Forex is just a game of probability...at least for those of us who want to keep it simple and do not wish to go too advanced in our strategies and still make a sizable profit.
I am not going to give a brief introduction of myself here but you can check out my previous posts and see that I have been here for a while although recently I have been lurking around. Now this thread is not to make money off anyone (that's why I veered away from being commercial recently...thanks Twee) but to show what is possible while keeping it as simple as possible.
One of the first ingredients to succeed in trading is having a good system right? But what do you mean by a good system? A system that is right 70% to 90% of the time? NO! I can prove to you that you can still be profitable with a system that is right 1/2 of the time, i.e. 50/50. Now assuming you win as much as you lose then you should have a break-even account as long as you sacrifice the same percentage every time you place a trade right? WRONG again! This can only happen if you increase your chances of trading which is where money management comes in because you can easily wipe out your account with 10 consecutive losing trades is you sacrifice 10% per trade.
Let's say you use the simplest of strategies that can give you a 50/50 chance of winning in name of flipping a coin, the tendency to have arrive at a 50/50 ratio of heads/tail increases when you increase the number of chances, the way to do this is to reduce how much percentage you sacrifice per trade say like 1%? If you do that then you have 100 chances at throwing the coin to place a trade. Now let's agree to buy every time heads turn up and sell every time tails turn up...now we have a strategy based solely on probability. Now this is not a guarantee that the market would go your direction 50% of the time based on this but at least it gives a yardstick for making the decision to go long/short. I am just trying as much to show that there are other things to consider more important than a great trading system which is what majority of newbie traders hunt for.
So do we now agree that we have a strategy though we haven't tried the profitability? Heads-you buy, Tails - you sell.
Now to the next point, I did observe in my trading experience that after I might have made up to 30% in two trades I suddenly lose all, and some more, in a similar amount of trades, this does not help emotionally because there is always that tendency to get attached to the amount you already made believing that your account would never decline beyond the profit you have made. This moved me to always seek to place trades where I have a Profit:Loss ratio of 2:1, this way the only way that I can have a negative balance after like 100 trades is if my trading strategy is right only 25% of the time but even a heads/tail system would not perform that bad.
I plan to trade only the EURUSD and would take a trade at the opening of the daily candle on my broker MT4 platform (10pm CAT) everyday when I am not in an existing trade.
My SL would always be 200pips while my TP would always be 400pips (for now). I plan to start with a $10,000 account and hopefully after 100 trades I should have gone up to at least 100% of the account since I plan to sacrifice 2% of the cumulative account per trade.
May the odds be in my favour!
PS: If this succeeds then I plan to add an element of trend trading to the strategy.
I am not going to give a brief introduction of myself here but you can check out my previous posts and see that I have been here for a while although recently I have been lurking around. Now this thread is not to make money off anyone (that's why I veered away from being commercial recently...thanks Twee) but to show what is possible while keeping it as simple as possible.
One of the first ingredients to succeed in trading is having a good system right? But what do you mean by a good system? A system that is right 70% to 90% of the time? NO! I can prove to you that you can still be profitable with a system that is right 1/2 of the time, i.e. 50/50. Now assuming you win as much as you lose then you should have a break-even account as long as you sacrifice the same percentage every time you place a trade right? WRONG again! This can only happen if you increase your chances of trading which is where money management comes in because you can easily wipe out your account with 10 consecutive losing trades is you sacrifice 10% per trade.
Let's say you use the simplest of strategies that can give you a 50/50 chance of winning in name of flipping a coin, the tendency to have arrive at a 50/50 ratio of heads/tail increases when you increase the number of chances, the way to do this is to reduce how much percentage you sacrifice per trade say like 1%? If you do that then you have 100 chances at throwing the coin to place a trade. Now let's agree to buy every time heads turn up and sell every time tails turn up...now we have a strategy based solely on probability. Now this is not a guarantee that the market would go your direction 50% of the time based on this but at least it gives a yardstick for making the decision to go long/short. I am just trying as much to show that there are other things to consider more important than a great trading system which is what majority of newbie traders hunt for.
So do we now agree that we have a strategy though we haven't tried the profitability? Heads-you buy, Tails - you sell.
Now to the next point, I did observe in my trading experience that after I might have made up to 30% in two trades I suddenly lose all, and some more, in a similar amount of trades, this does not help emotionally because there is always that tendency to get attached to the amount you already made believing that your account would never decline beyond the profit you have made. This moved me to always seek to place trades where I have a Profit:Loss ratio of 2:1, this way the only way that I can have a negative balance after like 100 trades is if my trading strategy is right only 25% of the time but even a heads/tail system would not perform that bad.
I plan to trade only the EURUSD and would take a trade at the opening of the daily candle on my broker MT4 platform (10pm CAT) everyday when I am not in an existing trade.
My SL would always be 200pips while my TP would always be 400pips (for now). I plan to start with a $10,000 account and hopefully after 100 trades I should have gone up to at least 100% of the account since I plan to sacrifice 2% of the cumulative account per trade.
May the odds be in my favour!
PS: If this succeeds then I plan to add an element of trend trading to the strategy.
Less is more...