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How many dollars do I have to lose to experience a margin close-out 19 replies

Why you lose money and will always lose 31 replies

I Finally have figured Forex out. Need help programming EA 3 replies

Soros said he's got it all figured out 12 replies

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 Profit Daily
{quote} Dead on. Couldn't have said it better myself.
It's interesting how I learned to look for good things, willing and eager to use anything life "throws" at me to be better next time, to play i better & safer & more profitable. Back then I saw high leverage is crazy, useless. After PFG I started to look for ways how to limit my risk and I suddenly somehow opened to see high leverage as possible solution together with other things. Just magic. What I'd see before as a "bad" stuff..turn into "blessings & great lessons & stepping stones" over the years. I guess I grew up trading.. Boy was I one naive sucker & looser for quite a long time!

Oh well, glad it's over! )

So I ain't bitter that it happened, just a lesson and as the life lessons usualy are..lesson worth it. That's what I have learned so far. Btw an interesting is that I had a hunch I should take take the money and find a different broker couple weeks before they went belly up. Unfortunately "logic" won as I was pretty much satisfied with them compared to what I heard from other fellow traders regarding execution/requoting etc..and I didn't follow that hunch.. Oh well! Learned to notice these hunches..can't explain that, no idea how could I foresee something that didn't yet happened or is about to happen.. but hey, it does work. Although I have to confess that even just catching these hunches is pretty challenging still a lot not to mention acknowledging them and following on them. But, I am moving step by step with this woo-woo stuff.
I trade to win/profit.
Quoting EarnPipsNow
{quote} 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...
I think this point confirms one other reason why people lose money in Forex. No one for sure knows what will happen in the future, yet some tend to have a strong conviction as to what may happen. That is exactly what everyone who held long position on CHF before the big decision believed. But as you put it, it's high risk, and perhaps could have been better with some hedging in play,.
Quoting VolTrader23
Funny. Usually the guys that make money use 20:1 or lower...
Really?

Then I guess traders who use a 1:1 leverage (the lowest leverage possible) must be all billionaires by now.

Quoting VolTrader23
Requiring more margin for a trade does not increase risk.
It does not decrease it either. Risk has nothing to do with leverage, and vice versa. The only way to decrease risk is to...decrease risk, in other words allocate a small percentage of your trading capital to each trade, simple as that.

But the idea that you can "decrease" risk by depositing more money into your Forex account (because now your "leverage" seems "much lower") is absurd to the extreme.
Each losing trade is an opportunity to learn
Quoting EarnPipsNow
{quote} Really? Then I guess traders who use a 1:1 leverage (the lowest leverage possible) must be all billionaires by now. {quote} It does not decrease it either. Risk has nothing to do with leverage, and vice versa. The only way to decrease risk is to...decrease risk, in other words allocate a small percentage of your trading capital to each trade, simple as that. But the idea that you can "decrease" risk by depositing more money into your Forex account (because now your "leverage" seems "much lower") is absurd to the extreme.
I fell like you and I keep repeating ourselves. Once again, the smartest way to protect your own funds is to access as much leverage as possible as this will require your margin with the broker to be as low as possible. Where you keep the rest of your forex trading capital doesn't matter, but it makes the LEAST SENSE to have it with a broker.
Quoting Profit Daily
Where you keep the rest of your forex trading capital doesn't matter, but it makes the LEAST SENSE to have it with a broker.
Absolutely.

For instance, depositing $10,000 or even $5,000 just to trade micro lots (where each pip represents about 10 cents) does not make any sense at all. And yet some traders would do it because they strongly believe that they just "lowered" their leverage to almost zero that way(?!?).

I mean give me a break, if they want to trade that way, why not just trade stocks then? After all, there is virtually no leverage in the stock market (or a 2 to 1 leverage at best, if you qualify financially).

So if all they want is "low" leverage or no leverage at all, why even bother with the Forex market at all, to begin with?
Each losing trade is an opportunity to learn
You're in a battlefield with one other person, you see a sniper rifle and a knife, you say "oh no sniper rifles are too dangerous, let me take the knife instead, that's much safer"

I'm loving this thread.
Quoting sinqua
You're in a battlefield with one other person, you see a sniper rifle and a knife, you say "oh no sniper rifles are too dangerous, let me take the knife instead, that's much safer" I'm loving this thread.
This thread is a great expose of why veteran traders tend to go quiet. I mean, what's the point? People are arguing about leverage, and an individual who has never placed a trade by his own admission has a thread with more than 550 posts.

As far as leverage goes, in the real world, the higher the leverage on my account, the less I have to risk in real dollars to get the same return. How hard is that? A person with 100:1 leverage has to put up half the money to get the same return as me, who has only 50:1 leverage. I fail to see how this got so out of hand, but that is the bottom line.
If you are good at something, never do it for free--Joker
Quoting jmn5611
{quote} This thread is a great expose of why veteran traders tend to go quiet. I mean, what's the point? People are arguing about leverage, and an individual who has never placed a trade by his own admission has a thread with more than 550 posts. As far as leverage goes, in the real world, the higher the leverage on my account, the less I have to risk in real dollars to get the same return. How hard is that? A person with 100:1 leverage has to put up half the money to get the same return as me, who has only 50:1 leverage. I fail to see how this...
You're completely missing the point. Almost nobody is taking $1,000 and taking a 100k position while they have over 99k in their bank account ready to replenish loses. What's happening is someone's life savings is $1,000 and they trade a 100k position. If the trade goes against them a little bit, they'll end up with Gambler's Ruin. If for example you went short EUR/USD at 1.12 on Jan 26th and on Feb 23rd you receive an MC. You'll lose out on any possible gains due to randomness in the market. It doesn't matter if you were right on the trade. The calculator clearly shows that ROI has to increase to offset loses caused by volatility.

If your account equity could only go randomly up or down 1%, it will hit zero eventually because ROI is slightly negative. A 1% loss requires a 1.0101% gain to break even. I've built a program that showed that it will always and consistently hit 0 after about 100k tries. The effect of this is amplified exponentially if your account equity gyrates more. If account equity randomly went up or down 10%, it would hit 0 in less than 1k trades. A 10% loss requires an 11.11% gain to break even. So on each trade an account's expected value should average -0.5005%.
Quoting replaced
{quote} You're completely missing the point. Almost nobody is taking $1,000 and taking a 100k position while they have over 99k in their bank account ready to replenish loses. What's happening is someone's life savings is $1,000 and they trade a 100k position. If the trade goes against them a little bit, they'll end up with Gambler's Ruin. If for example you went short EUR/USD at 1.12 on Jan 26th and on Feb 23rd you receive an MC. You'll lose out on any possible gains due to randomness in the market. It doesn't matter if you were right on the trade....
And yet again you are missing the point...if someone uses his life saving of 1k $ to open 1 lot position without knowing what he is doing then he deserves every punishment the market will give him.

No point in arguing here because you will see this wall of text on every brokers site out there (i even bolded the part for you):

Quote
Trading Forex and Derivatives carries a high level of risk. CFD investors do not own, or have any rights to, the underlying assets. It involves the potential for profit as well as the risk of loss which may vastly exceed the amount of your initial investment and is not suitable for all investors. Please ensure that you fully understand the risks involved, and seek independent advice if necessary. Also, see the section titled “Significant Risks” in our Product Disclosure Statement, which also includes risks associated with the use of third...
Quoting jmn5611
{quote} This thread is a great expose of why veteran traders tend to go quiet. I mean, what's the point? People are arguing about leverage, and an individual who has never placed a trade by his own admission has a thread with more than 550 posts. As far as leverage goes, in the real world, the higher the leverage on my account, the less I have to risk in real dollars to get the same return. How hard is that? A person with 100:1 leverage has to put up half the money to get the same return as me, who has only 50:1 leverage. I fail to see how...
Are you having a laugh?!? Jeez. This is a joke thread. Why not just do it, instead of writing a thesis on it? (jmn5611, this is clearly for the OP, not you, in case of any misunderstanding )

Leverage: it's a no-brainer. A broker (regulated, unregulated, scam or otherwise) offers you what is effectively an interest free loan and you say, no thanks, I'd rather use my own money. I'd rather not keep my money safe in my bank account but trust it all to you! So, if you only have $1000 savings? What is the difference between a $100 account at 500:1 and an account of $1000 at 50:1?
Quoting jen101
{quote} Are you having a laugh?!? Jeez. This is a joke thread. Why not just do it, instead of writing a thesis on it? (jmn5611, this is clearly for the OP, not you, in case of any misunderstanding ) Leverage: it's a no-brainer. A broker (regulated, unregulated, scam or otherwise) offers you what is effectively an interest free loan and you say, no thanks, I'd rather use my own money. I'd rather not keep my money safe in my bank account but trust it all to you! So, if you only have $1000 savings? What is the difference between a $100 account...

What a great explanation, Jen. I've been presenting this argument for months. You're explanation leaves no room for any rebuttal.
Quoting jen101
{quote} So, if you only have $1000 savings? What is the difference between a $100 account at 500:1 and an account of $1000 at 50:1?
The difference is that the $100 account would have to take on 10 times more leverage to have the same position size as the $1000 account. The $100 account is likely a gambler that's extremely likely to lose everything through high leverage. If a broker allows you to use up to 50:1 leverage, it doesn't mean that you're using that much leverage. Leverage is always the open position to equity ratio.
Quoting replaced
{quote} The difference is that the $100 account would have to take on 10 times more leverage to have the same position size as the $1000 account. The $100 account is likely a gambler that's extremely likely to lose everything through high leverage.
I use high leverage and a relatively small account. I do quite well, thank you very much. I am far from a gambler. I post plenty of live trades; if you looked them up, you will see I am actually pretty risk averse.
Although I believe the $100 account on 500:1 is a bit extreme (probably just to prove a point) I think anything over 100:1 is definitely pushing the limits.. I trade 50:1. I think that "leverage" should be replaced with "risk management" on the initial thread post of 3 reasons why people lose money in forex. I do not consider over 20:1 leverage as a reason why so many people lose money in forex. If a 100:1 trader has superior risk management skills compared to a 10:1 or 20:1 leverage individual, they will still see lower average drawdowns and other important factors when analyzing the respective accounts. Risk management is the name of the game!
Vision without action is a daydream. Action without vision is a nightmare.
Quoting eric6
Although I believe the $100 account on 500:1 is a bit extreme (probably just to prove a point) I think anything over 100:1 is definitely pushing the limits.. I trade 50:1. I think that "leverage" should be replaced with "risk management" on the initial thread post of 3 reasons why people lose money in forex. I do not consider over 20:1 leverage as a reason why so many people lose money in forex. If a 100:1 trader has superior risk management skills compared to a 10:1 or 20:1 leverage individual, they will still see lower average drawdowns and other...
No, you are completely wrong. My calculator shows that 20:1 leverage has a steep negative ROI. It doesn't matter what kind of "superior" risk management skills the person uses. Stops will slow the trend towards zero but it also decreases the probability of having a huge profit. The more risk management employed, the higher the trading costs will be due to the higher likelihood of stops triggering. The only risk management that works is leverage at around 1x. If you have $1,000 the most you should ever be trading is 0.01 lot.
Well it's like having a powerful car, there if you need it, but most of the time you don't. In the hands of a novice driver, of course it can be deadly. That doesn't mean to say that everyone should limit themselves to a 1 litre diesel that would struggle to overtake a tractor.
Quoting replaced
{quote} No, you are completely wrong. My calculator shows that 20:1 leverage has a steep negative ROI. It doesn't matter what kind of "superior" risk management skills the person uses. Stops will slow the trend towards zero but it also decreases the probability of having a huge profit. The more risk management employed, the higher the trading costs will be due to the higher likelihood of stops triggering. The only risk management that works is leverage at around 1x. If you have $1,000 the most you should ever be trading is 0.01 lot.
Simply put. Give a seasoned trader $1000 with 500:1 ratio, and give an amateur $1000 with 5:1 ratio end of the day, the amateur would loose, seasoned trader would at least break-even. Lower leverage just slows the loosing process for amateur traders, and just in case you decide to argue that the seasoned trader will loose eventually, and I in my benevolence agree with you (which I don't), well guess what... he's better off, as he's done it (lost) in lesser time (imagine all that time wasted loosing an account, lost account, wasted time - a no brainer)

Calculators cannot calculate common sense
Quoting replaced
{quote} If you have $1,000 the most you should ever be trading is 0.01 lot.
With a stop loss distance of 5 pips or 1000 pips?
Just wow. I read the first page but still find that Replaced is sticking to his guns 30 pages on. Just wow.

Trading is a business. In any business there are always fees involved.

Trading is NOT gambling. With gambling there is no market research possible but rather just pushing another coin into the slot machine and hitting a button.

If you didn't go to Med. school and tried to be a surgeon then it's quite possible that 90% of your patients would die on the bench.

Instead of a 55% win rate to make a profit you will now need 60% to include commissions, spreads etc.

There is much information to learn to become a successful trader. Allowing for commissions and spreads is part of the deal. Now you have learnt that, you need to stop wasting your energy on arguing a point that every successful trader is aware of and perhaps move on to trying to figure out how to read the markets rather than trying to blame brokers for your losses.

Can't believe there have been 600 posts here. A calculator doesn't understand how to trade. Even when the market goes through a really easy period to trade (and it does) unless you know how to trade there is no hope by blindly pushing buttons like a person playing a slot machine and then cry victory that your calculator predicted it.

Seriously wow.
As the lights go by so too do the shadows move
Quoting replaced
Leverage is always the open position to equity ratio.
NO, NO, NO AND NO!

Leverage is the total value of the contract/lot you are buying divided by margin money, that's it, end of story. If you can buy (control) 100,000 units of currency with only 1,000 units of currency then your leverage is 100 to 1 (100,000 divided by 1,000).

Leverage has nothing to do with your Forex trading balance, or the money you have in your local bank or your secret Swiss bank account, or the money you stashed under your mattress, or in the cookie jar or buried in your backward or the Nevada Desert. None of this nonsense matters as far as leverage is concerned

Keep in mind that each time you initiate a position, your broker is automatically lending you money, EVEN IF YOU ALREADY HAVE THAT MONEY IN YOUR FOREX ACCOUNT!

Here is an example. You open a new Forex account with $5,000. You buy five (5) micro lots (1 micro lot = $1K) and since the leverage offered by your FX broker is 100:1 you only need $50 to initiate that position. So what happened here? Well you just bought $5,000 worth of currency with only $50 (margin money).

But wait a minute, how can you possibly buy something that costs $5,000 with only 50 bucks? It's very simple, your broker just loaned you $4,950 to complete your purchase. Now I know what you (and other traders) are thinking right now: "Hey, what are you talking about, the broker did not lend me the $4,950 because I ALREADY have it in my account"

Well think again, because your broker is NOT using your $5,000 balance as a collateral.

Why?

Because you could withdraw the $4,950 immediately (and go play poker in Las Vegas) and your position would STILL remain open (assuming the market has not moved against your position).

Get it now?

One more thing. Some traders will look at this example and naively conclude that no leverage was used because they bought $5,000 worth of currency (5 micro lots) but they already had $5,000 in their account, so leverage is 1:1. Again no, leverage is still 100:1 because only $50 was needed to initiate the position, their balance ($4,950) is still available for immediate withdrawal. Or the trader can use it to finance tons of new positions at the same time.

Listen guys, if you cannot understand what leverage truly is you will never understand what Forex (or Futures) trading is all about.

I am dead serious.
Each losing trade is an opportunity to learn
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