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

  • #501
  • Mar 9, 2015 8:40am Mar 9, 2015 8:40am
Quoting replaced
{quote} That's not true. a 400 pip stop with .1 lot is less risk and should be higher ROI. The commissions paid will be less on the .1 lot than the 2 lot even though the amount of change in equity is the same. Also big moves over longer timescales can be more predictable. The EUR/USD didn't just move from $1.35 to $1.09 just by chance. However predicting a 20 pip move is pretty much unpredictable/random and almost the same as gambling.
OK, so a 410 pip move on .1 lot is the same as 20 on 2 lots, to cover commission. I was just demonstrating risk can be the same on both as that was your argument. There are price points on a chart where you can be precise and use a 20 pip stop. Instead of trying to dispute what everyone here has already proven you wrong, maybe you should try trading and you can see WHAT EVERYONE HERE IS TELLING YOU!!!!!!!!!!
  • #502
  • Edited 10:38am Mar 9, 2015 10:20am | Edited 10:38am
Quoting Slicktick
. Now, what about if I bought 1 Lot NZDJPY whit that $1000 deposit in my account, how come the broker is depositing interest into my account? How come I can loan money and even get interest payments doing that?
If I loan you 1 million USD at 0.5% interest in New York City so you can buy and deposit Australian dollars in a bank in Sydney (that pays 3% interest), you make money, assuming the currency market stays flat or does not move too much against you (you are now long AUD/USD).

You still have to pay the interest on the loan created in New York but because you are now earning excess interest, only the difference (2.5%) is credited to your account by your broker.

But make no mistake, your broker did take that interest money from your account. In this example, it was simply deducted from the 3% interest you received from the Sydney bank (although technically no deposit was ever made in Australia).
Each losing trade is an opportunity to learn
  • #503
  • Mar 9, 2015 10:41am Mar 9, 2015 10:41am
Quoting sinqua
Base of argument: Leverage Kills --- Counter argument: Leverage isn't the responsible factor, RISK is.
That's not the argument I've been making. That would be a straw man. First of all, I'm not arguing about what the single responsible factor is since I think that there are multiple factors involved. You can say that people lose money on gambling because it's risky but it's simply not the case. People lose money in gambling because the odds are against them. If the odds were for them, then people would be gaining money in gambling. Risk has nothing to do with it.


Quoting Profit Daily
{quote} OK, so a 410 pip move on .1 lot is the same as 20 on 2 lots, to cover commission. I was just demonstrating risk can be the same on both as that was your argument. There are price points on a chart where you can be precise and use a 20 pip stop. Instead of trying to dispute what everyone here has already proven you wrong, maybe you should try trading and you can see WHAT EVERYONE HERE IS TELLING YOU!!!!!!!!!!
You're paying commission on a higher percentage of equity the more leverage you take out and likely placing more trades in a shorter period of time. If you're paying 40 cents commission on 1x leverage, then you'd be paying around 8 dollars on 20x leverage. Plus you'd probably make at least 20 trades by the time you're done with the 1x leverage trade, so now you're out about 160 dollars on 20x while the other trade is down 40 cents on trading costs.
  • #504
  • Mar 9, 2015 10:51am Mar 9, 2015 10:51am
best is non farm payroll, major economic breaking, interest rates.....if everyday will be volia ....cos the trend does prolong...i haven lost any of those trades ..everyone is on greed. nobody will dare to manipulate those situation.

you dont have to trade on daily basis , just wait and wait for those development, and trade FULL LOTS, also always look out for the 55min mark , 14 min mark, those can tell tell if bears and bulls are more determined.

also if i see price ranging for long periods , i close my chart and take a nap
  • #505
  • Mar 9, 2015 11:03am Mar 9, 2015 11:03am
Quoting Slicktick
A trader had $5000 in his account, traded about 0.05 EURCHF long. His account shows now still a positive balance. So, he owns nothing as he did not use any real leverage
Ok, wait a minute Slicktick.

How much margin money do you need just to initiate that 5 micro lots EUR/CHF position (to simplify assume spread is zero and 1 euro = 1 chf)?
Each losing trade is an opportunity to learn
  • #506
  • Mar 9, 2015 11:04am Mar 9, 2015 11:04am
Quoting replaced
{quote} That's not the argument I've been making. That would be a straw man. First of all, I'm not arguing about what the single responsible factor is since I think that there are multiple factors involved. You can say that people lose money on gambling because it's risky but it's simply not the case. People lose money in gambling because the odds are against them. If the odds were for them, then people would be gaining money in gambling. Risk has nothing to do with it. {quote} You're paying commission on a higher percentage of equity the more leverage...
You mean position size. It has already been proven that leverage is simply position size/ used margin. That does not change. You pay commission per position size, I pay .6 pips round trip, so once my trade is up .6 pips REGARDLESS OF POSITION SIZE, commission is paid for. If I am trading .1 lot pips are worth 10 cents and commission is 6 cents, if I'm trading 2 lots, pips are $20 and commission is 12 dollars, either way .6 pip profit covers commission. You clearly have never actually placed a forex trade.
  • #507
  • Mar 9, 2015 11:16am Mar 9, 2015 11:16am
Quoting Profit Daily
{quote} You mean position size. It has already been proven that leverage is simply position size/ used margin. That does not change. You pay commission per position size, I pay .6 pips round trip, so once my trade is up .6 pips REGARDLESS OF POSITION SIZE, commission is paid for. If I am trading .1 lot pips are worth 10 cents and commission is 6 cents, if I'm trading 2 lots, pips are $20 and commission is 12 dollars, either way .6 pip profit covers commission. You clearly have never actually placed a forex trade.
You're looking at it wrong.

If you make a trade where the gain is 0 pips, your balance after a 60 cent commission on would be $9,999.40 verses $9,988.00 for 20x the position. The huge effect of this can clearly be seen on the calculator on the first page.
  • #508
  • Mar 9, 2015 12:20pm Mar 9, 2015 12:20pm
Quoting replaced
{quote} You're looking at it wrong. If you make a trade where the gain is 0 pips, your balance after a 60 cent commission on would be $9,999.40 verses $9,988.00 for 20x the position. The huge effect of this can clearly be seen on the calculator on the first page.
Once again, your assuming 50/50 games of chance. Trading is not. I don't have time for this shit. You just don't get it period. I'm too busy making money to post here any longer.
  • #509
  • Mar 9, 2015 1:43pm Mar 9, 2015 1:43pm
Quoting replaced
{quote} You're looking at it wrong. If you make a trade where the gain is 0 pips, your balance after a 60 cent commission on would be $9,999.40 verses $9,988.00 for 20x the position. The huge effect of this can clearly be seen on the calculator on the first page.
Let me challenge that for a second.. Okay so .say 60 cents commission for A trade and then 20x that position. would be .60 x 20 = $12

On a black and white yeah assuming that you took x amount of trades BROKE even on every single one of them and not to mention 20x the size.. were talking about so much money that even casino whales would start to trickle.

I can see your point, but the reality is its not as black and white as that.. No matter what you trade or what you do for that matter you incur cost. There is no "free meal tickets" So when you trade you need to make more then not only your losses but your cost too..

Then how is it different then a business? A business has cost too and they can also break even and lose and etc.. The idea is you need to tilt the board in a way where you are making the costs.

Its easy to say something is that or something is this, but the reality is.. Its Risk! Yes if it Risk free you wouldn't get the same rewards. The Greater the Risk the Greater the Reward.. Its a basic function not just a financial one.

I finally understand your argument, but at the same time its very unrealistic because your not going to lose because of the commission.. yes its a cost, but its not the end game regardless of what because its statistically very small chance of even breaking even that many times, because even at the most basic of models you need to at least count on ONE variable because as it currently stands its extremely "hypothetical" Basically saying in a perfect world if things were like this - then this would be your results.. YES in a PERFECT WORLD. Not in this world. Its not as black and white or as simple as saying throw a die and count your probabilities.

So lets talk about your random.. You said that if you want to take 20 pips its random.. the only way to TRULY know is to do an experiment. So we would conduct a hypothesis and your hypothesis would be that if we take 100 trades and look for 20 pips that we at the end would achieve losses counting PROPER commission into it, now to be more specific the losses would occur BECAUSE of the commission. We can then do the experiment and see how close or far you are from your hypothesis by comparing it to a control group.
There are those who know, and there are those who don't know.
  • #510
  • Mar 9, 2015 11:33pm Mar 9, 2015 11:33pm
Quoting EarnPipsNow
Again, you cannot decrease/increase leverage. Leverage is fixed by your Forex broker. It does not change, just like you cannot change the fees that your local bank charges you for ATM withdrawals.
To keep things simple, I prefer to see risk as distinct from "leverage", just as you do. However, I'm also aware that many textbooks make a distinction between "true leverage" or "real leverage" — as the amount of leverage that the trader is effectively utilizing — as opposed to the "maximum leverage" that's permitted by the br0ker (if you google "how to calculate true leverage" you'll find plenty of examples, e.g. 1, 2, 3, 4, ......). Hence, if we want to be pedantic, "real leverage" is set by the trader, whether consciously or not; while "maximum leverage" is set by the br0ker (as you correctly point out). Confusingly, it seems that the term "leverage" is sometimes used to describe one, sometimes the other.
  • #511
  • Mar 10, 2015 12:22am Mar 10, 2015 12:22am
Quoting hanover
{quote} To keep things simple, I prefer to see risk as distinct from "leverage", just as you do. However, I'm also aware that many textbooks make a distinction between "true leverage" or "real leverage" as the amount of leverage that the trader is effectively utilizing as opposed to the "maximum leverage" that's permitted by the br0ker (if you google "how to calculate true leverage" you'll find plenty of examples, e.g. 1, 2,...
Hi Hanover,

Yes I am aware of this thing called "true" leverage (as opposed to "false" leverage I suppose ?!?).

Personally, I believe this "concept" was invented by brokers just to confuse traders even more! And they did succeed, don't you think?

Thanks for your input.
Each losing trade is an opportunity to learn
  • #512
  • Edited 1:20am Mar 10, 2015 12:54am | Edited 1:20am
Quoting hanover
{quote} To keep things simple, I prefer to see risk as distinct from "leverage", just as you do. However, I'm also aware that many textbooks make a distinction between "true leverage" or "real leverage" as the amount of leverage that the trader is effectively utilizing as opposed to the "maximum leverage" that's permitted by the br0ker (if you google "how to calculate true leverage" you'll find plenty of examples, e.g. 1, 2,...
btw my response is not "directed" just generally speaking, for anyone who will listen.

I read the "1" link and I got a kick out of this quote "This is vital. The broker takes a huge risk to lend you money and therefore they have certain rules which you must adhere to." And the brokers got complacent BAZOOM FXCM! Giant stumbles and falls.

2nd. I didn't read any other links to tired but about the 1st link.. I'd hate to read this guys book his so repetitive.

3rd point, he does make good sense in a very boring way.. But regardless of true leverage fake leverage sexy leverage.. people will stumble and fall BAZOOM! lol unless they learn to control themselves and not play with levers..

2 life lessons.. Don't borrow money if you don't have it in the 1st place because what makes you think you'll have it to pay it back PLUS interest! I've been living "credit free" for 8 years, can't afford it can't afford it lol.

2nd life lesson, don't "leverage" all your money dummy lol. Just because you can, don't do it! just don't and you'll already move up 10 steps on the Forex board! (sorry the 1st start of the sentence rhymed had to go with it) see this is why my books wouldn't be boring!

Generally speaking Leverage is not the enemy.. regardless of what shape form or structure its in. Like it has been said many times its a tool.. and regardless of collectively how its described or thought as.. which don't get me wrong is interesting in its own way..I just like to make funnies You can have any type of leverage as long as your in control of it and its not in control of you. That's the bottom line, and the final bottom line is to learn the tools, and the concepts, and system of trade. Like I once read some book about the federal reserve it was god awful, but I did it lol. I'm sure somehow I am smarter for doing it, probably not, but its part for the course.

There that's all that has to be said on leverage. I rest my case!
There are those who know, and there are those who don't know.
  • #513
  • Edited 1:54am Mar 10, 2015 1:11am | Edited 1:54am
Quoting EarnPipsNow
{quote} Like I said in the previous post, the number one reason why traders fail is precisely due to the spread and/or commissions. You cannot, CANNOT make money in the long run if someone (your broker) is taking money from your account each time you place a bet (initiate a position). The ONLY way to make money trading is to find a way to beat the spread (transaction costs), end of story. That's only the first step of course, you can still lose money if you don't follow the exact rules of your system, including the all important money management...
you misunderstand my post. you said it yourself that forex is not zero sum game and i do believe the same. having an edge in forex means you CAN succeed and beat the commission and spread thing you keep mentioning in all your posts because your chance to win is not 50-50 anymore due to your "edge" in your trading system. what point are you trying to prove?

i agree with someone else here who said that spread doesnt matter much if your trading system is proven and you have good R:R ratio with good amount of pips. for example, i lost a trade costed me -22 pips yesterday and another one costed me -6 pips but i had 2 winners with +24 pips and +86 pips yesterday, all with same risk/lot size. If you count commission for all the transactions, I'm still winning a lot because I had a winner with 86 pips. ofc it was just a single day but i told you this just to give you the idea that with proper trading system, discipline, and money management, spread + commission shouldnt matter much because you are having an "edge" to defeat those accumulated spread+commission you were talking about. You said it yourself, forex is not zero sum game, then why you feel bothered about paying commissions to your broker if you know your winning chance and R:R is more than 50%? The WAY to beat the spread IS the trading system, not trying to find a broker with the least spread+commission, although it's always nice to trade with better broker.

also what you said about long term is subjective. someone's long term is different from another. if someone is trading on D1, a year or two years history IS not long term because he probably only makes 20 trades a year. You should define what a "long term" is.

i also disagree when you said no.1 reason traders fail due to spread+commission. I would like to see the data about this if it wasn't purely your assumption. i dont know how social you are with other trades in real life but from about 10 traders i know irl, the failed ones were always due to their aggressive entries, bad money management, fixed pips TP/SL, or pscyhogical reasons (like doubling lot size after they lose, start taking bad setups, etc.). Most of them also consider a method to be rubbish after 2-3 bad weeks/DD, even if their previous 7 months told them otherwise, while we all know every system has such thing no matter what. I hardly found anyone says that he lost because of spread (tbh i never found one).

the most important thing about trading forex, to me, is actually you need another income source. forex is investment world and should always be treated as such. It's not a business world. it's not like opening a successful restaurant where you will always have customers every single day. People who own another business have much better chance to succeed in forex because he wouldnt have the pressure to make money from forex to pay his bills. ofc this doesn't change the fact that a proper trading system, money management, and all the other stuffs people keep saying about are all important as well.
  • #514
  • Mar 10, 2015 6:16am Mar 10, 2015 6:16am
Quoting rsg10z
..i also disagree when you said no.1 reason traders fail due to spread+commission. I would like to see the data about this if it wasn't purely your assumption. i dont know how social you are with other trades in real life but from about 10 traders i know irl, the failed ones were always due to their aggressive entries, bad money management, fixed pips TP/SL, or pscyhogical reasons (like doubling lot size after they lose, start taking bad setups, etc.)..
I guess you won't see the data, might be just his assumption.
Funny is that his signature says "Manage your losses first, your winning positions will manage themselve", nothing about spread. So it's either about spread or losses for him, can't be both ways!

Looking at my history of losses/costs. Even if I'd trade on zero spread & 0 commision I would have only some 1/10 of what I lost during the years. The remaining 90% was lost due to stupid trades, not cutting the losses short, cutting the winners while letting the losses grow, overtrading, you name it. Basicaly emotional based trading. Trader's fault, not the reason of spread & commision. And it's my guess after meeting traders through out the years that it was the same for them. Costs might play smaller or bigger role then they did/do in my case, depending on ones trading strategy, but unless you are scalper going for just a pip or couple pips it won't kill you/your account. But that's my data, my experience..and if somebody chooses to dissagree with that, I am totally fine with that.
Markets wispers, just tune in.
  • #515
  • Mar 10, 2015 6:23am Mar 10, 2015 6:23am
please take care about bonus money... many trades are made because of bonus money; so..what you see is what you get, but not every time : ) Trading today is much more complicate, probably you can see only one side, one piece of strategies...
  • #516
  • Mar 10, 2015 1:06pm Mar 10, 2015 1:06pm
Quoting rsg10z
having an edge in forex means you CAN succeed and beat the commission and spread thing you keep mentioning
Where did I ever say the contrary?

Quoting rsg10z
your chance to win is not 50-50 anymore due to your "edge" in your trading system.
Careful with that idea my friend. Having an edge does not necessarily mean that you are know able to predict the direction of the market more than 50% of the time. You could lose 70% of the time and still make a bundle each month/quarter/year. Edge has nothing to do with percentage of winning trades.

Quoting rsg10z
You said it yourself, forex is not zero sum game, then why you feel bothered about paying commissions to your broker if you know your winning chance and R:R is more than 50%?
I am not bothered by anything, all I am saying is that most traders lose because they are unable to find a way to beat the trading costs (spread, commissions, slippage, taxes, etc...). Trading is a "rigged" game right from the start, just like all casino games.

If I play Head or Tail with you (Head you win $1,000, Tail you give me $1, 000) and I ask you to pay me $30 upfront each time you throw the coin, then in the long run I will take ALL your money, simple as that. Now replace the $1,000 in this example with the word margin money and the $30 with the word spread and you will understand why most traders lose money, slowly by surely, trade after trade. And just like in a casino, the more they trade the more they lose.

And again, the only to stop the bleeding and beat the spread is to find/design a winning trading system.
Each losing trade is an opportunity to learn
  • #517
  • Mar 10, 2015 1:33pm Mar 10, 2015 1:33pm
Quoting EarnPipsNow
{quote} Where did I ever say the contrary? {quote} Careful with that idea my friend. Having an edge does not necessarily mean that you are know able to predict the direction of the market more than 50% of the time. You could lose 70% of the time and still make a bundle each month/quarter/year. Edge has nothing to do with percentage of winning trades. {quote} I am not bothered by anything, all I am saying is that most traders lose because they are unable to find a way to beat the trading costs (spread, commissions, slippage, taxes, etc...). Trading...
Once again, what most folks are not understanding is when trading forex you can manipulate your "bet" once it's placed. Roulette, blackjack, flipping a coin,etc. , once the bet is placed, the odds are the odds, the end.

If I place a trade, first of all, my profit target is always higher than my risk, but, more importantly I can pull the trade within seconds if I wish instead of taking a full loss.

When a trade is a winner, I can increase the bet, in a strong trend, I can add multiple times.

There are traders who have a 20% win rate and are making a killing in this market.

Absolutely true though, in a 50/50 game, with risk exactly equal to reward, you will break even over a large enough sample size. Throw in any additional cost, as in your commission on the coin flip, there is a 100% chance you will lose ALL OF YOUR MONEY.
  • #518
  • Edited 2:59pm Mar 10, 2015 2:46pm | Edited 2:59pm
Quoting Profit Daily
Throw in any additional cost, as in your commission on the coin flip, there is a 100% chance you will lose ALL OF YOUR MONEY.
Absolutely.

If a trader deposits say $2,000 and the cost of spread is say $20, after 100 trades all his money is gone.

And then he will start scratching his head wondering why all his trading capital has disappeared. Because let's face it, unless he has psychic powers, at best he will able to win 50% of the time (assuming a 1 to 1 risk/reward ratio).

It's impossible to make money in the long run if someone (here the broker) is constantly taking money upfront from your account (via the spread). That's the number one reason why most traders fail.

Don't get me wrong, I have absolutely nothing against brokers, we NEED them to make money so it is only fair that they get compensated for their service, after all they are buying/selling billions of dollars of currency on our behalf.

So I will repeat this for the last time : no edge no money.
Each losing trade is an opportunity to learn
  • #519
  • Mar 10, 2015 3:02pm Mar 10, 2015 3:02pm
Quoting EarnPipsNow
{quote} Absolutely. If a trader deposits say $2,000 and the cost of spread is say $20, after 100 trades all his money is gone. And then he will start scratching his head wondering why all his trading capital has disappeared. Because let's face it, unless he has psychic powers, at best he will able to win 50% of the time. It's impossible to make money in the long run if someone (here the broker) is constantly taking money upfront (via the spread). That's the number one reason why most traders fail. Don't get me wrong, I have absolutely nothing against...
At the end of the day, everything regarding trading is tied to math. Successful traders look at trading only from a mathematical perspective. That's why professional trading firms (i.e. quant firms) look for PhD's as employees because those bosses think they are good in math.

Here is the key: From a pure mathematial perspective, it is unlikely that a retailer makes money on the long run, mainly becuase of the spread you mentioned. There is another very important reason which however is not math related: Lack of information. Retail is only 4% of the daily market. 96% is institutional. To be successful in trading, you Need to know what the big guys are up to or otherwise it's like driving a car without having a map. Retailers do not have that information, and are therefore at a huge information disadvantage.

However, what is important to note is that nobody is forcing you to trade forex. You can also get a job or open up a Company or invest into stocks. The mathematical probability of making money is multiple times higher in those areas than in Forex.
Forex is a losers game.
  • #520
  • Mar 10, 2015 3:11pm Mar 10, 2015 3:11pm
Quoting trader121
{quote} At the end of the day, everything regarding trading is tied to math. Successful traders look at trading only from a mathematical perspective. That's why professional trading firms (i.e. quant firms) look for PhD's as employees because those bosses think they are good in math. Here is the key: From a pure mathematial perspective, it is unlikely that a retailer makes money on the long run, mainly becuase of the spread you mentioned. There is another very important reason which however is not math related: Lack of information. Retail is only...
I believe most retail traders do not trade in FX because that is their only source of income, but rather because they can make secondary income without developing a conflict of interest. Additionally, you will most certainly find that most retail FX traders have diversified their investments into other areas, like stocks and real estate. Therefore, it is more about diversification and Forex, with its high liquidity levels can be a crucial source of cash when everything else is tied up. I believe in stocks, you have have to wait for them to gain value in order to sell, or lose value in order to capitalize on short-selling opportunities, and the gains are never that much. It is a pound for pound gain/loss, unlike in FX where you can trade on margin.
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