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I've figured out why so many people lose money in Forex

  • #261
  • Edited 4:33pm Feb 27, 2015 4:12pm | Edited 4:33pm
Quoting replaced
Trading anything more than 1x leverage leads to lower ROI
Actually that's quite the opposite, trading on margin increases your return on investment, if your system is profitable.

By definition, with a 100:1 leverage and percentage wise, a successful Forex trader is making a 100 times more money than a stock trader with no leverage.

Quoting replaced
So having the broker place a limit on your account makes sure you don't go overleveraged.
Sure, you could call your Forex broker and ask him to reduce your leverage.

Or better yet, and just to be on the "safe" side, ask him to completely remove your margin (leverage) privileges

But now, the next time you want to buy 1 standard lot, the software will politely ask you to deposit at least $100,000 in margin money just to initiate the position.

Good luck trying to earn any money in these conditions...
Each losing trade is an opportunity to learn
  • #262
  • Feb 27, 2015 4:29pm Feb 27, 2015 4:29pm
Quoting replaced
{quote} Stops would increase trading costs. You would have to deposit money in the brokerage account again and pay commission and spread just to have the same position while someone with 1x leverage doesn't have to do that. Stops are worse than deleveraging. {quote} Having a broker placing a limit on your account increases ROI.
Ok, I get it now, the whole problem comes from the fact that you still don't know what leverage truly means.

For the last time, if your Forex broker is offering you a 50:1 leverage for example, you CANNOT trade with a 1:1 leverage, it's impossible.

The only way to trade with a 1:1 leverage is to call your broker and request a 1:1 leverage, end of story.
Each losing trade is an opportunity to learn
  • #263
  • Feb 27, 2015 4:37pm Feb 27, 2015 4:37pm
Quoting EarnPipsNow
{quote} Actually that's quite the opposite, trading on margin increases your return on investment, if your system is profitable. By definition, with a 100:1 leverage and percentage wise, a successful Forex trader is making a 100 times more money than a stock trader with no leverage.
There is no such thing as a successful Forex trader. There are only lucky Forex traders. The chances of a Forex trader making 100x more money is much less than 1%.

Quoting EarnPipsNow
{quote} Sure, you could call your Forex broker and ask him to reduce your leverage. Or better yet, and just to be on the "safe" side, ask him to completely remove your leverage! But now, the next time you want buy 1 standard lot, the software will politely ask you to deposit at least $100,000 in margin money just to initiate the position. Good luck trying to earn any money in these conditions...
That's exactly correct. The highest ROI on the trade would be from putting at least 100k in your account for buying 1 standard lot. If the trade goes down, then you need to deleverage which means selling your position to prevent from being even 5% overleveraged.
  • #264
  • Feb 27, 2015 4:44pm Feb 27, 2015 4:44pm
Quoting TimTheTrader
{quote}Money talks, bullshit walks. Get a job a McDonalds, you are not trading material. {image}
Is it a bragging time? Can I join, too? Pleeease
You have nice results, keep up the good job. I could never achive this in 1-2 min averege holding time. I have no idea how you manage to do this. And this only proves that there are many ways to skin a cat. We all have different aproaches to trading and a lot of those aproaches work. Traders just need to find what suit them. I am still learning myself as well. It feels like never ending learning process. The shity thing is I have to do this part time and I am far from being smart. But it can be done.
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  • #265
  • Feb 27, 2015 4:44pm Feb 27, 2015 4:44pm
Quoting replaced
There is no such thing as a successful Forex trader.
Have a good weekend, Replaced.
Each losing trade is an opportunity to learn
  • #266
  • Feb 27, 2015 5:50pm Feb 27, 2015 5:50pm
Quoting replaced
{quote} Stops would increase trading costs. You would have to deposit money in the brokerage account again and pay commission and spread just to have the same position while someone with 1x leverage doesn't have to do that. Stops are worse than deleveraging. {quote} Having a broker placing a limit on your account increases ROI.
One last post as I will be too busy making money with my high leverage broker next week. I can't believe I keep getting lucky.. I think I now understand why you are under the illusion of ROI decreasing with leverage. You are under the assumption that using leverage, in and of itself increases spread and commission. Spread and commission is based on order size. So once again, if you are trading one lot, your spread and commission cost is the same whether it is a $2,000 account or a $100,000 account. Once again, sometime next week visit FX-Ray Dragon Riders GBP/JPy thread and forexalien Alien's extraterrestrial visual system, which is the system I use for 80% of my trades. Although not familiar, I hear Sonic's system is pretty amazing as well. These guys are not lucky, they know what the f--- they are doing. That's the key. I'm just trying to show you the light, I'm not sure of your motive here. I don't know if you're here to convince others not to trade forex, or you've lost and now nobody can be successful because you weren't or you're looking for someone to hand you the magic pill. However, if you want to learn forex and be successful, there are people doing it and for too long and too consistently to be considered luck.
  • #267
  • Feb 27, 2015 6:06pm Feb 27, 2015 6:06pm
From an FXCM thread on another site:

Additionally, all of our regulated entities except the U.S. provide clients with segregated funds. All of our global client base in our regulated entities minus US clients would be protected under a bankruptcy. Our UK regulated entity through the FSCS even offers clients £50,000 per person in protection. Canada has similar insurance for retail traders of up to $1 million CAD.

Read more: http://forums.babypips.com/fxcm/7195...#ixzz3SzcMXQ2S

Why is it, the toughest country in the world as far as forex "regulation" refuses to protect trader funds. Aren't the NFA/CFTC suppose to be protecting us from ourselves. Just more reason besides horrible trading conditions, that no trader should be with A US broker.
  • #268
  • Feb 27, 2015 6:52pm Feb 27, 2015 6:52pm
Quoting EarnPipsNow
{quote} Ok, I get it now, the whole problem comes from the fact that you still don't know what leverage truly means. For the last time, if your Forex broker is offering you a 50:1 leverage for example, you CANNOT trade with a 1:1 leverage, it's impossible. The only way to trade with a 1:1 leverage is to call your broker and request a 1:1 leverage, end of story.
If I may.... You can have 50:1 leverage and trade with 1:1 leverage....

If you set your account to say"1000:1" leverage, the only way to actually use 1000:1 leverage would be to risk 100% of your account. Thus meaning that a 10 pips loss would margin call the account.
If you risk 50% of your account with your margin set to "1000:1" then the moment you entered the trade you are only using 500:1 leverage
ETC.....
In fact, here at forexfactory, when you have an open order, it shows the LEVERAGE which is being used. If you simply click my name, and look at my trade explorer, you'll notice that I am only using 1:1 leverage with an account which is set at 1000:1 leverage.

The commission isn't the issue here, as if you enter a position and end up earning say 300 pips, the commission which a typical broker will charge you is only 1 pip. Thus a net profit of 299 pips once you take out the commission + spread. For some odd reason their is a misinterpretation of Leverage, which of course is why many people speak about it negatively. I believe those who use high leverage SHOULD have a great understanding of the market, as you don't have many pips to give to the market.
Looking "cool" isn't so "COOL" after all. #ProfilePicture
  • #269
  • Edited 8:02pm Feb 27, 2015 7:42pm | Edited 8:02pm
Quoting nicholas1021
You can have 50:1 leverage and trade with 1:1 leverage....
No you cannot, Nicholas

You can risk 1%, 2%, 3%,..., 100% of your account on any particular trade but you cannot change the leverage, just like you cannot change the maximum amount of money you can withdraw from your ATM debit card in any given 24 hour period. This maximum is controlled by your bank and you cannot change it, just like leverage is also fixed by your broker and you cannot change it, unless you officially ask him to do so.

Quoting nicholas1021
If you set your account to say"1000:1" leverage, the only way to actually use 1000:1 leverage would be to risk 100% of your account
No.

Even if you somehow manage to convince your Forex broker to grant you a 1,000:1 leverage, it still does not mean you are risking 100% of anything. You can use a Forex account with a 1,000 to 1 leverage and still risk only 1% or less on each trade.

Why do so many Forex traders have a hard time understanding this extremely simple concept is beyond my comprehension.

Quoting nicholas1021
I believe those who use high leverage SHOULD have a great understanding of the market, as you don't have many pips to give to the market.
Leverage is only a tool, nothing more. Used properly, it will allow you to compound your winnings and make a killing in a very short period of time. That's all there is to it.
But thinking for even one second that high leverage is "bad" is beyond stupidity. YOU, and only YOU control the percentage of risk you are willing to take on each trade, even if your Forex broker is offering a 1,000,000,000 to 1 leverage.

So, do traders lose money "because" of the "high" leverage offered by Forex brokers? The answer is NO, they lose money because, once again, they have no edge, no plan, no money management and no discipline.
Each losing trade is an opportunity to learn
  • #270
  • Feb 27, 2015 8:00pm Feb 27, 2015 8:00pm
Quoting EarnPipsNow
{quote} No you cannot, Nicholas You can risk 1%, 2%, 3%,..., 100% of your account on any particular trade but you cannot change the leverage, just like you cannot change the maximum amount of money you can withdraw from your ATM debit card in any given 24 hour period. This maximum is controlled by your bank and you cannot change it, just like leverage is also fixed by your broker and you cannot change it, unless you officially ask him to do so. {quote} No. Even if you somehow manage to convince your Forex broker to grant you a 1,000:1 leverage,...

Your answer will support what it is I am saying. Simply answer this question.
1) If I decide to use 1:1 leverage, and I use 100% of my equity, how many pips would it take to margin call the account?
Looking "cool" isn't so "COOL" after all. #ProfilePicture
  • #271
  • Edited 8:17pm Feb 27, 2015 8:06pm | Edited 8:17pm
Quoting Profit Daily
{quote} One last post as I will be too busy making money with my high leverage broker next week. I can't believe I keep getting lucky.. I think I now understand why you are under the illusion of ROI decreasing with leverage. You are under the assumption that using leverage, in and of itself increases spread and commission. Spread and commission is based on order size. So once again, if you are trading one lot, your spread and commission cost is the same whether it is a $2,000 account or a $100,000 account. Once again, sometime next week visit...

VERY Nicely Put

When I had first started trading FX I was so green it wasn't funny. I blew up my account so often it became a nightly occurrence to be woken in the middle of the night with margin calls. In total I lost NZD$36920 in one year. It got to the stage that I had to really consider if I was cut out to be a currency trader. So what I did was take stock of all my faults and then set about to correct them, these were as follows.

1--- Overtrading (in every respect)
2--- Not following the Trend
3--- Not setting realistic weekly profits
4--- Trying to follow the market after being misled by supposed experts
5--- Insufficient funds in respect to some of the entry positions I was opening.
6--- Entering positions during high impact news releases
7--- Greed
8--- Fear
9--- No long term financial planning
10-- No workable and or defined strategy

There are probably a few others, but essentially that is about it. It was not easy changing some of these habits, but knowing what they were certainly helped. At the end of the day I persisted and eventually after a period of time I started to see results. In the last four months I have subsequently recovered the losses that I had made. The most important lesson that I have taken from all of the above is NEVER EVER OVERTRADE.


As a measure of my progress I do not count pips. For example, say I entered a 100k buy on the NZD/USD and it cost NZD$500 to enter that position. I will set my TP at 20% profit of the NZD$500 (ie NZD $100) and close it when it achieves that result. I know it is a pain if the position keeps on going onto profit, but hey sometimes the turnaround can be sudden and I have learn't that Greed does not increase your bottom line, (consistency is what does that). I am also a keen advocate of the 50 SMA with a 200 SMA coupled with RSI. The 24H and 4H charts in conjunction with the 15min and 1min charts is the only entry system and exit systems that I use. I set myself a weekly target and then at the end of the week, I add it to my planning schedule for the next week where I then compound it for the following week. This way I know exactly where I am and what I have made. I do not set SL's and my records are proof that my decision to not set myself up for a loss, works very well for me

In closing this let me just say, I am really happy that I did persist as the rewards of being a successful Trader are just bloody fantastic.
  • #272
  • Feb 27, 2015 8:09pm Feb 27, 2015 8:09pm
Quoting nicholas1021
If I decide to use 1:1 leverage
Ok, stop right there.

If you are using a 1:1 leverage (and that means no leverage at all), then you will need at least $100,000 margin money just to open 1 standard EUR/USD lot position, assuming $1 = 1 Euro, and I am not even counting the cost of the spread.

Are you with me so far? Answer yes or no so I can answer your question.
Each losing trade is an opportunity to learn
  • #273
  • Feb 27, 2015 8:24pm Feb 27, 2015 8:24pm
Quoting EarnPipsNow
{quote} Ok, stop right there. If you are using a 1:1 leverage (and that means no leverage at all), then you will need at least $100,000 margin money just to open 1 standard EUR/USD lot position, assuming $1 = 1 Euro, and I am not even counting the cost of the spread. Are you with me so far? Answer yes or no so I can answer your question.
Just want to add that the $100,000 is just margin ALONE by itself you would need X amount of money to even be able to sustain $10 per pip position so assume each 100 pips is $1k.. You'd need at $150,000 to trade 1 position at one time to be in good secure area at 1:1

Just to expand if you wanted to trade say 5 positions.. either same or different.. would need $750k Dollars once again to be in safe secure area where you have enough room from your "margin call" of 100k lol.

and another final note lol.. For those who think leverage is the enemy.. Banks build on leverage.. Economies grow on leverage.. Cycles turn on Leverage. Leverage is more then just forex.. Its an ability to "grow" but most people wouldn't know that because it requires opening an economics book the horror!
There are those who know, and there are those who don't know.
  • #274
  • Feb 27, 2015 8:34pm Feb 27, 2015 8:34pm
Quoting palabara
Just want to add that the $100,000 is just margin ALONE by itself you would need X amount of money to even be able to sustain $10 per pip position so assume each 100 pips is $1k..
That's true Palabara, but in this example the Forex platform only needs to see $100K (plus, say, 30 dollars - 3 pips - for the spread) in your trading account to accept the transaction.

Of course, as soon as the market moves just 1 pip against your position, the FX platform will issue a margin call, or even close your position depending on your broker's policy.
Each losing trade is an opportunity to learn
  • #275
  • Feb 27, 2015 8:42pm Feb 27, 2015 8:42pm
Quoting EarnPipsNow
{quote} Ok, stop right there. If you are using a 1:1 leverage (and that means no leverage at all), then you will need at least $100,000 margin money just to open 1 standard EUR/USD lot position, assuming $1 = 1 Euro, and I am not even counting the cost of the spread. Are you with me so far? Answer yes or no so I can answer your question.
Very good. You would need 100,000 usd in order to open an order of .01 lots which would be $1 dollar per pip. So spread not included.. How many pips would it take of .01 lot order with an account size of 100kusd with 1:1 leverage.
Looking "cool" isn't so "COOL" after all. #ProfilePicture
  • #276
  • Feb 27, 2015 8:47pm Feb 27, 2015 8:47pm
Quoting palabara
and another final note lol.. For those who think leverage is the enemy.. Banks build on leverage..
Absolutely.

Using other people's money (OPM) to create tremendous wealth is no longer a secret, Palabara...
Each losing trade is an opportunity to learn
  • #277
  • Feb 27, 2015 8:48pm Feb 27, 2015 8:48pm
Quoting nicholas1021
{quote} Very good. You would need 100,000 usd in order to open an order of .01 lots which would be $1 dollar per pip. So spread not included.. How many pips would it take of .01 lot order with an account size of 100kusd with 1:1 leverage.
your confusing the leverage.. for 0.01 that's 10 cents per pip and it would cost $1,000 in margin on 1:1 for $1 per pip that's 0.1 and that's $10,000 margin 1:1

Quoting EarnPipsNow
{quote} Absolutely. Using other people's money (OPM) to create tremendous wealth is no longer a secret, Palabara...
if its not a secret how come 7 out of 10 people don't know about it You'd be amazed of the ignorance of the world.
There are those who know, and there are those who don't know.
  • #278
  • Feb 27, 2015 8:53pm Feb 27, 2015 8:53pm
Quoting nicholas1021
You would need 100,000 usd in order to open an order of .01 lots which would be $1 dollar per pip.
No.

Using the same example , to open a 1 micro lot position (0.01 standard lot) you will need $1,000 (plus cost of spread) if you are using a 1:1 leverage account.

On the other hand, if your Forex broker grants you a 100 to 1 leverage, now you only need $10 to open the same position (plus cost of spread).
Each losing trade is an opportunity to learn
  • #279
  • Feb 27, 2015 8:54pm Feb 27, 2015 8:54pm
Please everyone here keep in mind that having access to a high leverage and using it to it's full extent are 2 completely different things. From a money management point of perspective having a huge leverage is always favorable because you have the possibility to put in another trade (e.g. to hedge in another pair) which you would not be able to do so without a high leverage.

If that is in conflict with your system rules is another topic and brokers who offer astronomical leverage should be looked at closely anyways but gaining more room for action for free can't be bad right?

Just because you have a 1:200 leverage doesn't mean you are forced to trade the 5 lots instead of the 1 lot you can trade with a lower leverage. the pip value for the same lotsize still stays the same.
  • #280
  • Feb 27, 2015 9:00pm Feb 27, 2015 9:00pm
I'm starting to think the problem is combing all this elements together into 1 calculation.

Leverage x Lot Size x Risk x Drawdown (divide) available equity. Most people are having hard time calculating this in a nutshell.

Of course more can be added into like Variable of open positions on top of it all.
There are those who know, and there are those who don't know.
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