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mitsubishi

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This is how to outshine amateurs

My friend Peter just blew his account.

After spending $15,000 on Forex courses, $10,000 on coaching, and losing $5,000 to a scam broker (InvesttechFX) – he was ready to call it quits.

After all of that, he decided to give it one last try. He bought an Expert Advisor (EA, also known as a trading robot).

After 6 months, boom… his trading account was gone – again.

“I am just stupid! Bloody stupid.” he told me.

However, Peter didn’t understand that it wasn’t his fault. He wasn’t “stupid”.

He was being harsh on himself. It wasn’t his fault for believing marketers and people with their “track records”, MyFXBook results, and hundreds of testimonials.

It is hard to resist.

Upon closer inspection though, it was obvious to me that this would never have worked.

Do you really think Warren Buffet relies on MyFXBook or a MetaTrader 4 account to make his buying decisions?

Do you think that anybody in the City of London or Wall Street make trading decisions based on that?

Of course not.

I do have an unfair advantage though. I spent 23 years on Wall Street trading wealthy client accounts. The last 13 years have been spent trading for myself.

During that time I have seen a number of miracles happen.

One of my biggest wins early in my trading career was a trade in 1982.

I started with a paltry $8,000 to my name and I used it to buy silver on the futures exchanges.  As it turns out my analysis was spot on, and I ended up running my $8,000 account to a little over $280,000 in only 30 days.

Since that time I have modified my trading strategy  – slightly.

After 120,000 trades, 1,200 trading accounts, and 8 Wall Street Firms – I am going to give you an exact guide to walking away with 4 additional winning trades per month and avoid losing your shirt – like Peter did (I’ll tell you what happened to him in a minute).

Before you read this article you must agree to the following statements:

  • There’s no magic pill. The markets are full of sharks and they will eat you alive. You need to stick to simple and sensible rules.
  • The Forex systems and robots churned out by internet marketer’s are laughable. – especially if you think that’s how they make money on Wall Street. And trust me, they DO make tons of money.
  • Forget about making 20% per month. That’s how poor people think. I’ll let you know exactly how much you can actually make later in this article.

Now, if you agree with all of those statements then I salute you. If you disagree with any of them, then close this page right now.

Still here? Good…

You are part of a small group of people who can separate reality from outright dreams and lies. And for that reason you will understand the words in this article better than anyone.

I don’t have time for ‘internet traders’, the ‘Forex forums’, or any other breeding ground for newbies who pretend they really know how the markets work – and neither should you.

This article is going to be simple.

I am going to show you how to get 4 – yes, just 4 – additional winning trades every month.

Don’t be fooled by the goofy EA developers and internet marketers out there.

Having 4 profitable trades per month is more than enough to push you into the big boys club.

You can make more, but my aim is to get you started with something consistent. Once you’ve got that mastered you can increase your output.

Why you won’t make a dime from the information contained in this article

Most people reading this won’t make a single dollar. Not because the content sucks – I believe it is some of the best trading tips in the world.

It is because people are lazy and don’t implement what they learn.

It is because people lose their shit and take too much risk.

And it is because you might not be able to handle my style. My past results really are no indication of you making any money whatsoever.

You might simply not have what it takes. However, there are a small percentage of people who do. And by following the rules you might be one of them.

There are no guarantees. So read carefully and make sure you examine every word on this page as if your life depends on it. Because it might just change it forever – if you have what it takes.

#1. The last opportunity for major profits in the Forex market

Have you ever been stopped out of the trade, just for it to change direction immediately?

Do you ever feel like every decision you make is the wrong one?

There is this big lie out there that hundreds of thousands of Forex traders believe.

And you may have believed this too at one point.

“The Forex market is the most liquid market in the world and therefore it cannot be manipulated“.

That is plain wrong.

Governments have been cracking down on big banks because of their manipulation of a whole host of markets.

Check out this article on the BBC:

Screenshot 2015-08-18 21.01.02

Have a look at this chart they supplied:

_78920580_forex_rigging_explainer1_624

Have you ever been knocked out of a trade that just seemed totally random?

Well, chances are somebody rigged it. And chances are… you didn’t confirm your trade with a “2-pattern overlay”. More on that in a little bit.

You and I are small fish who are competing with much MUCH bigger sharks. Sharks who know the waters better than you do.

I used to swim with them. Merrill Lynch was only one of 8 companies I worked for on Wall Street. They did NOT take prisoners.

There are entire teams who’s job it is to cheat the system. And those are some of the brightest minds in the world from the best universities in the world.

You have to accept that you cannot beat them.

That’s why, what I’m about to reveal, is the very last opportunity to profit in the Forex markets.

Forget scraping a few pips off the charts.

Forget taking daily pivot trades, or “snipers”, or FAPTurbos, or whatever else these idiots are selling these days.

You have to stick to simple daily trades that unfold over a period of days, weeks, and sometimes months.

By riding the wave on a boat, you’ll be safe from the sharks on Wall Street.

If you want to get all 21 of my Power Strategies then click here and I’ll email them to you.

#2. How to dominate a currency with profitable trades

That’s a lie. You can never ‘dominate’ a market. That kind of thinking will get your account murdered.

However, you can put the odds severely in your favor by doing one thing.

You can use a simple “2-pattern overlay” before entering a trade

I’ve been using this since the 80s and it still works better than anything.

One million dollar client at EF Hutton & Co (another Wall Street company) dubbed me the “2-pattern wizard”.

Every time I used it he knew he was about to make enough cash to buy another house.

All you do is look for a minimum of two chart patterns to “confirm the trade”.

Now, that doesn’t mean you confirm an entry. You simply confirm that you potentially want to take a trade.

Here’s an example from one of my trades:

Example 2 pattern overlay

I saw a triple “core support bounce”, and then a simple overhead resistance. (If you don’t know how to spot price patterns then don’t worry… I’ll get to that).

DON’T jump into the trade just yet – it isn’t that easy.

You still have to know when to enter. I use a very specific ‘trigger’ that usually means the market is coiled like a spring, ready to burst in the right direction.

Keep reading and you’ll learn all about it.

#3. Use this simple trigger

Most newbies would simply jump into the trade because they saw a “double bottom” or some other pattern.

You and I know better.

You have to wait for the market to form a coil.

There are several different types of market “coils”, however the one I’m about to reveal is the easiest to spot and tends to give me better results.

It is called an “inside day bar”.

So, looking at the daily chart I would wait for this bar to form.

inside-day-bar

Here’s a real live example from a trade I took a while ago:

Screenshot 2015-08-20 17.31.49

Two inside day bars were the beginning of a nice coil. Here’s another example:

Screenshot 2015-08-20 17.34.30

#4. Have a tight stop loss and await the coming burst in movement

Remember that silver trade I told you about in the 1980s? It was my first big win.

Even though I turned $8k into $280k the risk was minimal. I did that by scaling into a rocketing market. Despite what people say… NEVER do that.

Not until you understand the true risks involved.

It can take a heavy psychological impact on you. I once saw a guy at Commodities Corp (now a division of Goldman Sachs) throw his computer across the room because he leveraged his position by scaling in too much.

Theres no need to do it.

Simply stick with what I am about to reveal and you could walk away with a handful of winning trades each month.

Keep the initial stop loss tight, and then keep it loose…

The initial stop loss is very tight. I anchor it close to the previous bar.

If you’ve established the correct price action and trigger bar, you should see it shoot off in the right direction.

Only 1 out of 2 trades tends to linger around. If they turn, then it means the trade is a dud and your stop loss will kick you out quickly.

However, when it goes… it goes.

Here’s an example of a good trade I took.

graph51

I made a fat 5.2% in about one week.

This example shows how it immediately jumped in my favor. That means I spotted a good coil.

By the way… those are actual trades. My trading platform marks them with those little circled arrows.

Here’s another example:

EURGBP immediately jumped after a trigger coil for a 2.5% gain in just one day.

graph11

I don’t usually exit trades in the same day, however, 2.5% is a lot of money in my world.

You don’t often see 2.5% days. If everyday was like that my account would grow by a billion every month.

So when it happens… I take it.

#5. Exiting the trade for a fat profit

This is how you get 4 additional winning trades.

If you get the coil right. Your trade should shoot out of the block like Usain Bolt.

This allows you to have a tight stop loss. It puts you in a great position to make huge gains with a tiny risk.

If your stop loss was far away from your initial entry then your risk would be greater and you’ll have to reduce your position size.

Therefore, I would recommend a hard and fast 3:1 risk reward ratio.

If your stop loss is 35 pips away, your profit target will be 105 pips (three times the stop loss).

Now, admittedly I use a way more complicated process for my exits. I could write an entire book on it.

However, when I looked back at my last 300 trades, I noticed that if I used THIS exit strategy I would still have made a great return.

It is simple and it takes psychology out of the equation.

#6. How to ‘never’ lose

I learned this while working at Bridgewater Associates (they manage about $170 billion) from a funny looking Irishman.

Back in 2011/2012 I forgot this rule and I duly got slaughtered.

There is a story inside of the book ‘Marketing Wizzards’. It talks about a great trader who locks himself in a room with no distractions. No windows. No TV. No Computer.

He has his assistant bring him his chart-book without the instruments named.

So he doesn’t know if he’s trading pork bellies or gold. He doesn’t care.

All he cares about is the price and the fact that he has no distractions. It means he ‘never loses’.

My rule gives me the same sort of piece of mind.

Before I let you in on it you must know what I mean by ‘never’ lose.

When you lose a trade – you aren’t ‘losing’. It is simply part of the process. It is the equivalent of a business expense.

You will always lose trades. However, when you lose your mind and you don’t follow your own rules. That’s when you truly lose.

So here are the exact rules you need to follow to NEVER lose, always stick to your rules, and always win in the long run.

Do not share your trading results

I did once. And only once.

It was a huge mistake.

All of the sudden I was answerable to thousands of people who happen to stumble across my profile. This doesn’t work when you are a trader.

I lost focus. I kept fussing about whether a trade was a winner or a loser. I didn’t focus on whether it followed the rules or not.

As long as you follow the rules… you are winning.

When you don’t follow the rules – you are losing (even when you make a profit).

Systems and routines are the only thing that make you profitable in the long run.

It is the only thing that’ll protect you against the sharks.

So whatever you do – don’t share you trading results. Not even with your husband or wife.

It’ll put external pressures on you.

Don’t even mention a winning trade or a losing trade. Simply tell them you’re winning because you followed the rules.

#7. How to make $1m from trading

Do you want to know the real secret?

The one that most people ignore, because they don’t really take their trading seriously?

Well, it is a system of recording and documenting your trades in detail.

I call it a trade journal. Super original right?

Every single time I am about to take a trade, I stop.

I take a snapshot of the chart, I write out my analysis (the reason WHY), and then I enter the order.

90% of my orders are pending orders, which means they only enter when the market reaches a specific price.

This is an example of three pages inside of my journal.

Trade Journal

By doing this with your trading you’ll be able to get a lot more focussed.

When you look at the markets you will feel excited. You will get a rush of adrenaline.

Stop. Take a deep breath and start recording the trade before it happens.

It gives you the breathing room you need to make rational decisions. It helps you to be a winner every time by following the rules.

If you want to receive my 21 Power Strategies then click here and I’ll send them to you.

Seriously. Get my journal. It’ll show you how you should structure yours for maximum results.

You’ll also get a better feel for the way I trade.

#8. Past trading results on MyFXBook will drain your trading account

This is the biggest difference between the Wall Street traders and normal folk.

On Wall Street – we know that past results don’t mean anything. They really are no indication of future performance.

Even if the results are third party verified.

Think about it. How many times have you bought a system or a program based on their past results?

And… how many times has it worked out?

Now you have two choices

I should congratulate you. You’ve read the entire article.

However, this is just the start. You now face two choices.

Choice #1

Forget what I told you and keep doing what everybody else is doing.

It is easier to follow the herd after all. Some of the things I talked about aren’t easy. Some of them are plain boring.

Yet this is what it takes. And I think you know that, which is why you’ll probably go for…

Choice #2

This is the choice smart Forex traders go for.

You grit your teeth and follow the rules.

So that you can finally break away from the ‘internet herd’ and actually start taking pride in being a trader. Don’t fall into the same trap as Peter.

Be the person that “actually makes money”. How nice would that feel for a change?

I’ll help you out by giving you my 21 Power Strategies without asking you for a dime. Just let me know which email address I should send it.

Dont forget to like and subscribe

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On 1/11/2020 at 12:26 PM, mitsubishi said:

DefinItely you can make money in FOREX if you understand what is beneath the statistics in financial data as it evolves in countries you may have wrongt ideas about. (Did I really need to state the obvious)🙁

THINK OUTSIDE THE BOX- throw those indicators OUT OUT OUT.

Defining Capitalism, Communism, Fascism, Socialism

 Caveat: There are some inherent pitfalls trying to offer simple, bite sized definitions of capitalism, socialism, communism and fascism – the first being that these are complex concepts concerning both economics and government, so short definitions will be incomplete; the second being that these concepts are not always mutually exclusive (most modern states combine elements of more than one); the third being that historical states defined the terms differently; and finally, some of the terms refer strictly to economic systems (capitalism) while others (fascism) also refer to government and economic systems (communism and fascism). 

For a point of reference, the United States is a Constitutional Democratic Republic that has long embraced both capitalism (free markets) and socialism (public schools and universities, and public works – parks, roads and highways, sewer and water, dams, harbors, as well as social welfare, such as worker’s comp, unemployment insurance, social security etc.).

Capitalism
In common usage, the word capitalism means an economic system in which all or most of the means of production are privately owned and operated, and the investment of capital and the production, distribution and prices of commodities (goods and services) are determined mainly in a free market, rather than by the state. In capitalism, the means of production are generally operated for profit.

In a purely capitalist economy, there would be no public schools, no state owned or maintained roads and highways, public works, welfare, unemployment insurance, workers compensation, Social Security benefits etc.

Socialism
Most generally, socialism refers to state ownership of common property, or state ownership of the means of production.  A purely socialist state would be one in which the state owns and operates the means of production. However, nearly all modern capitalist countries combine socialism and capitalism.

The University of Idaho, and any other public school or university, is a “socialist” institutions, and those who attend it or work for it are partaking in socialism, because it is owned and operated by the state of Idaho.  The same is true of federal and state highways, federal and state parks, harbors etc.

Communism
Most generally, communism refers to community ownership of property, with the end goal being complete social equality via economic equality.  Communism is generally seen by communist countries as an idealized utopian economic and social state that the country as a whole is working toward;  that is to say that pure communism is the ideal that the People’s Republic of China is (was?) working toward.  Such an ideal often justifies means (such as authoritarianism or totalitariansim) that are not themselves communist ideals.

Fundamentally, communism argues that all labor belongs to the individual laborer; no man can own another man's body, and therefore each man owns his own labor.  In this model all "profit" actually belongs in part to the laborer, not, or not just, those who control the means of production, such as the business or factory owner.  Profit that is not shared with the laborer, therefore, is considered inherently exploitive.

 Fascism
The word descends from the Latin ‘fasces’, the bundle of sticks used by the Romans to symbolize their empire.  This should clue you in that Fascism attempts to recapture both the glory and social organization of Rome.

Most generally, “a governmental system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism.” 

Unlike communism, fascism is opposed to state ownership of capital and economic equality is not a principle or goal.  During the 1930s and WWII, communism and fascism represented the extreme left and right, respectively, in European politics.  Hitler justified both Nazi anti-Semitism and dictatorship largely on the basis of his working to fight-off communism.

The church also played a major role in all of the European fascist countries (Germany, Italy, Spain, Portugal) as the authority on religious and moral issues, which was opposed to the threat of "godless communists".

Mussolini, the Italian father of Fascism, writes that: “..Fascism [is] the complete opposite of…Marxian Socialism, the materialist conception of history of human civilization can be explained simply through the conflict of interests among the various social groups and by the change and development in the means and instruments of production.... Fascism, now and always, believes in holiness and in heroism; that is to say, in actions influenced by no economic motive, direct or indirect. And if the economic conception of history be denied, according to which theory men are no more than puppets, carried to and fro by the waves of chance, while the real directing forces are quite out of their control, it follows that the existence of an unchangeable and unchanging class-war is also denied - the natural progeny of the economic conception of history. And above all Fascism denies that class-war can be the preponderant force in the transformation of society....

After Socialism, Fascism combats the whole complex system of democratic ideology, and repudiates it, whether in its theoretical premises or in its practical application. Fascism denies that the majority, by the simple fact that it is a majority, can direct human society; it denies that numbers alone can govern by means of a periodical consultation, and it affirms the immutable, beneficial, and fruitful inequality of mankind, which can never be permanently leveled through the mere operation of a mechanical process such as universal suffrage....

A Note On Morality:  Capitalism and socialism are essentially a-moral* terms: they simply refer to economic systems – who owns what and how capital is exchanged – regardless of any other type of moral principle or goal.  Communism and fascism, on the other hand, refer to both economics, governance, and basic moral principles: that is to say they refer to overarching ideas about how people should live (rather than describing how people do business), so they imply a total ideology: a morality, an economy, a government.

DONT forget to like and subscribe

https://www.webpages.uidaho.edu/engl_258/Lecture Notes/capitalism etc defined.htm

Worth bumping because you all forgot to subscribe and like Will keep bumping until there is a change in attitude here.. just kidding jeez

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You cant argue with statistics (statistically speaking.. though)

Find out what are your chances to make money with forex and stock trading and which is the “riskiest” and which is the “safest” broker out there.

For the first time in the history of trading, you get to know the real statistics of how many investors actually make money by trading CFD’s like forex, stocks etc.

One of the most popular questions bothering new forex traders has been “What percentage of forex traders make money?”, “How risky is forex trading?”. There was some speculation, but nobody had significant hard facts. Until now…

Most traders have heard the popular estimate that 96% to 99% of traders lose money. This figure has been circling around for many years, but it was more like a folk legend than a hard fact. There was some data from a couple of brokers, but it was not possible to get the results from all the market participants. But now the secret can be revealed thanks to the new regulations.

With the new European regulations that came into effect from August 1, 2018, brokers are required to display clearly on their marketing message what is the percentage of their clients that lose money. For example: “75% of retail investor accounts lose money when trading CFDs with this provider.”

So we decided to gather the statistics from all of the established brokers to get a proper answer on what percentage of forex traders make money. It seems that we are the first ones to publish this information, so you are in the lucky place! 31 CFD brokers were surveyed overall and here are the results:

how many forex and stock traders lose money when trading - different broker comparison

It turns out that the losing account percentage varies from 65% to 89%. And the average percentage of losing accounts is 77%.

Pie chart showing how many forex traders make and lose money

77% of accounts losing money still seems quite a lot, but it is much lower than the folk legend of 96%. So we can say that the myth has been busted! Given the fact that all business activities are risky and that more than 90% of startups fail, this number is not so bad after all.

Who are the winning brokers / trading providers

Now that we know the average losing percentages, let’s find out which trading providers report the lowest rates of losing investor accounts. Here are the Top5:

forex brokers with the lowest rate of losing accounts and traders

As you can see in the image above, eToro stands out from the crowd with the lowest percentage of losing accounts. 65% losing accounts means that 35% of eToro users are profitable. That is 3 times more than the worst performing brokers and almost 9 times more than the folk legend predicted.

What could be the reason behind the high profitability rate of eToro? The main difference of eToro from other trading providers is the possibility to connect with other traders, discuss trading strategies, and use their patented CopyTrader™ technology to automatically copy the trades of successful traders. Apparently, this actually works!

Who are the losing brokers / trading providers

Here are the Top5 brokers with the highest percentages of losing investor accounts:

forex brokers with the highest rate of losing investor accounts

It might be that these brokers attract the least experienced traders and don’t offer them enough learning and training tools.

Here is the full list of trading providers with the corresponding losing accounts:

How many forex traders and investors lose money - full broker comparisonNow you know the true chances of winning in the forex and stock trading markets! Accept that there is no such thing as a free lunch. Winning at forex trading takes work just like anything else.

Disclaimer:

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

  Dont forget to like and subscribe

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On 1/15/2020 at 6:04 PM, mitsubishi said:

This is how to outshine amateurs

My friend Peter just blew his account.

After spending $15,000 on Forex courses, $10,000 on coaching, and losing $5,000 to a scam broker (InvesttechFX) – he was ready to call it quits.

After all of that, he decided to give it one last try. He bought an Expert Advisor (EA, also known as a trading robot).

After 6 months, boom… his trading account was gone – again.

“I am just stupid! Bloody stupid.” he told me.

However, Peter didn’t understand that it wasn’t his fault. He wasn’t “stupid”.

He was being harsh on himself. It wasn’t his fault for believing marketers and people with their “track records”, MyFXBook results, and hundreds of testimonials.

It is hard to resist.

Upon closer inspection though, it was obvious to me that this would never have worked.

Do you really think Warren Buffet relies on MyFXBook or a MetaTrader 4 account to make his buying decisions?

Do you think that anybody in the City of London or Wall Street make trading decisions based on that?

Of course not.

I do have an unfair advantage though. I spent 23 years on Wall Street trading wealthy client accounts. The last 13 years have been spent trading for myself.

During that time I have seen a number of miracles happen.

One of my biggest wins early in my trading career was a trade in 1982.

I started with a paltry $8,000 to my name and I used it to buy silver on the futures exchanges.  As it turns out my analysis was spot on, and I ended up running my $8,000 account to a little over $280,000 in only 30 days.

Since that time I have modified my trading strategy  – slightly.

After 120,000 trades, 1,200 trading accounts, and 8 Wall Street Firms – I am going to give you an exact guide to walking away with 4 additional winning trades per month and avoid losing your shirt – like Peter did (I’ll tell you what happened to him in a minute).

Before you read this article you must agree to the following statements:

  • There’s no magic pill. The markets are full of sharks and they will eat you alive. You need to stick to simple and sensible rules.
  • The Forex systems and robots churned out by internet marketer’s are laughable. – especially if you think that’s how they make money on Wall Street. And trust me, they DO make tons of money.
  • Forget about making 20% per month. That’s how poor people think. I’ll let you know exactly how much you can actually make later in this article.

Now, if you agree with all of those statements then I salute you. If you disagree with any of them, then close this page right now.

Still here? Good…

You are part of a small group of people who can separate reality from outright dreams and lies. And for that reason you will understand the words in this article better than anyone.

I don’t have time for ‘internet traders’, the ‘Forex forums’, or any other breeding ground for newbies who pretend they really know how the markets work – and neither should you.

This article is going to be simple.

I am going to show you how to get 4 – yes, just 4 – additional winning trades every month.

Don’t be fooled by the goofy EA developers and internet marketers out there.

Having 4 profitable trades per month is more than enough to push you into the big boys club.

You can make more, but my aim is to get you started with something consistent. Once you’ve got that mastered you can increase your output.

Why you won’t make a dime from the information contained in this article

Most people reading this won’t make a single dollar. Not because the content sucks – I believe it is some of the best trading tips in the world.

It is because people are lazy and don’t implement what they learn.

It is because people lose their shit and take too much risk.

And it is because you might not be able to handle my style. My past results really are no indication of you making any money whatsoever.

You might simply not have what it takes. However, there are a small percentage of people who do. And by following the rules you might be one of them.

There are no guarantees. So read carefully and make sure you examine every word on this page as if your life depends on it. Because it might just change it forever – if you have what it takes.

#1. The last opportunity for major profits in the Forex market

Have you ever been stopped out of the trade, just for it to change direction immediately?

Do you ever feel like every decision you make is the wrong one?

There is this big lie out there that hundreds of thousands of Forex traders believe.

And you may have believed this too at one point.

“The Forex market is the most liquid market in the world and therefore it cannot be manipulated“.

That is plain wrong.

Governments have been cracking down on big banks because of their manipulation of a whole host of markets.

Check out this article on the BBC:

Screenshot 2015-08-18 21.01.02

Have a look at this chart they supplied:

_78920580_forex_rigging_explainer1_624

Have you ever been knocked out of a trade that just seemed totally random?

Well, chances are somebody rigged it. And chances are… you didn’t confirm your trade with a “2-pattern overlay”. More on that in a little bit.

You and I are small fish who are competing with much MUCH bigger sharks. Sharks who know the waters better than you do.

I used to swim with them. Merrill Lynch was only one of 8 companies I worked for on Wall Street. They did NOT take prisoners.

There are entire teams who’s job it is to cheat the system. And those are some of the brightest minds in the world from the best universities in the world.

You have to accept that you cannot beat them.

That’s why, what I’m about to reveal, is the very last opportunity to profit in the Forex markets.

Forget scraping a few pips off the charts.

Forget taking daily pivot trades, or “snipers”, or FAPTurbos, or whatever else these idiots are selling these days.

You have to stick to simple daily trades that unfold over a period of days, weeks, and sometimes months.

By riding the wave on a boat, you’ll be safe from the sharks on Wall Street.

If you want to get all 21 of my Power Strategies then click here and I’ll email them to you.

#2. How to dominate a currency with profitable trades

That’s a lie. You can never ‘dominate’ a market. That kind of thinking will get your account murdered.

However, you can put the odds severely in your favor by doing one thing.

You can use a simple “2-pattern overlay” before entering a trade

I’ve been using this since the 80s and it still works better than anything.

One million dollar client at EF Hutton & Co (another Wall Street company) dubbed me the “2-pattern wizard”.

Every time I used it he knew he was about to make enough cash to buy another house.

All you do is look for a minimum of two chart patterns to “confirm the trade”.

Now, that doesn’t mean you confirm an entry. You simply confirm that you potentially want to take a trade.

Here’s an example from one of my trades:

Example 2 pattern overlay

I saw a triple “core support bounce”, and then a simple overhead resistance. (If you don’t know how to spot price patterns then don’t worry… I’ll get to that).

DON’T jump into the trade just yet – it isn’t that easy.

You still have to know when to enter. I use a very specific ‘trigger’ that usually means the market is coiled like a spring, ready to burst in the right direction.

Keep reading and you’ll learn all about it.

#3. Use this simple trigger

Most newbies would simply jump into the trade because they saw a “double bottom” or some other pattern.

You and I know better.

You have to wait for the market to form a coil.

There are several different types of market “coils”, however the one I’m about to reveal is the easiest to spot and tends to give me better results.

It is called an “inside day bar”.

So, looking at the daily chart I would wait for this bar to form.

inside-day-bar

Here’s a real live example from a trade I took a while ago:

Screenshot 2015-08-20 17.31.49

Two inside day bars were the beginning of a nice coil. Here’s another example:

Screenshot 2015-08-20 17.34.30

#4. Have a tight stop loss and await the coming burst in movement

Remember that silver trade I told you about in the 1980s? It was my first big win.

Even though I turned $8k into $280k the risk was minimal. I did that by scaling into a rocketing market. Despite what people say… NEVER do that.

Not until you understand the true risks involved.

It can take a heavy psychological impact on you. I once saw a guy at Commodities Corp (now a division of Goldman Sachs) throw his computer across the room because he leveraged his position by scaling in too much.

Theres no need to do it.

Simply stick with what I am about to reveal and you could walk away with a handful of winning trades each month.

Keep the initial stop loss tight, and then keep it loose…

The initial stop loss is very tight. I anchor it close to the previous bar.

If you’ve established the correct price action and trigger bar, you should see it shoot off in the right direction.

Only 1 out of 2 trades tends to linger around. If they turn, then it means the trade is a dud and your stop loss will kick you out quickly.

However, when it goes… it goes.

Here’s an example of a good trade I took.

graph51

I made a fat 5.2% in about one week.

This example shows how it immediately jumped in my favor. That means I spotted a good coil.

By the way… those are actual trades. My trading platform marks them with those little circled arrows.

Here’s another example:

EURGBP immediately jumped after a trigger coil for a 2.5% gain in just one day.

graph11

I don’t usually exit trades in the same day, however, 2.5% is a lot of money in my world.

You don’t often see 2.5% days. If everyday was like that my account would grow by a billion every month.

So when it happens… I take it.

#5. Exiting the trade for a fat profit

This is how you get 4 additional winning trades.

If you get the coil right. Your trade should shoot out of the block like Usain Bolt.

This allows you to have a tight stop loss. It puts you in a great position to make huge gains with a tiny risk.

If your stop loss was far away from your initial entry then your risk would be greater and you’ll have to reduce your position size.

Therefore, I would recommend a hard and fast 3:1 risk reward ratio.

If your stop loss is 35 pips away, your profit target will be 105 pips (three times the stop loss).

Now, admittedly I use a way more complicated process for my exits. I could write an entire book on it.

However, when I looked back at my last 300 trades, I noticed that if I used THIS exit strategy I would still have made a great return.

It is simple and it takes psychology out of the equation.

#6. How to ‘never’ lose

I learned this while working at Bridgewater Associates (they manage about $170 billion) from a funny looking Irishman.

Back in 2011/2012 I forgot this rule and I duly got slaughtered.

There is a story inside of the book ‘Marketing Wizzards’. It talks about a great trader who locks himself in a room with no distractions. No windows. No TV. No Computer.

He has his assistant bring him his chart-book without the instruments named.

So he doesn’t know if he’s trading pork bellies or gold. He doesn’t care.

All he cares about is the price and the fact that he has no distractions. It means he ‘never loses’.

My rule gives me the same sort of piece of mind.

Before I let you in on it you must know what I mean by ‘never’ lose.

When you lose a trade – you aren’t ‘losing’. It is simply part of the process. It is the equivalent of a business expense.

You will always lose trades. However, when you lose your mind and you don’t follow your own rules. That’s when you truly lose.

So here are the exact rules you need to follow to NEVER lose, always stick to your rules, and always win in the long run.

Do not share your trading results

I did once. And only once.

It was a huge mistake.

All of the sudden I was answerable to thousands of people who happen to stumble across my profile. This doesn’t work when you are a trader.

I lost focus. I kept fussing about whether a trade was a winner or a loser. I didn’t focus on whether it followed the rules or not.

As long as you follow the rules… you are winning.

When you don’t follow the rules – you are losing (even when you make a profit).

Systems and routines are the only thing that make you profitable in the long run.

It is the only thing that’ll protect you against the sharks.

So whatever you do – don’t share you trading results. Not even with your husband or wife.

It’ll put external pressures on you.

Don’t even mention a winning trade or a losing trade. Simply tell them you’re winning because you followed the rules.

#7. How to make $1m from trading

Do you want to know the real secret?

The one that most people ignore, because they don’t really take their trading seriously?

Well, it is a system of recording and documenting your trades in detail.

I call it a trade journal. Super original right?

Every single time I am about to take a trade, I stop.

I take a snapshot of the chart, I write out my analysis (the reason WHY), and then I enter the order.

90% of my orders are pending orders, which means they only enter when the market reaches a specific price.

This is an example of three pages inside of my journal.

Trade Journal

By doing this with your trading you’ll be able to get a lot more focussed.

When you look at the markets you will feel excited. You will get a rush of adrenaline.

Stop. Take a deep breath and start recording the trade before it happens.

It gives you the breathing room you need to make rational decisions. It helps you to be a winner every time by following the rules.

If you want to receive my 21 Power Strategies then click here and I’ll send them to you.

Seriously. Get my journal. It’ll show you how you should structure yours for maximum results.

You’ll also get a better feel for the way I trade.

#8. Past trading results on MyFXBook will drain your trading account

This is the biggest difference between the Wall Street traders and normal folk.

On Wall Street – we know that past results don’t mean anything. They really are no indication of future performance.

Even if the results are third party verified.

Think about it. How many times have you bought a system or a program based on their past results?

And… how many times has it worked out?

Now you have two choices

I should congratulate you. You’ve read the entire article.

However, this is just the start. You now face two choices.

Choice #1

Forget what I told you and keep doing what everybody else is doing.

It is easier to follow the herd after all. Some of the things I talked about aren’t easy. Some of them are plain boring.

Yet this is what it takes. And I think you know that, which is why you’ll probably go for…

Choice #2

This is the choice smart Forex traders go for.

You grit your teeth and follow the rules.

So that you can finally break away from the ‘internet herd’ and actually start taking pride in being a trader. Don’t fall into the same trap as Peter.

Be the person that “actually makes money”. How nice would that feel for a change?

I’ll help you out by giving you my 21 Power Strategies without asking you for a dime. Just let me know which email address I should send it.

Dont forget to like and subscribe

Waiting for one constructive comment from you guys..anyone

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good news!!

It seems you can make good money at forex

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

David Rodriguez
11-14 minutes

  • We look through 43 million real trades to measure trader performance
  • Majority of trades are successful and yet traders are losing
  • Reward to Risk ratios play a vital role in capital preservation

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?

The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult.

We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.

Percent of All Trades Closed Out at a Gain and Loss per Currency Pair

 

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time.

If traders were right more than half of the time, why did most lose money?

Average Profit/Loss per Winning and Losing Trades per Currency Pair

image.gif.8807f4ef6eb361f828b94f0553d3e388.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades.

What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution.

Cut Losses, Let Profits Run – Why is this So Difficult to Do?

In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run.

When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later.

If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains.

But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology.

A Simple Wager – Understanding Human Behavior Towards Winning and Losing

What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?

       

Expected Return

Gains

Choice A

50% chance to Win 1000

50% chance to Win 0

Expect to win $500 over time

 

Choice B

Win 450

 

Win $450

Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.

       

Expected Return

Losses

Choice A

50% chance to Lose 1000

50% chance to Lose 0

Expect to lose $500 over time

 

Choice B

Lose 450

 

Lose $450

In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why?

Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory

Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards.

The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains.

It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around.

This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently?

Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure

image.gif.4170df05e5702049d6fc164f7cd4026f.gif

Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success.

Avoid the Common Pitfall

Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely?

When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book.

Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio.

If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even.

Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning.

This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call money management. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.

Does Using 1:1 Reward to Risk Really Work?

Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.

Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.

Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference.

image.gif.e7da45931077183f1488818e49476773.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

Game Plan: What Strategy Can I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.

We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders.

*Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015.

Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan.

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

David Rodriguez
11-14 minutes

  • We look through 43 million real trades to measure trader performance
  • Majority of trades are successful and yet traders are losing
  • Reward to Risk ratios play a vital role in capital preservation

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?

The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult.

We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.

Percent of All Trades Closed Out at a Gain and Loss per Currency Pair

 

 

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time.

If traders were right more than half of the time, why did most lose money?

Average Profit/Loss per Winning and Losing Trades per Currency Pair

image.gif.5b0766e13bbcff95d04f02fcd54e440b.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades.

What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution.

Cut Losses, Let Profits Run – Why is this So Difficult to Do?

In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run.

When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later.

If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains.

But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology.

A Simple Wager – Understanding Human Behavior Towards Winning and Losing

What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?

       

Expected Return

Gains

Choice A

50% chance to Win 1000

50% chance to Win 0

Expect to win $500 over time

 

Choice B

Win 450

 

Win $450

Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.

       

Expected Return

Losses

Choice A

50% chance to Lose 1000

50% chance to Lose 0

Expect to lose $500 over time

 

Choice B

Lose 450

 

Lose $450

In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why?

Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory

Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards.

The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains.

It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around.

This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently?

Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure

image.gif.ab2d8a3005c6df9c500161924a517f7d.gif

Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success.

Avoid the Common Pitfall

Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely?

When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book.

Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio.

If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even.

Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning.

This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call money management. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.

Does Using 1:1 Reward to Risk Really Work?

Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.

Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.

Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference.

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

David Rodriguez
11-14 minutes

  • We look through 43 million real trades to measure trader performance
  • Majority of trades are successful and yet traders are losing
  • Reward to Risk ratios play a vital role in capital preservation

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?

The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult.

We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.

Percent of All Trades Closed Out at a Gain and Loss per Currency Pair

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time.

If traders were right more than half of the time, why did most lose money?

Average Profit/Loss per Winning and Losing Trades per Currency Pair

image.gif.2313ce8da60e24caf8ff27a39c907751.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades.

What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution.

Cut Losses, Let Profits Run – Why is this So Difficult to Do?

In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run.

When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later.

If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains.

But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology.

A Simple Wager – Understanding Human Behavior Towards Winning and Losing

What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?

       

Expected Return

Gains

Choice A

50% chance to Win 1000

50% chance to Win 0

Expect to win $500 over time

 

Choice B

Win 450

 

Win $450

Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.

       

Expected Return

Losses

Choice A

50% chance to Lose 1000

50% chance to Lose 0

Expect to lose $500 over time

 

Choice B

Lose 450

 

Lose $450

In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why?

Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory

Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards.

The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains.

It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around.

This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently?

Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure

image.gif.14e767ef161a67f689cd6bcea558618a.gif

Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success.

Avoid the Common Pitfall

Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely?

When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book.

Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio.

If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even.

Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning.

This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call money management. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.

Does Using 1:1 Reward to Risk Really Work?

Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.

Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.

Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference.

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

David Rodriguez
11-14 minutes

  • We look through 43 million real trades to measure trader performance
  • Majority of trades are successful and yet traders are losing
  • Reward to Risk ratios play a vital role in capital preservation

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?

The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult.

We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.

Percent of All Trades Closed Out at a Gain and Loss per Currency Pair

 

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time.

If traders were right more than half of the time, why did most lose money?

Average Profit/Loss per Winning and Losing Trades per Currency Pair

image.gif.1f460b216ff33d32a110a9640f681fc8.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades.

What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution.

Cut Losses, Let Profits Run – Why is this So Difficult to Do?

In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run.

When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later.

If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains.

But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology.

A Simple Wager – Understanding Human Behavior Towards Winning and Losing

What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?

       

Expected Return

Gains

Choice A

50% chance to Win 1000

50% chance to Win 0

Expect to win $500 over time

 

Choice B

Win 450

 

Win $450

Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.

       

Expected Return

Losses

Choice A

50% chance to Lose 1000

50% chance to Lose 0

Expect to lose $500 over time

 

Choice B

Lose 450

 

Lose $450

In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why?

Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory

Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards.

The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains.

It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around.

This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently?

Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure

image.gif.1eb6b8bfc19697d2d161562f59ef936c.gif

Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success.

Avoid the Common Pitfall

Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely?

When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book.

Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio.

If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even.

Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning.

This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call money management. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.

Does Using 1:1 Reward to Risk Really Work?

Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.

Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.

Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference.

Why Do Many Forex Traders Lose Money? Here is the Number 1 Mistake

David Rodriguez
11-14 minutes

  • We look through 43 million real trades to measure trader performance
  • Majority of trades are successful and yet traders are losing
  • Reward to Risk ratios play a vital role in capital preservation

Why do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article, we look at the biggest mistake that forex traders make, and a way to trade appropriately.

Why Does the Average Forex Trader Lose Money?

The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult.

We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain.

Percent of All Trades Closed Out at a Gain and Loss per Currency Pair

 

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time.

If traders were right more than half of the time, why did most lose money?

Average Profit/Loss per Winning and Losing Trades per Currency Pair

image.gif.1803a5d244eaec996affab97ed90e55b.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We see that EUR/USD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades. The track record for the volatile GBP/USD pair was even worse. Traders captured profits on 59% of all GBP/USD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades.

What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution.

Cut Losses, Let Profits Run – Why is this So Difficult to Do?

In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run.

When your trade goes against you, close it out. Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later.

If a trade is in your favor, let it run. It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains.

But if the solution is so simple, why is the issue so common? The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology.

A Simple Wager – Understanding Human Behavior Towards Winning and Losing

What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose?

       

Expected Return

Gains

Choice A

50% chance to Win 1000

50% chance to Win 0

Expect to win $500 over time

 

Choice B

Win 450

 

Win $450

Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again.

       

Expected Return

Losses

Choice A

50% chance to Lose 1000

50% chance to Lose 0

Expect to lose $500 over time

 

Choice B

Lose 450

 

Lose $450

In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why?

Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory

Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards.

The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains.

It feels “good enough” to make $450 versus $500, but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around.

This doesn’t make any sense from a trading perspective—500 dollars lost are equivalent to 500 dollars gained; one is not worth more than the other. Why should we then act so differently?

Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure

image.gif.646f2a34b8c75e2ca6733ec889b70528.gif

Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss. Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success.

Avoid the Common Pitfall

Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely?

When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book.

Typically, this is called a “reward/risk ratio”. If you risk losing the same number of pips as you hope to gain, then your reward/risk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 reward/risk ratio.

If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.

What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio. That way, if you are right only half the time, you will at least break even.

Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower reward/risk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher reward/risk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the reward/risk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series.

Stick to Your Plan: Use Stops and Limits

Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning.

This will allow you to use the proper reward/risk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call money management. Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading.

Does Using 1:1 Reward to Risk Really Work?

Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.

Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.

Traders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference.

image.gif.26db3f435a14b8d02d38cfaef5bdec6e.gifdont forget- like subscribe

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

Game Plan: What Strategy Can I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.

We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders.

*Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015.

Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan.

View the next articles in the Traits of Successful Series:

Trading Leverage - A Real Look at How Traders May Use it Effectively

Do the Hours I Trade Matter? Yes - Quite a Bit

Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com

image.gif.1c9e4a71668fa482d125368b75233bb5.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

Game Plan: What Strategy Can I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.

We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders.

*Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015.

Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan.

View the next articles in the Traits of Successful Series:

Trading Leverage - A Real Look at How Traders May Use it Effectively

Do the Hours I Trade Matter? Yes - Quite a Bit

Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com

 

image.gif.d256c9cd28ba0d37bcb8ee38fc45c9a3.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

Game Plan: What Strategy Can I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.

We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders.

*Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015.

Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan.

View the next articles in the Traits of Successful Series:

Trading Leverage - A Real Look at How Traders May Use it Effectively

Do the Hours I Trade Matter? Yes - Quite a Bit

Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com

 

image.gif.cfc170146154908739985753f1c120ad.gif

Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015.

Game Plan: What Strategy Can I Use?

Trade forex with stops and limits set to a risk/reward ratio of 1:1 or higher

Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account.

The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same reward/risk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away.

We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders.

*Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015.

Interested in developing your own strategy? On page 2 of our Building Confidence in Trading Guide, we help you identify your trading style and create your own trading plan.

View the next articles in the Traits of Successful Series:

Trading Leverage - A Real Look at How Traders May Use it Effectively

Do the Hours I Trade Matter? Yes - Quite a Bit

Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com

 

 

View the next articles in the Traits of Successful Series:

Trading Leverage - A Real Look at How Traders May Use it Effectively

Do the Hours I Trade Matter? Yes - Quite a Bit

Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX.com

Edited by mitsubishi

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