2 cent advice - countering popular mis-conceptions

High leverage is risky ... NOT

Lets look ...

leverage: 50 // relative margin: 51% // absolute margin: 168 // used lot: 11000 // profit (loss) of balance with 0.0002: 0.906928%
leverage: 500 // relative margin: 6% // absolute margin: 18 // used lot: 12000 // profit (loss) of balance with 0.0002: 0.989376%

Leverage JUST defines how much margin you need. The risk above is almost the same: -2pips and you have about the same result.
Leverage would be equal risk, if you dont define an exit point and just let it roll - what most people do.

Higher TF are more predictable ... NOT

Let someone choose the TF for you and then look at it. You will not know which TF it is. Now, OVERALL higher timeframes
are smoother. But what does this matter if trading is about the moment and not the overall appeal? The only bad
thing about lower TF is that traders have more entries - thats all. Therefore, bad traders (and most are bad) will lose
fast a lot of money. Higher TF give less signals and it takes longer for the bad trader to get to margin call. Thats the
MAIN difference.

Need amount X to start ... NOT

Someone who does not understand the concept behind percentage will tell you this. Lets see:

100 USD // -50% // 50 USD
1000000 USD // -50% // 500000 USD

If you are a beginner and have a lot of money: Do Not Trade (perhaps at all!). So you need a lot of experience, not money.

x% in time y is impossible ... NOT

Lets say you have 1 Mio. EUR, earned it yourself and are able to continue to do the thing which gave you this money.
It is realistic to assume that this person earns 25k / month and up.

Common wisdom (lol) tells: Trade only if you have a high balance, because you cant expect more than e. g. 5% / year.
5% of 1 Mio. EUR are 50k EUR. This is now the most important part: If you have only 100 EUR on your account
50k EUR sounds amazing. But if you have 1. Mio EUR it is ONLY 5%.

Now someone will tell you that someone can live a good life with 50k, but thats the 100 EUR balance mentality.
Rising living standards ignored, the 1 Mio. EUR trader needs to only work for two months to get this money.
Percentage is ALWAYS a relative-to-thing.

If the trader cannot make 1% / day on average - forget it. This is especially true for traders with low balance.
If you have a low balance, but cant do average 1% / day and are not willing to compound, become an Entrepreneur and
start some cleaning business. This will have a much higher financial impact for you. Or just chill out and realize
that time is the only currency and do whatever you want.

Trading for a living ... NOT

Lets say someone makes 1% / day on average, but has living expenses and no job. So compounding will be impossible.
Give me 1% / day on average and I will be flipping burgers for the next three years. Compounding WITH simple living
is the holy grail.

Trading is team work ... NOT

Entrepreneurs are often forced to do the teamwork thing, but as a trader you are not. Thats one psychological edge for traders.
The mob never has an edge, thats why it is a mob. You can be an OUTSTANDING Entrepreneur with common mentality (to some
extend it is important to be average as an Entrepreneur, so you can identify the needs of the people etc.). But as a trader it is your
MISSION to beat the average and rise above - NOT from a BS social standpoint, but a statistical standpoint.

Thats for now. I love PMs, and 1:1 individual discussions, so write me if you want.

Exactly!

hmmm good one

very solid and constructive first post, Dorn!

Keep it up!!

lately i have been thinking about the same things. really good points. we are taught to think that leverage is not a good thing but sure one can find ways to exploit leverage cleverly. also agree that we need to aim 1% a day with compounding, otherwise all these pain of trading is not really worth it.

I'm not trying to be a wise a** but I always used too much leveraged on losing trades and not enough on winning trades.

I am not sure, but I think thats because you have an institutional background where higher TF are prefered. If someone manages her or his trades on higher TF or has the habbit to trade higher TF, disaster will strike. The higher the TF the lower the leverage. If someone uses higher TF only for orientation for entry and switches to lower TF its an other story.

Hi JacobFrodFx,
Maybe you can tell me when you're taking a low leverage trade, so I can join!!! hahahahhahahahha

Now without kidding. You do not have to pay attention on leverage when you are trading. Leverage is linked to margin.
You have to concentrate on Risk% per trade. Decide what your risk appetite is. Determine what % of risk you want to bear on each trade.
Determine how many pips your sl is, than calculate based on your sl pips and your risk%, your position size (=lot size).
This process is independent of the pair you trade or the time frame you choose.

Your risk and so your lost as % of your amount is always the same.

If not clear to you, do not hesitate to ask.

What? making 1% per day would make you very rich.. and then you write "dont expect to make more then 5% a year" rofl
Ive seen some uber conservative and grey-boring predictions of "you need a billion to live of forex"

You do realize that most people on FF trade with 100-500 leverage.. which makes your 5% a year totally useless..
If someone has a year end success, count on atleast 100-500% increase in account balance..

Ive never heard a newbie say "well thats it im quitting my job even tho i just tried forex and lost my first deposit"
etc etc..


One thing is for sure.. NEVER listen to advice, because you will fail.. being to cautious..not risking to seek the unseen..
betting 0.5% per trade even tho your account balance is 500USD...dont read books..
95% chance is that the guy telling you how to do things is a LOOSER in the game
WATCH A CHART for hours..days..weeks.. become one with it.. u will find out by that time if you still have passione for it you will find the right way

Take no advice, have no respect.. make it or break it..

All in all, why should you listen to any advice? from the guy telling you should aim for 10% per year with high account balance..and dont quit your job.
Or "read 100books, dont play outside the rules" or the guy who says "you can make it big..so much money"

Tell yourself.. screw all of you guys.. im doing this my way

Sincerly / a guy thats +4,000% this year.

@ Dutch-Trader: Perfect

High spreads are bad ... NOT

The problem with high spreads is that they make your risk higher, but as long as you put them into consideration, they are fine. So if someone has a risk of 1% per 4 pips and the spread is 4 pips, the spread alone is 1% risk. The problem is that you will need more pips to reach your goal if you decrease risk, therefore high spread should be avoided. But if you find a pair with a great opportunity, higher spread should not be a hindrance.

"I want to be the next Buffet, Soros, etc." ... NOT

Imagine you learn some new skill. First you will make massive progress, but the more you advance, the harder it gets to make new progress. At some point you begin maintainance mode. The same is true for trading: It is possible to make massive financial gains in Forex, but the more you progress, the harder it will get to make financial progress. So its absurd to tell someone with a 100 balance that the account cant be doubled in a relative short timeframe, only because large HedgeFunds cannot double their money. Its like saying a newbie in English that it is impossible to learn 100 new words each day, only because the Nobel Prize winner cannot do it. Sure, its not easy as it sounds, but we cannot compare two different conditions, which define different goals.

+4000% this year guy, you missed the point. reread "can't expect to make more then 5% a year" line once more.

Win Lose, Winner Loser ... NOT

If you think in terms of "win" or "lose" you set yourself for failure. Why? Just accept that winning or losing is a temporal condition which has nothing to do with future outcome. This is one major reason why W : L ratios dont tell anything. They simply dont represent reality. If you still say "I am a loser" or "I have lost" or "The trade is a loser", you are saying that you now what reality is - which you simply cannot know.

Trading is business - Trading is gambling ... NOT

Both points have their value, but trading is a business, which is a gamble - therefore it is called speculation. It is not a business and it is not gambling. Its more like life, where you can be 50 years a loser, and then become a winner (see above).

Trading needs much wisdom, intelligence, art, knowledge, guts ... NOT

The only thing trading needs is that you unlearn! The more you know, the more you will interpret, the more you interpret, the more you identify with your trading, the more you identify with your trading, the more painful the path will be.
Unlearning is also learning, but it is destructive, not constructive. School constructs knowledge (btw. thats why its dumb), while experiments like life deconstruct - if you let them.