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Greatest Threat Facing the Industry and Setting Up a Hedge Fund #Askfinmag

This week our social media followers at #Askfinmag wanted to know what can derail the industry and how to set

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Thanks for the interesting question Siya. The first step to setup your own hedge fund is to create a verifiable track record of success.

Getting investors to believe in you and trust you with their money is the biggest challenge to any new fund. These days, with financial frauds seemingly lurking everywhere, people are very skeptical of anyone asking for an investment. To overcome that you will need to have a way to prove you are cautious and profitable based on an independent reporting system.

There are a number of ways to do that in the forex space. An app like TopTradr, that also offers trading competitions, can work for you and is designed for this purpose exactly. For more complicated trading that uses algorithms you can use the popular myfxbook with any MT4 account and display your public system page as a resume of your trading skills.

After you have such a verifiable track record of success you can approach investors and gather the needed capital. Once you have enough money, there are many agencies in various financial hubs around the world that can handle the legal matters and even connect you with a broker and everything else as a turnkey business. Good luck!

Jeff Patterson answers:

Thanks for the question Sprinkles. I dare to wonder if FX could exist without humanity or if humanity could exist now without FX? But we can leave that for another week.

As to potential headwinds for the FX industry that could act as a threat to its survival, I am tempted to say another event such as what we saw on January 15th, i.e. the fallout from the Swiss National Bank’s (SNB) abandonment of its currency peg, which convulsed FX markets worldwide.

However, large swaths of the industry were completely fine or even benefitted from this, while the occurrence has made the industry even more immune to such seismic events of this nature. Thus I am tempted to look elsewhere…

I look at the US FX industry and see something that is akin to watching a Simpsons episode nowadays (nice image of Ralph Wiggum’s Wiggle Puppy by the way) – a construct that was once flourishing, but has lingered on in a galvanized state despite repeated attempts to be put out of its misery. As such, I feel that regulation alone is capable of disintegrating the FX industry, however this would have to be a country-by-country example, though of course anything is possible in the world of hypotheticals.

As for the biggest threat to humanity, I think honestly a Coronal Mass Ejection would be the worst thing for humanity, which in layman’s terms is a massive solar flare. The sun emits gamma radiation in the form of solar storms, which hit the earth everyday, most of which are nullified by our atmosphere.

However, in 2012 (and countless other times before that), the Earth was nearly in the direct path of a massive one of these, several days only in fact. Should this storm have hit the Earth, our entire electrical grid would have been destroyed – NASA scientists estimate that the US would be without power for at least 2.5 years in this scenario. No internet, industry, heating, cellular communications, electric of any kind – this is something I feel could be a crippling blow to civilization as humanity seldom shows its cool in the face of such catastrophes.

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