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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 EarnPipsNow
{quote} Nonsense. A loan is legally and financially created each time you trade on margin. {quote} True, at least technically. But what you conveniently "forgot" to mention is that the loss could be quite, quite substantial and in some cases even exceed your trading capital 10 or 50 times over (think SNB massacre, for instance).
You refuse to take into account impact of time and instrument design's ability of working around it.

Brokers want deposits before they allow you to trade, because they do not want to give out any loans. They will close out positions if you no longer have money to support difference between trade origination rate and the current exchange rate. In rare circumstances, the deposit may not be enough, but that is entirely different issue from the issue of loan being made for you to originate a trade.
Quoting grin
You refuse to take into account impact of time and instrument design's ability of working around it
I am not refusing anything, YOU simply do not get it, period.

And what's even worse is the fact that you are (deliberately or not) feeding false information to traders, especially beginners.

Quoting grin
Brokers want deposits before they allow you to trade, because they do not want to give out any loans
Reread what you just wrote, no disrespect but it's just total gibberish. Tell this to a few bankers or brokers and they will laugh for 3 hours, at least.

Quoting grin
In rare circumstances, the deposit may not be enough, but that is entirely different issue from the issue of loan being made for you to originate a trade.
But that's PRECISELY the issue!

Anyway, I will not answer any more of your comments. I am very, VERY patient but enough is enough.
Each losing trade is an opportunity to learn
Quoting EarnPipsNow
I am very, VERY patient but enough is enough.

Thanks for a clarification, but your comments do not negate anything which I said. I do not know what else I can add.

At least we share exactly the same feeling about each other.

Cheers.
Quoting GEfx
{quote} If this thread were split into 2 teams, I'd be on yours. I am concerned that the other team is winning converts to their side, because they seem so confident in their position while being so wrong. Here is where I would start with an explanation of leverage. You deposit $10,000 in your margin account (forget how much money you have elsewhere). Assume you limit your capital exposure to 2% per trade, or $200. Along comes a trade opportunity that fits your market structure analysis, meets your capital exposure rule of no more than 2% (for me,...

That is another effective way to negate leverage, but I think what he was trying to show by that 'money in the bank' talk is this:

Two traders A & B both have $10,000... they decide trade forex with it, by risking 2% ($200) of this $10,000 on each trade.

A goes with a broker leverage of 50:1 (max. lot = 0.1) --- requires $10,000 with broker.

B goes with a broker leverage of 200:1 (max. lot = 0.4) --- requires $10,000 with broker.

B can now decide to to maintain a (max. lot of 0.1) like A --- and at the same time only have $2500 with the broker. ($7,500 is SAFE in the Bank)

Remember Like you said, both traders are trading the same strategy, and will make the same loss or profit.

So where is the reasoning in leaving $7,500 to 'hang' with the broker when it can be SAFE in your bank?? Your guess is as good as mine...
Quoting sinqua
So where is the reasoning in leaving $7,500 to 'hang' with the broker when it can be SAFE in your bank?? Your guess is as good as mine...
Excellent point, Sinqua.

Once again, this problem comes from the fact that some traders still have no clue what leverage truly means.

They naively believe that if they deposit (or maintain) more money/capital with their FX (or futures) broker they will "reduce" (??) their leverage and trade "safely" (??) that way.

Of course it's total nonsense, that's what we have been trying to explain since day one.
Each losing trade is an opportunity to learn
Sinqua and EarnPipsNow,
Point well made. I understand the need to manage the risk of broker failure. I have 6 trading accounts and since the CHF blowup, have made a few changes in how I fund these accounts. I am big believer in only depositing money you intend to trade.

In my example of the $10,000 account, the trading strategy's intent should be to "leverage" the margin account to the maximum money-making potential. Here in the US, we have (at best) 50:1 leverage. In my mind, this trader should be thinking about how to leverage their margin. Trade 1 (at 50:1) "costs" me $2000 in margin (it's more than that in actuality but lets go with this for example), plus the possible $200 loss, for a total of $2200 that I will mentally set aside from the $10,000. I now have $7800 left to trade with, so I better be looking for my next trade. As trade 1 makes its run to my 60 pip target, if history repeats itself, there will be opportunities to enter a 2nd and 3rd trade. By the time the 3rd trade is in and all 3 are reaching the 60 pip target, my margin impact is $6600 ($2200 x 3 trades), minus the profits from the trades, and minus the impact of moving stops from -20 to BE.. Since all 3 trades are 1 standard lot each, lets say trade 1 is +60 or $600, trade 2 is +40 pips or $400, and trade 2 is +20 pips or $200. The total is $1200, so as the trades hit their target, the actual impact on margin of the trading was $6600-$1200-$600 (moving stops), totaling $4800. That leaves $5200 in unused margin in your account. Instead of moving this money to the bank, it would be better (IMHO) to look for another trading opportunity to put this money to work. If not, I agree you should move some of it out of the margin account and into something else.

In this example, with broker leverage of 100:1, all the numbers dramatically change even more in your favor. The trades "cost" $1000 plus the $200 for stop, or $1200 for each trade, and in the example of 3 trades, totals $3600. By the time you are reaching the 60 pip target, the "$3600 set aside goes to $3600-$1200-$600, or $1800. That leave you with $8200 in unused margin in your account. So if broker leverage is 100:1, you should move unused money to another investment or start working harder at trading!

The broker offers us leverage to trade, and it's our responsibility to use that leverage as we leverage our margin account to its maximum potential, while managing all the risks associated with trading. Your margin account should exactly reflect the funding needs of your trading strategy. What I have written here reflects my approach to trading, and is a subset of what I do. It works for me but may not work for everyone. Good trading everyone!
This is exactly why, with a 500:1 broker, you can compound winners using just the free margin which profits are creating. The potential return is exponential, so it is not only 10 X (50 vs 500). It is impossible to make this type of return in the US, butt yet they claim low leverage is "protecting" us, it only hinders me. People ask why I only place small amounts with broker, it is simply because I can make 2000% in 2-3 days with one trade!
Quoting Profit Daily
This is exactly why, with a 500:1 broker, you can compound winners using just the free margin which profits are creating. The potential return is exponential, so it is not only 10 X (50 vs 500). It is impossible to make this type of return in the US, butt yet they claim low leverage is "protecting" us, it only hinders me. People ask why I only place small amounts with broker, it is simply because I can make 2000% in 2-3 days with one trade!
Exactly what I think. I have considered moving our of the US and establishing citizenship in another country to achieve exactly that. Its better use, or more explosive use, of margin.
Quoting EarnPipsNow
{quote} Excellent point, Sinqua. Once again, this problem comes from the fact that some traders still have no clue what leverage truly means. They naively believe that if they deposit (or maintain) more money/capital with their FX (or futures) broker they will "reduce" (??) their leverage and trade "safely" (??) that way. Of course it's total nonsense, that's what we have been trying to explain since day one.
We've tried every way! I hope its settled this time once and for all, the back and forth was beginning to get redundant, began getting bored.
Quoting sinqua
{quote} That is another effective way to negate leverage, but I think what he was trying to show by that 'money in the bank' talk is this: Two traders A & B both have $10,000... they decide trade forex with it, by risking 2% ($200) of this $10,000 on each trade. A goes with a broker leverage of 50:1 (max. lot = 0.1) --- requires $10,000 with broker. B goes with a broker leverage of 200:1 (max. lot = 0.4) --- requires $10,000 with broker. B can now decide to to maintain a (max. lot of 0.1) like A --- and at the same time only have $2500...
Quoting sinqua
{quote} We've tried every way! I hope its settled this time once and for all, the back and forth was beginning to get redundant, began getting bored.
Watching pulling teeth is only entertaining for a short while. I'm off; good luck whatever you believe, be it little green men on Mars or giving all your life savings to a broker
Quoting jen101
{quote} {quote} Watching pulling teeth is only entertaining for a short while. I'm off; good luck whatever you believe, be it little green men on Mars or giving all your life savings to a broker
I believe in green men!! Green pips to you.
Quoting DavieM
I believe there are many things that can influence whether you will lose or win in your Forex trading. This really depends on the level of your knowledge. If you are new to forex then you don't have the experience and patience to understand how the markets work. To add to this you probably wont know how to use the tools in front of you. Your platform, your charts. If you are somewhat more experienced I believe that greediness is a major factor. Not knowing how to stop whilst your ahead. The greatest reason I believe anyone would lose in trading...
Fair point.
Quoting Profit Daily
This is exactly why, with a 500:1 broker, you can compound winners using just the free margin which profits are creating. The potential return is exponential, so it is not only 10 X (50 vs 500). It is impossible to make this type of return in the US, butt yet they claim low leverage is "protecting" us, it only hinders me. People ask why I only place small amounts with broker, it is simply because I can make 2000% in 2-3 days with one trade!
Just because you can make 2000% in 2-3 days doesn't mean that it will happen. I can also win the lottery with one ticket.

Quoting GEfx
{quote} Exactly what I think. I have considered moving our of the US and establishing citizenship in another country to achieve exactly that. Its better use, or more explosive use, of margin.
The same thing can be achieved by putting $500 in an account rather than 50 bucks.

Quoting GEfx
That leaves $5200 in unused margin in your account. Instead of moving this money to the bank, it would be better (IMHO) to look for another trading opportunity to put this money to work. If not, I agree you should move some of it out of the margin account and into something else. In this example, with broker leverage of 100:1, all the numbers dramatically change even more in your favor. The trades "cost" $1000 plus the $200 for stop, or $1200 for each trade, and in the example of 3 trades, totals $3600. By the time you are reaching the 60 pip target,...
It's not about placing as many trades as you can, it's about placing trades that have a higher likelihood of making money than a coin flip. It just turns out that making trades over small timescales have a negative ROI because of commission and spreads involved. You do not have a chance of making any money.
Quoting Abhimanyu
My 2 cents is that biggest reason a trader may lose money in the long run is " lack of patience ". You need to wait for a high probability trade.
YES and YES
In trading, you have to be defensive and aggressive at the same time
Patience is key. Some of the biggest profits are made at the market turns, which only happen a handful of times per pair in each calendar year.
Patience like a Cheetah - awaiting the exact right moment.
Quoting ForexCheetah
Patience is key. Some of the biggest profits are made at the market turns, which only happen a handful of times per pair in each calendar year.
Absolutely wrong. Patience will only slow the descent of your account to zero. The key to start making money is to admit that you cannot predict where the markets are headed in the short term. You CANNOT consistently make money in Forex trading short timespans. You WILL lose money eventually. Forex daytrading is no different than gambling on a slot machine. You'll get your ups and downs but eventually you'll go down to zero.
Quoting replaced
{quote} Absolutely wrong. Patience will only slow the descent of your account to zero. The key to start making money is to admit that you cannot predict where the markets are headed in the short term. You CANNOT consistently make money in Forex trading short timespans. You WILL lose money eventually. Forex daytrading is no different than gambling on a slot machine. You'll get your ups and downs but eventually you'll go down to zero.
Someone mentioned that in forex you need patience in waiting for a high probability trade..... What do you think about that?
Men lie, women lie, the numbers don't.
Quoting BeHonest
{quote} Someone mentioned that in forex you need patience in waiting for a high probability trade..... What do you think about that?
Worth reading
http://www.learntotradethemarket.com...-trading#close
You need experience to know when to wait and when to get in.I am afraid this can not be taught.Its something learned by yourself.
In trading, you have to be defensive and aggressive at the same time
Quoting BeHonest
{quote} Someone mentioned that in forex you need patience in waiting for a high probability trade..... What do you think about that?
Yes. Patience should exist when waiting to enter a high probable trade that correlates with the system traded. Patience in a losing trade can be detrimental, if a trader is moving SL etc. I prefer to set and forget SL. When in a winning trade, have the patience to sit and await Target.

Davit has a great point in learning by yourself. Personally, the experience came with a price, but the reward is great to those who can weather the storm and learn from the painful mistakes.
Patience like a Cheetah - awaiting the exact right moment.
Quoting BeHonest
{quote} Someone mentioned that in forex you need patience in waiting for a high probability trade..... What do you think about that?
I think that you can't make the determination on what's probable or not in short timespans. Why would you think otherwise?
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