After thinking long and hard about why nearly every trader fails, I think that I have found the answer.
The basic trading dilemma is this:
It is nearly impossible to make the math work.
Let me give you an illustration of why it is so hard to make the math add up trading:
I traded this method the whole day today and did well but there is a problem that all traders face regardless of their methods and it is this:
You never know how much profit the trade will give you.
You can know, for sure, your stop and entry but you just can not know how much profit the trade has in it
This is the main reason why nearly everyone loses money trading.
For instance, today on all my trades the entries were crystal clear and so was my stops- always set to 15 pips.
Being that you can never know how much the trade has in it, on many of my trades I wanted to take the profits before they disappeared, so on many trades I took 3 pips profit, 5 pips profit, and 10 pips profit.
Some of these trades went on to give bigger profits if I had stayed in the trade but some of them retraced and my profit would have disappeared if I had not exited with a quick profit.
So, what I am getting at is this:
The risk/reward ratios in trading are unfavorable because you can't be GUARANTEED that the trade will give a profit that is equal or more than your stop loss.
So, basically you are risking 15 pips(if you use a 15 pip stop) to make 3,6, 10 and sometimes 15 pips.
Today, I hit most of my trades but if my 15 pip stop got hit a few times, most of my profits would have disappeared.
Sooner or later, this will happen and all of those small profits will be given back by being stopped out a few times.
So, my question is this:
How, exactly, do you handle this problem?
Is it the case that many profits, that are smaller than 15 pips, in the end make up for getting stopped a couple of times?
In my opinion, this problem is the main dillema in trading and is the reason why nearly every trader, in the end, ends up losing all their money.
It is nearly impossible to make the math works (your profits add up to more than your losses) because it is impossible to INSURE that your profits will be bigger than your losses because you NEVER KNOW how much profit a trade has in it.
Can anyone one think of a way to solve this most basic trading dilemma?
Any and all ideas would be appreciated.
Thanks and Happy Trading
The basic trading dilemma is this:
It is nearly impossible to make the math work.
Let me give you an illustration of why it is so hard to make the math add up trading:
I traded this method the whole day today and did well but there is a problem that all traders face regardless of their methods and it is this:
You never know how much profit the trade will give you.
You can know, for sure, your stop and entry but you just can not know how much profit the trade has in it
This is the main reason why nearly everyone loses money trading.
For instance, today on all my trades the entries were crystal clear and so was my stops- always set to 15 pips.
Being that you can never know how much the trade has in it, on many of my trades I wanted to take the profits before they disappeared, so on many trades I took 3 pips profit, 5 pips profit, and 10 pips profit.
Some of these trades went on to give bigger profits if I had stayed in the trade but some of them retraced and my profit would have disappeared if I had not exited with a quick profit.
So, what I am getting at is this:
The risk/reward ratios in trading are unfavorable because you can't be GUARANTEED that the trade will give a profit that is equal or more than your stop loss.
So, basically you are risking 15 pips(if you use a 15 pip stop) to make 3,6, 10 and sometimes 15 pips.
Today, I hit most of my trades but if my 15 pip stop got hit a few times, most of my profits would have disappeared.
Sooner or later, this will happen and all of those small profits will be given back by being stopped out a few times.
So, my question is this:
How, exactly, do you handle this problem?
Is it the case that many profits, that are smaller than 15 pips, in the end make up for getting stopped a couple of times?
In my opinion, this problem is the main dillema in trading and is the reason why nearly every trader, in the end, ends up losing all their money.
It is nearly impossible to make the math works (your profits add up to more than your losses) because it is impossible to INSURE that your profits will be bigger than your losses because you NEVER KNOW how much profit a trade has in it.
Can anyone one think of a way to solve this most basic trading dilemma?
Any and all ideas would be appreciated.
Thanks and Happy Trading
