Dream killer at FOREX
I wish you a beautiful day.
I would like to dedicate today´s article, time and energy to topic which surely deserves it. Always when I want to write or record something I have to think over deeply about what I say to avoid saying too much and still forcing someone else to think over too. Today will be this task very harsh. Topic of today´s article is quite difficult for numbers, but I will surely write it in a way to minimize their usage and we won´t be worried by boring numbers. I have never liked math myslef and I have perhaps never received better mark than 4 (only on the 1st level of elementary school). However, one will find out after some time that he/she does not have
chance nowadays without operating basic math.
Why is almost no one successful at FX and on the market in general? If I start with fact that chance of guessing market´s direction is still around 50/50, it should mean that quite decent number of traders should be successful, but not in reality. Why? Everyone who has ever thought this over had to figure out that fees are the dreams killer from a big part.
In general is spread an idea that what I loose will have to win somebody else. This is just a partial truth. Most of it will still take the broker on fees despite on first sight it does not look like that. Nowadays is very wide-spread intraday trading. Brainwashed people by brokers, the whole marketing who are consequently pouring out their souls on discussions are so blind by profit that they have absolutely forgot to think and count. They are sitting whole days in front of computers and eventually they gamble and loose evrything regardless if they are newcomers or skilled people. Most of people play this game with perception that the more trades they have the faster they earn and get rich. Is it really like that?
Let´s start a bit with those simple numbers. Let´s take a trader who will deposit 5,000 USD to account at broker as an example. He has read it is possible to achieve something with such an amount. He has also studied that the best for him will be ECN or STP broker because they are the fairest, they will not act as his counterparty, they are the cheapest etc. He has decided to trade EUR/USD as it is the most often traded and the cheapest and he starts. He knows as a right trader that the more time spent in front of the screen the better and thus he launches a minute graph. Because he has also a different job, he spends with graph only cca 5 hours a day, but he compensates it on the phone in case there would appear a great trade when he is in the lift for example etc… This age brings so terrific opportunities, no? As he is not any gambler and he has already studied something, he is surely following a golden rule 2 % on a trade and thus he is risking 100 USD in one trade. As he doesn´t know much about management, he does not use negative RRR and he goes for 10 pips with SL 10 pips (to make it easier to count). He manages to find cca 10 such opportunities daily and he goes for them. As he has ECN broker, his spread is moving on level 0,5 pips in average and commision on level 0,5 pips. He has positive slips as well because his broker is super extra class and thus he pays pretty and cheap 1 pip for each trade in average. He opens 1 lot in a period when he is successful and account is growing. He is adding in order to he still risks 2 % on one trade. So let´s start. He will buy daily 10 lots.
His average loss on one trade is 9 pips (because he is risking 100 USD)
His average profit is 10 pips in one trade.
He makes 200 trades a month and thus he pays on fees 2,000 USD.
We know his level of success, but as he has a broker of high quality, his counterparty will be surely represented by a super bank of type too big to fail. He will not get into conflict of interest with such a bank because it has a lot of money and he sleeps so sweetly. Because he is not long-term loosing, his level of success will be surely enormous… BUT what the f**k 40 % on the fees a month? And how much money has had to loose the other side? Let´s twist it several times around and let´s ask who is actually earning? We could further discuss how much he has earned or lost, but what for? We already know a winner. Quite decent dose of disadvantage which is influencing the success. Due to this almost any traders are long-term successful. Interesting about this is that people are still solving where the market will move and why, but this is the last thing they should care about. How to overcome this big barrier which is sawing our branch from beginning to the end? There exists a solution for each problem. Otherwise it would not be a problem. So take your calculators and start thinking and counting before you start copying types, listening to brokers, investing to PAMMs, MAMs, AOS´s or operating your own home playroom where you are the main gambler.