ADVANCE FOREX EDUCATION: PART SIX: GOOD TRADES ARE LESS THAN 10% OF BAD TRADES:

ADVANCE FOREX EDUCATION: PART SIX: GOOD TRADES ARE LESS THAN 10% OF BAD TRADES:

 

Have you ever wondered why 98% of forex traders are losers? One of the reasons is that forex business is so designed in such a way that no matter the method or strategy you deploy to trade, there are certain “obstacles” you must encounter along the way. If you are a follower of technical analysis, your predicaments will be much more, because, when you are experimenting with the numerous technical indicators available, it would appear you have gotten the secrets of forex trading at your finger tips. It is when you now deploy such technical analysis to trading real time, that you will be shocked at its shortcomings. Your mindset will now shift to more advanced technical indicators, to be able to, either predict price action or a trend or a reversal trend etc. But you will quickly forget so soon the fact that, others before you had used the same advanced technical analysis and still formed buck of the losing lot.

 

Fundamental analysis is on the same pedestal, in the sense that others before us have used the same methods that we are now using, should tell us something, and  that is, we are still going to face the same challenges those before us faced, that is, in spite of the “effectiveness” of fundamentals to dictate the “price action”, a lot of them could not break even. But the rate of fundamental analysis to predict price action correctly is 90% as against that of technical analysis which is less than 10%. The difference is that, predicting price action does not indicate the sustainability of such price action. Knowing the direction of the currency market alone is not an indication of a good trade all the time, because, the swift movement in that direction could have a swift reversal of price action in the opposite direction.

 

Nothing is guaranteed as far as forex trading is concerned, it is purely and irrevocably speculative in nature. If the so called signal providers, who claim to make 1000 pips in a month, (some even claim to make such in a week), are sincere, why should the number of forex traders on the losing side be so much? My years of research showed me clearly that such people cannot even trade their live accounts successfully. They look for easy means of earning revenue by scamming unsuspecting forex new guys. Some will even print fake records of their “live trading accounts” to convince you, all is a lie, cleverly scripted to deceive you.

Rogues are quite clever and they are always steps ahead of their victims. Some will say, you will pay $1 per pip, which pip? They will dish out some signals based on guess work, because they are aware there must be price action and they could be lucky at times to meet part of the price action. What stops them from trading their accounts to make money, instead of waiting for your subscriptions to feed and take care of their families? Because of my knowledge, conviction and confidence, I trade my live accounts and there is no need to sell anything to anybody for whatever reasons.

 

Since forex trading is designed in such a way to have as many as 95% of bad trades, the onus is on us to strategize in order to be able to identify most of the bad trades and avoid them, so as to capitalize on the few good ones available. This is the only way forex trading can be lucrative.

 

Lets us assume you have a $1000 account and a leverage of 500 : 1. It means you can confidently trade one standard lot. If in each lot you trade you are risking a 10 pip-stop loss, it means, each trade you lose, it is minus $100. But each trade you win is plus $100 assuming too you get only 10 pips profit. The only way you can blow up this account is by losing seven trades in a roll which will leave you with a balance of $300 in your account. With the $300 balance in your account, you can still trade a standard lot in several currency pairs. If there is a change in situation and instead of having seven losing trades in a roll, and you have just one good trade in a month with 50 pips, that translates into a win of $500. Even if you had lost $700 in seven bad trades, with just one good trade, your account will be revived back to life with $800 balance. Can you imagine a situation where you control your destiny by being meticulous on the strategy you use in trading?

If you have three good trades and a bad one in a month, what will happen to the size of your account? Your guess is as good as mine.

 

The way you handle your strategy will determine how you grow your account or otherwise. Since good trades are less than 10% of bad ones, you can effectively change that to: "The number of BAD trades is less than 10% of GOOD ones in my trading account". If you can do this, I can imagine the rate at which your trading account will grow. There is nowhere in the world today where you can enjoy up to 5% interest on your deposit annually, except of course some third world countries with little or no guarantee of payment at maturity. Do not let anyone deceive you about joining the forex community to make quick money. Whose money do you want to take? The forex brokers’? You are joking. They have numerous staff who are paid to post technical analysis to confuse you, like this: "that since GBPUSD has reached a certain level, the trend will continue". This is done to make you jump in with your order and before you know it, your stop loss is triggered.

 

They know that the number of good trades is less than 10 % of bad ones. If care is not taken, very soon, the number of forex brokers will be more than forex traders, not a joke. You need to see the rate of proliferation of forex brokers, especially, the Dealing-Desk ones, it is simply frightening. Before any of your trade, do not forget this: GOOD TRADES ARE LESS THAN 10% OF BAD ONES.