Money Management - so many fake statements | Forex Factory

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Money Management - so many fake statements

  • #1
  • First Post: Edited 5:09pm Dec 21, 2020 2:58pm | Edited 5:09pm
Today I watched a youttube video. I have watched between 5 - 10.000 hours of youtube videos during the last 10 years. This present video was from a trading millionair who was teaching newbies. I accept, that this man REALLY IS a trading millionaire. No question about it, we know him in my country. A bright example for all us traders. But he said things that are not correct. And it is essential things.

There are things anoying me. Experts that don't know what they are talking about. A common problem is experts that do not understand the difference between pips and points! Jesus - that happens often and how can they call themself experts??? Pips and points are NOT the same. 100 Points are 10 pips. This millionaire made that fault.

Another problem is that when these very well knowing guides tell you "Not to risk more that 1 or 2% of your account" and it is understood from their saying, that "you should not invest more that 1 or 2% of your account".

The problem is, that those guys talks blindly. They don't understand what they are saying. This is what they have read form other "experts". In books or on Youtube.

Lets do the math:

If you invest 1 % of your account, and you set a stop loss at 5% of your investment, then your risk is 0.05% of your account. NOT 1% of the account!!! Why is this so hard to understand???

Example.
You have an account of 10,000 $.
You invest 1% = 100 $.
Let us say that you lose 25% of the investment because of a stoploss. That is 25 $! (Ohh, please see a psychiatrist before hanging your self)

Is this insane? You have an account of 10.000$ and you are afraid of investing more than 1 % of the account, because you could lose 25 $ !!!!!

If you instead invested 10% of the account, then your loss would be 250$. That is bearable. Your win would of cause be 10 times as big as well!

You can lose 250 $ 40 times before you get broke on a 10,000 $ account. And if you do - then you surely deserve it ;-)

I don't know what I want with this thread. Other than try to get people to think about it them self and to point out, that there are way to many "gurus" out there, who really don't know much about what they are saying. They have watched the youtubes form other "gurus" and faults are spreading.
MetaTrader 4 - so many advantages.
  • #2
  • Dec 21, 2020 5:11pm Dec 21, 2020 5:11pm
Quoting RiskFighter
Today I watched a youttube video. I have watched between 5 - 10.000 hours of youtube videos during the last 10 years. This present video was from a trading millionair who was teaching newbies. I accept, that this man REALLY IS a trading millionaire. No question about it, we know him in my country. A bright example for all us traders. But he said things that are not correct. And it is essential things. There are things anoying me. Experts that don't know what they are talking about. A common problem is experts that do not understand the difference...
By the way, I have a strategy building of these facts. In near future I will push it to public.
MetaTrader 4 - so many advantages.
  • #3
  • Dec 21, 2020 5:12pm Dec 21, 2020 5:12pm
Quoting RiskFighter
Today I watched a youttube video. I have watched between 5 - 10.000 hours of youtube videos during the last 10 years. This present video was from a trading millionair who was teaching newbies. I accept, that this man REALLY IS a trading millionaire. No question about it, we know him in my country. A bright example for all us traders. But he said things that are not correct. And it is essential things. There are things anoying me. Experts that don't know what they are talking about. A common problem is experts that do not understand the difference...
What?
  • #4
  • Edited 8:07pm Dec 21, 2020 7:24pm | Edited 8:07pm
because of that I don’t look youtube-videos...
10.000 hrs saved for better stuff..
Open where needed. Close where feeded.
  • #5
  • Dec 21, 2020 7:51pm Dec 21, 2020 7:51pm
Quoting RiskFighter
Today I watched a youttube video. I have watched between 5 - 10.000 hours of youtube videos during the last 10 years. This present video was from a trading millionair who was teaching newbies. I accept, that this man REALLY IS a trading millionaire. No question about it, we know him in my country. A bright example for all us traders. But he said things that are not correct. And it is essential things. There are things anoying me. Experts that don't know what they are talking about. A common problem is experts that do not understand the difference...

are they forex traders? I found that stock traders tends to say INVEST n% of capital, because they focus more on diversification of capital on different stocks, and the first concern is how much capital/leverage they can use.

of course if they are forex traders then RISKING n% is more reasonable primary consideration.

I also found some people who are good at charting may have less knowledge in MM, probably because they are comfortable of what they can make/lose. However I doubt they can stay in the game for long.
  • #6
  • Dec 21, 2020 8:54pm Dec 21, 2020 8:54pm
Quoting RiskFighter
Today I watched a youttube video. I have watched between 5 - 10.000 hours of youtube videos during the last 10 years. This present video was from a trading millionair who was teaching newbies. I accept, that this man REALLY IS a trading millionaire. No question about it, we know him in my country. A bright example for all us traders. But he said things that are not correct. And it is essential things. There are things anoying me. Experts that don't know what they are talking about. A common problem is experts that do not understand the difference...

if im not mistaken they mean RISK 1% as in 1%/(entry to stops)
ie if 1% of AUM = $10,000
stop loss is 100 pips = $10,000/100 pips = $100/pip = 10 lot size

they use the word invest & risk willy nilly.
  • #7
  • Dec 22, 2020 7:43am Dec 22, 2020 7:43am
Quoting RiskFighter
TI don't know what I want with this thread.

That doesn't matter. It's still a valuable thread.

And of course I agree fully with everything you've said above.

There's misinformation everywhere, online. Part of the problem is that so many people try to learn from "online sources" of various kinds rather than from long-established, independently published textbooks (not selling anything) which have been edited and scrutinized in detail before publication, and have stood the test of time.
  • #8
  • Jan 5, 2021 10:29am Jan 5, 2021 10:29am
Unfortunately, in most cases, traders are confronted with this at the moment when they start real work. And it often serves as a reason for great disappointment in trading. This is unfortunate.
But do not forget that it is the banal mathematics, because anyone who is good at calculations can understand it.
I agree that it is necessary to pay attention to the data from some verified analytical resources and the question of risk should be studied in detail at all levels of the market, because this will determine the performance and profitability of a trader.
Not everything is as simple as it seems at first sight. The details always matter.
  • #9
  • Jan 5, 2021 12:29pm Jan 5, 2021 12:29pm
the funny thing is that the traders you talk about say right, it is you who did not understand anything
When they say that they mean 1% of the account, out of 10,000 it's 100 dollars, I don't know what mental journey you took to draw certain conclusions
  • #10
  • Edited 10:45am Jan 6, 2021 10:14am | Edited 10:45am
OK, I try to explain once more - in a different way.

1% of 10,000$ is 100$. Jep, that´s right.
When people say "Only risk 1% of your account, then most of them mean "Only invest 1% of your account". They do not understand the difference of investing and risking.

The money that you risk are NOT the amount that you invest!! The mony that you risk are the money that you lose if stoploss is hit.

So, if you will risk 1 % of your account and your stoploss are 10 pips on a $ pair with a pipvalue of 10, then you can invest 10% of your account!!

I know - it is not easy to understand what I am saying, but it is vital for your trading. Investing only 1% of your account, then you will never get anywhere. Use your time on something else.

Example:
Account size is 10,000$
You want to risk 1%.
You set a stoploss at 10 pips (With a pipvalue of 10$)
It is a $ pair with a pipvalue of 10$ per pip when investing a Lot.

Example #1
Invest 1% = 100$
Risk 10 Pips = 10$.
Loss will be 10$ of the 10,000$ account. That is 0.1% - not 1 %.

Example #2
Invest 10% = 1000$
Risk 10 Pips = 100$.
Loss will be 100$ of the 10,000$ account. That is 1% of the account.

Aaaaaand - how many trades can you lose by losing 100$ on a 10,000$ account?? Yes - 100 trades. You can actually trade 100 times before you are broke if you lose all 100 trades. If your strategy is a winning strategy which makes more winnings than losings, then that will not happen. It is safe to invest more money. Buuut, that needs a special money management strategy which I will reveal some other time. I think this is enough brain material for now.

See??? If you invest 1% of the account then you can only lose 10$ which is 0.1%.
But if you want to risk 1% of the account, then you can invest 10% of the account.
This means 10 times the profit when you have a win. AND THIS IS EXACTLY WHY IT IS SO IMPORTANT TO UNDERSTAND THIS. This is the difference between hobby trading and making money.

So when somebody tells you only to risk 1% of your account - and they do not specify by using stoploss and by investing xx% of the account, then it is because they dont understand this. And I hear this again and again from people that claims to be experts.

Note: All of the above text claims a Risk of 10 pips (to make it easy to understand). If your strategy uses another risk like eg. 30 pips, then you have to put that number into the formula. It is still worth it!!!
MetaTrader 4 - so many advantages.
  • #11
  • Edited 11:15am Jan 6, 2021 10:19am | Edited 11:15am
By the way, there is a money management method that I allways wanted to test:

Programe a trading robot that is profittable most of the time. Let it trade on say 10 different pairs in parallel. Include in the code, that when the gain reach 5% of the account size (Not the investment), then exit everything and let the robot rest until next day.

Now the hope is - since the robot is mostly gaining profit, that it at some point of the day is in profit. I have seen that again and again. You have a robot. During the day the robot was very proffitable, but at the end of the day it lost money. By wishing a small amount and letting 10 pairs work on it, then I think it will be possible to have a daily small profit by breaking in at the right time when the gain is positive.

Well I have programmed such a robot and it is now trading in demo accounts. One account takes 5% profit and one account takes 3% profit.

Gaining 5% every day will really grow an account. However losing 50% on a single day, will mean that you have to use 10 days to catch the loss.

Aaaaand losing 50% and afterwards gaining 50% does NOT allways get you back on the same level. I will elaborate on that another time.
MetaTrader 4 - so many advantages.
  • #12
  • Jan 10, 2021 11:18am Jan 10, 2021 11:18am
You're all right, but maybe it's because they don't want to reveal their secrets until the end, because it's a certain marketing move or it's some kind of provocation. But to figure it out on your own trader needs a lot of time and preferably practical experience (on the demo, of course), and it's not as easy as it seems. But you must understand that it is necessary for effective decision-making. On the other hand it's certainly not fair and it creates in traders a wrong idea about the work and about trading in general. And it's certainly hard to call that good news. And it proves once again that you can't trust everything you see on the Internet.
  • #13
  • Jan 10, 2021 11:34am Jan 10, 2021 11:34am
Enig, 95% af hvad der er på youtube omkring trading er ubrugeligt eller decideret scam...
EA's backtesting report kan nemt manipuleres, så stol aldrig på sådan en, selv med '99% nøjagtighed'
Held og lykke med dine handler, vh Lekkim
  • #14
  • Jan 10, 2021 4:13pm Jan 10, 2021 4:13pm
Quoting Lekkim
Enig, 95% af hvad der er på youtube omkring trading er ubrugeligt eller decideret scam... EA's backtesting report kan nemt manipuleres, så stol aldrig på sådan en, selv med '99% nøjagtighed' Held og lykke med dine handler, vh Lekkim
Jamen dog, det er sjældent at møde en dansker her.

Ja, EA backtestings hos diverse youtubere er blandt andet ubrugeligt fordi at de bare tester på én timeframe og med standard indikator værdier. Man skal teste på alle time frames og med alle mulige værdier på indikatorerne. Man skal finde den der twist og man bliver altid overrasket hvis man finder den. Og hvis man finder den, så viser det sig selvfølgelig, at fremtiden tilbyder helt andre handelsmuligheder og det som virkede sidste år, det giver tab det kommende år.

MEN, jeg har set kilometervis af youtube videoer. Man får ofte nogle gode tanker / idéer. Der skal bare skubbes lidt til hjernen, så begynder den at arbejde.

Lykke også til dig med din trading i 2021.

Mvh
René
MetaTrader 4 - so many advantages.
  • #15
  • Jan 10, 2021 4:25pm Jan 10, 2021 4:25pm
Quoting RiskFighter
I don't know what I want with this thread. Other than try to get people to think about it them self and to point out, that there are way to many "gurus" out there, who really don't know much about what they are saying. They have watched the youtubes form other "gurus" and faults are spreading.
I have the same feelings. There are so many fairy tales and fake statements around.
The biggest lie is about stop losses. I'm a professional trader, a programmer and I can't find how to use them. Impossible.
Second lie is about "trade bigger tf". Bigger tf = min lot size = less variants to recover. In fact no way.
Third lie, that I love most - you have to have patience, discipline. But please no EA here. Why you are asking people to act like a robot but robots are not allowed here? And why people are so blind and can't see that they cheat you?

But why worry? More they lose more we win. So f#$k that.
Observer effect
  • #16
  • Last Post: Jan 10, 2021 6:40pm Jan 10, 2021 6:40pm
@riskfighter.....are you sure the guy in the video was talking about forex?......just know that in futures trading for instance we dont talk about pips, but only mention points.....
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