DislikedClever use of expectancy in your argument. There may be a flaw in your premise:Ignored
- | Membership Revoked | Joined Aug 2006 | 11,977 Posts
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Another reason why 99% of traders fail 63 replies
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The reason why 95% of new traders consistantly lose money 203 replies
Why Traders fail despite of good system available here in Forum?? 8 replies
DislikedEither you buy at 1.5000 or 1.5002. If the bid is 1.5000 and the ask is 1.5002 and you buy, you buy at 1.5002. If tp is 50, then you sell at 1.5052 not 1.5050. The gross profit is 50. That means the expectancy is: 0.5*500-0.5*500=0.Ignored
DislikedNo it's not. The expectancy is (tp-spread)/(sl+tp)*50-(sl+spread)/(sl+tp)*50=-2. (tp=50 pips and sl=50 pips and spread=2 pips)Ignored
DislikedDidn't I already show the flaw in my post along with the proof?Ignored
DislikedYou get a buy signal at 1.5000, set your tp and sl to be 50 pips, spread is 2 pips.
You buy at 1.5002. You are lucky and get your tp hit at 1.5052.
The probability of success is not 50% but (50-2)/(50+50)=48%.
The probability of failure is 1-0.48=52%.
So the expectancy is 0.48-0.52=-0.04Ignored
DislikedOk, when you buy at 1.5002 the actual price is 1.5000 and not 1.5002 so you are already -2 pips down! So it means that the price has to go up 52 pips instead of 50 pips in order to hit the tp. And this is why the probability of winning is smaller than 50%.Ignored
DislikedOk, when you buy at 1.5002 the actual price is 1.5000 and not 1.5002 so you are already -2 pips down! So it means that the price has to go up 52 pips instead of 50 pips in order to hit the tp. And this is why the probability of winning is smaller than 50%.
When you buy at 1.5000, you have to pay 1.5002. Now you set your tp to 1.5052 and sl to 1.4952. (Spread is 2 pips)
But here is the trick: you can only sell at BID price and not the ASK price.
So 1.5000-1.4952 is 48 pips and 1.5052-1.5000 is 52 pips.
So the chance of winning is 48/100=48%...Ignored
DislikedThe REAL reason why 95% of traders fail is the SPREAD.
Let me give you all a small example:
Imagine you have a tp of 30 pips and a sl of 10 pips and the spread is 2 pips (yeah in your dreams!).
Now let's assume that we buy at 1.5000.
But in reality we pay 1.5002. (NOTE: the spread)
Now let's dream that our tp is hit at 1.5032.
Then we buy instantly after out tp is hit at 1.5032.
But in reality we pay now 1.5034. (NOTE: the spread)
etc....Ignored
DislikedEd Ponsi would agree with you. Coincidentally, I've just completed reading Chapter 18 of his Forex Patterns and Probabilities book, where he discusses how spread has a relatively bigger effect on shorter timeframe trades. He likens spread to the zero on the roulette wheel, that gives the 'house' an edge.
If, for example, we're looking to catch 10 pip moves, and the spread is 2 pips, then we would require a 20% edge from our trading just to break even. If we're looking to catch 100 pip moves, then the edge required is 'only' 2%. And so on....Ignored
DislikedEd Ponsi would agree with you. Coincidentally, I've just completed reading Chapter 18 of his Forex Patterns and Probabilities book, where he discusses how spread has a relatively bigger effect on shorter timeframe trades. He likens spread to the zero on the roulette wheel, that gives the 'house' an edge.
If, for example, we're looking to catch 10 pip moves, and the spread is 2 pips, then we would require a 20% edge from our trading just to break even. If we're looking to catch 100 pip moves, then the edge required is 'only' 2%. And...Ignored