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

Quoting trader121
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.
Yes, but that's precisely the goal of any trading system : to quickly capture any temporary inefficiency in the market and/or recognize what the smart money is up to.

If you see a big Head and Shoulders formation at the end of an extended uptrend for example, that usually means the big boys (who bought a long time ago) are now cashing their chips and ready to jump chip, while the average trader is still buying. It's hard for the big players to make a significant move without leaving footprints (patterns) all over the charts.
Each losing trade is an opportunity to learn
Quoting plukin
{quote} 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...

You obviously didn't learn from your mistakes. While commissions can't blow up your account, they'll however erode anyone's account trading anything less than 100 pips. If commission is 0.4 pips and each trade is 100 pips. That means you have to have an edge of at least 0.4% just to cover commission. For example, if you had a stop loss of 100 pips and took profits at 100 pips, you would have to have the 100 pip profit trigger 50.8% of the time just to break even.

Also, a loss could easily turn into a winner. Just because a trade turns into a loss doesn't mean that it'll continue to be a losing position. If you did cut loses short, you probably would've also had more losers than winners. The best thing to do would be to deleverage.
Quoting replaced
{quote} You obviously didn't learn from your mistakes. While commissions can't blow up your account, they'll however erode anyone's account trading anything less than 100 pips. If commission is 0.4 pips and each trade is 100 pips. That means you have to have an edge of at least 0.4% just to cover commission. For example, if you had a stop loss of 100 pips and took profits at 100 pips, you would have to have the 100 pip profit trigger 50.8% of the time just to break even. Also, a loss could easily turn into a winner. Just because a trade turns into...
Lol, you obviously think you know my data more then I. Well, ok, whatever floats your boat. )
Also, thanks for sharing what market tought you, I am all ears to learn from people with body of real trading experience!
Thanks for that. )
I trade to win/profit.
Quoting EarnPipsNow
{quote} Yes, but that's precisely the goal of any trading system : to quickly capture any temporary inefficiency in the market and/or recognize what the smart money is up to. If you see a big Head and Shoulders formation at the end of an extended uptrend for example, that usually means the big boys (who bought a long time ago) are now cashing their chips and ready to jump chip, while the average trader is still buying. It's hard for the big players to make a significant move without leaving footprints (patterns) all over the charts.
I have used this method to identify trading opportunities and I can confirm that it really works, only perhaps a small difference in terms. In my case I identify the buy/sell zones (when institutions are buying or selling) by tracking huge volume and price movements.

Once the exchange rate approached a similar level at some point in future, then it is more likely that the institutions will place similar trades, i.e buy if they bought in the past when the exchange reached the same level, or sell if they sold.
Quoting moonshot
In my case I identify the buy/sell zones (when institutions are buying or selling) by tracking huge volume and price movements.
You've got it.

A support/resistance level is more powerful and meaningful if trading volume was also relatively heavy in that same area, in the past.
Each losing trade is an opportunity to learn
Quoting replaced
{quote} You obviously didn't learn from your mistakes. While commissions can't blow up your account, they'll however erode anyone's account trading anything less than 100 pips. If commission is 0.4 pips and each trade is 100 pips. That means you have to have an edge of at least 0.4% just to cover commission. For example, if you had a stop loss of 100 pips and took profits at 100 pips, you would have to have the 100 pip profit trigger 50.8% of the time just to break even. Also, a loss could easily turn into a winner. Just because a trade turns into...
In case anyone new to trading is reading this post, please note that everything replaced states here is completely wrong. Forget commissions and spreads, and forget his warped use of the phrase leverage (and by association deleverage). I don't know replaced but my guess is he knows nothing about trading, has experienced lots of losses, is frustrated with the market and his inability to "dance" with it (to borrow a phrase from my old FF friend fti), and has developed an unhealthy fear of trading. Stay away from people like this on FF. Their negative energy will suck you dry and leave you in the same hopeless condition they're in. Case in point: find a broker that does not charge a commission. Then commissions will not "erode" your margin account. But more to the point, learn to trade in a way that makes spreads and commissions irrelevant to your trading success. They are the price of trading -- the entry gate to trading -- and if your trading can't get beyond the entry gate you should find another line of work. Because in that case, as replaced has found, it's impossible for you to make trading a profitable endeavor.
Quoting replaced
{quote} You obviously didn't learn from your mistakes. While commissions can't blow up your account, they'll however erode anyone's account trading anything less than 100 pips. If commission is 0.4 pips and each trade is 100 pips. That means you have to have an edge of at least 0.4% just to cover commission. For example, if you had a stop loss of 100 pips and took profits at 100 pips, you would have to have the 100 pip profit trigger 50.8% of the time just to break even. Also, a loss could easily turn into a winner. Just because a trade turns into...
This is profoundly misguided. You continue to assume that every trade is random and that it is impossible to create an edge that would cover losses and the spread/commissions. It may not be easy to do but I can assure you it can be done. Deleveraging has absolutely nothing to do with it.
Quoting dkrock
Hello. By your analysis, should I conclude you have not made a Forex trade yet? It seems to me that commission is commission, and is not applied against the leverage, but against position size. At least that is how my commission is calculated. $X times number of lots. It seems to me you are analyzing position trades of equities with Forex. Why would anyone have a stop of 250 pips? That is ridiculous. Volatility is your best friend. Without it, the market is flat and you make nothing. You reference volatility of your account balance. ?HUH? I am sorry...

I'm a broker at one of the biggest FX brokerages in the US/World. I deal with HVC's and the everyday new trader. I have had an account here on FF since 2006 (my other name Twee couldn't help me recover... lol ). I know this business better than most of you here. I know what a multi million dollar account looks like shoring the Euro by yards. I've learned so much by being in this business - probably forgot more than most of you know by this point.

I'm not trying to come off as a know it all, but the insight and information accessible in my position is amazingly informative. All of that said, emotions and market ignorance are the biggest reasons traders lose. I've seen half a mil lost in a week, and 15 mil made in a month. I too wouldn't believe it unless I've seen it (the profits).

There are definitely patterns to bad habits, and dkrock was pretty on point. As my "first new post" back here on FF - I thought this was a fitting thread to join.

Happy trading!
Quoting GEfx
{quote} In case anyone new to trading is reading this post, please note that everything replaced states here is completely wrong. Forget commissions and spreads, and forget his warped use of the phrase leverage (and by association deleverage). I don't know replaced but my guess is he knows nothing about trading, has experienced lots of losses, is frustrated with the market and his inability to "dance" with it (to borrow a phrase from my old FF friend fti), and has developed an unhealthy fear of trading. Stay away from people like this on FF. Their...
I agree 100% with everything you've stated with the exception of finding a broker which doesn't charge commission. That's the last thing you want to do. I haven't traded with a non commission broker since my first 6 months in forex. In almost all cases, your trading costs are 2-3 times HIGHER. For example, I pay a .6 commission and get 1.4 spread on GBPJPY, total 2 pips, most spread only brokers are at 4 pips spread, which is double the cost. Pure interbank spreads with a small commission is far superior. Not to mention, most, not all, non-commission brokers are market makers who trade against you, whereas most commission based are STP/ECN/DMA models.
Quoting replaced
{quote} That's correct. However I can still analyze what would probably happen if someone were to trade Forex. {quote} My calculator isn't perfect but it's still very accurate in determining what would happen. In this example, I assumed the trader had one position and 1:1 leverage meant that the position itself was equal to the entire equity of the account. Of course in real life it's not completely accurate as there are lot sizes to deal with. I've spent enough time with this calculator, something like that would be too complicated and wouldn't...
I haven't read the entire thread, but if people listened to what he said more, maybe more traders would actually be profitable.

If you are a retail trader, deleveraging is very probably the best thing you can do to increase profitability, all things constant.
Build good relationships with others.
Quoting shellsnail
{quote} I haven't read the entire thread, but if people listened to what he said more, maybe more traders would actually be profitable. If you are a retail trader, deleveraging is very probably the best thing you can do to increase profitability, all things constant.
. You might want to read the entire thread then. there is no such thing as deleveraging. leverage is simply position size/used margin. There is such thing as reducing risk.
  • Post #532
  • Quote
  • Edited 10:51pm Mar 12, 2015 10:21pm | Edited 10:51pm
Quoting Profit Daily
{quote} . You might want to read the entire thread then.
And while I'm at it, I'll add that the old adage of sticking to one system and trying to master one pair is complete bullshit (to mislead retail.) You ought to diversify strategies and pairs as soon as possible to reduce risk.

Using high leverage (w/o proper SLs in place) + trading 1 strategy on 1 pair only = suicide

Using high leverage with proper SLs in place increases your lifespan slightly, but high leverage + SL means your stops are going to be very tight, and thus commissions and spread are going to EAT UP huge percentage of you profits (assuming you are doing one of those stupid one-in-one-out 1:X RR strategies i.e. 99% of all systems I've seen)--> you'll still lose money.

If you ever wondered why larger accounts tend to be profitable, it's precisely these two factors at work. They use lower leverage, and they trade more (uncorrelated) pairs and more (uncorrelated) systems.

All of these factors reduce RISK.

This is not speculation. It's MATH.

p.s. most professional traders don't use more than 1:8 leverage even for FX. Which means if they had 10k in their account, they would only open up to 0.8 lots. How many lots are you opening with yout 500 dollar account? lol.

*note I am referring to effective leverage employed, not how much leverage you're given. If you use 1:200 leverage account that has 10k in it, to open 0.1 lot, you are not using any effective leverage. i.e. your leverage is 1:1 If margin requirements are 100%, then you can at most open 19.99 lots (theoretically). That would be employing effective leverage of 1:200.
Build good relationships with others.
Quoting shellsnail
{quote} And while I'm at it, I'll add that the old adage of sticking to one system and trying to master one pair is complete bullshit (to mislead retail.) You ought to diversify strategies and pairs as soon as possible to reduce risk. Using high leverage (w/o proper SLs in place) + trading 1 strategy on 1 pair only = suicide Using high leverage with proper SLs in place increases your lifespan slightly, but high leverage + SL means your stops are going to be very tight, and thus commissions and spread are going to EAT UP huge percentage of you profits...
Well I trade with high leverage and do so very profitably. The key is compounding winners. I have many small losses, but when a trade starts running in my favor I add many positions while moving stops to break even. I've had trades with position sizes 240 times equity with stops at break even. I've had 400 pip winners which equals 960% growth. Doing so while having no risk.
Quoting Profit Daily
{quote} Well I trade with high leverage and do so very profitably. The key is compounding winners. I have many small losses, but when a trade starts running in my favor I add many positions while moving stops to break even. I've had trades with position sizes 240 times equity with stops at break even. I've had 400 pip winners which equals 960% growth. Doing so while having no risk.
That's possible. I do something like that too.

But it's effective leverage that matters. When you set to break-even you are essentially removing the potential for losses, hence lowering effective leverage.

Although there's still tail risk you can't get rid of. Look at CHF. Price gaps can kill you.
Build good relationships with others.
Quoting shellsnail
{quote} That's possible. I do something like that too. But it's effective leverage that matters. When you set to break-even you are essentially removing the potential for losses, hence lowering effective leverage. Although there's still tail risk you can't get rid of. Look at CHF. Price gaps can kill you.
Once again, leverage is simply position size/used margin. If you're broker offers 500:1 , you're position size will always be 500 times used margin, 50:1 broker, it will always be 50 times. Setting to break even simply removes risk.
It's also my opinion we will not seen an event of that magnitude for another 40 years. I hadn't traded the CHF since peg was put in, I trade it now that it's been removed.
Quoting Profit Daily
It's also my opinion we will not seen an event of that magnitude for another 40 years. I hadn't traded the CHF since peg was put in, I trade it now that it's been removed.
I hear things about the Yen. And I wouldn't be surprised if events like this, maybe a bit more subdued, take place more often. The environment that we are in right now is volatile, as volumes have increased in Jan alone from around 5 T per day to almost 10 T.

When a central bank has the balls to do what the Swiss have done, it opens the door for that kind of reaction as being somewhat acceptable. It's the world we now live in.
  • Post #538
  • Quote
  • Edited 11:53pm Mar 12, 2015 11:27pm | Edited 11:53pm
Quoting Profit Daily
It's also my opinion we will not seen an event of that magnitude for another 40 years.

Hi ProfitDaily:

Some countries are still pegged to the US dollar, here is a partial list:

Aruba
Bahamas
Barbados
Belize
Bermuda
Caribbean island states
China
Colombia
Cuba
Ecuador
Eritrea
Hong Kong
Jordan
Macau
Maldives
Oman
Panama
Qatar
Saudi Arabia
Trinidad & Tobago
United Arab Emirates
Venezuela
Zimbabwe

Granted, these currencies are not heavily traded worldwide, but they can still create a big problem at anytime, especially for speculators betting on the Chinese Yuan against the USD (USD/CNY) or the Euro (EUR/CNY)...

Even worse, a few countries are now starting to peg their own currencies to the Euro, and that creates an additional risk for FX traders!

Bottom line guys, stick to the 8 majors for now!
Each losing trade is an opportunity to learn
Quoting EarnPipsNow
{quote} Hi ProfitDaily: Some countries are still pegged to the US dollar, here is a partial list: Aruba Bahamas Barbados Belize Bermuda Caribbean island states China Colombia Cuba Ecuador Eritrea Hong Kong Jordan Macau Maldives Oman Panama Qatar Saudi Arabia Trinidad & Tobago United Arab Emirates Venezuela Zimbabwe Granted, these currencies are not heavily traded worldwide, but they can still create a big problem at anytime, especially for speculators betting on the Chinese Yuan against the USD (USD/CNY) or the Euro (EUR/CNY)...
Well, I guess that's my point. Probably not enough volume to have much of an impact. The CHF is what, the 5th most traded currency in the world? All banks intervene to some extent, I did real well back when the JPY were doing it heavily a few years back. But for a major currency to have a peg/floor for 3+ years and come out and say they will no longer support it, that was huge. Like I mentioned earlier, I have just recently started trading CHF again, saw no point with peg in place. If i thought USDCHF was going up, I'd short EURUSD, etc. I realy can't see why anyone trades a pegged currency.
Quoting Profit Daily
I really can't see why anyone trades a pegged currency.
Why?

Because in the case of the CHF for example, and peg or no peg, people/corporations/governments all over the world still had to buy and sell Swiss Francs for commercial/investment purposes, or simply for tourism.

And the only way to conduct these daily transactions is through the Forex (also called the Interbank) market, via the usual network of central/private banks and other financial institutions. So Forex traders had to buy and sell CHF, peg or no peg (on behalf of big commercial players, hedgers, investors or simply speculators of course).

But you are right, speculating with pegged currencies is extremely risky, unless you are doing it via call/put options in the Futures currency market for example (limited risk and unlimited reward).
Each losing trade is an opportunity to learn
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