.75% part of today's target range)? It is enforced by the Fed through the OMO called overnight repurchase agreement (ON RRP). With it, the Fed can drain some reserves from the system by borrowing cash from market participants, giving them securities as a collateral. Since not only banks can earn interest on their funds with ON RRP (GSEs can also do it), this sets the de facto lower boundary for the EFFR. Who would lend at a lower rate if they can choose to get at least this rate from the risk-less loan to the Fed? One important feature of the current system is that the EFFR does not cling to the upper side of the rate range (IOER) but hovers below it, falling down to near the ON RRP rate during the final day of the month. The reason for the former is that the banks pay higher FDIC insurance fees when they borrow more. And the reason for the latter is that the banks need to follow the Basel requirements, which limit their leverage, but are calculated based on the end-of-month balance sheet.

Efficiency

As a result, we can see the EFFR fluctuating between ON RRP and IOER — well within the boundaries of the Fed's target FFR. The short-term interest rates (represented by the 3-month Treasury bills) roughly follow the EFFR, which means that the interest rates get propagated beyond the FFM. Note the EFFR spiking down on each last day of the month:
EFFR inside target FFR range with 3-month Treasury Bill rate for comparison

Relation to Forex

So why should Forex traders care about this? Because effective federal funds rate and the Fed's ability to uphold it are even more important for the US dollar than the target rate set by the Federal Open Market Committee at its meetings. It is the higher EFFR that would stimulate banks buying more USD to park it either with the Fed or with the GSEs. It is the lower EFFR that would let banks to use the USD as a carry trade short side. Now you see that any significant news concerning GSE regulations, Basel III requirements, or FDIC insurance fee policies could have tremendous influence on the USD rate based on how such news could affect the EFFR. As a currency trader, you have to be up-to-date with the expectations of the FFM participants regarding those three components. I recommend the following resources to stay up-to-date with those topics:

• New York Fed — Markets & Policy Implementation — for all important changes in how FFM functions.
• Federal Reserve — the Fed board members might hint at the upcoming changes to how they will make sure that EFFR keeps within their target FFR.
• Bank for International Settlements — for its news regarding Basel III development and implementation.
• FHLBanks Office of Finance — for news on how Federal Home Loan Banks financial regulation changes.
• Federal Deposit Insurance Corporation — Financial Institution Letters — for anything related to changes in how FDIC fees work for depository institutions.

Of course, you can also use some financial news outlet of your choice that would cover all these topics.