Trading Laws

Beginner Questions
21

And many of the other components, too, I’m afraid.

There’s a little bit of talking at cross-purposes, here.

This isn’t really what “quantify” means, in this context.

It means something more like working out [I]from your own practical experience[/I] (on a demo account) what you’re going to do, and then after that doing 300+ consecutive trades, also on a demo account, monitoring all the monitorable parameters and then calculating from them what your [B][U]expectancy[/U][/B] is.

[I]Without[/I] doing this, you can’t tell (a) whether what you’re doing actually has an edge at all, (b) how big it is, © what the appropriate position-size is (and by the way it’s not going to be anywhere near 5%!), or (d) any of the other things you need to know before trading it with real money.

No impoliteness intended at all, but at the moment, all you’re doing is [I]guessing[/I].

I can’t recommend any videos to you, and in any case I’d strongly suggest that you avoid internet “information” on this subject. I’d stick mostly to mainstream, orthodox, well-established books from mainstream, orthodox publishers. Books which have stood the test of time and been re-issued. Unlike modern publishing and internet “information” (and especially PDF’s and self-publishing) they were peer-reviewed and authoritative when they were written, and are at least to some extent vouched for. Whereas online, anyone can “publish” anything, and most of it is written within a kind of sales/promotional/marketing context and background, and frankly a lot of it is junk.

Here are three books which will explain all this to you really clearly …

  • [I]Trade Your Way to Financial Freedom[/I] by Van K. Tharp (especially the second half of the book - very useful to read before trying trading on demo - a downloadable PDF copy of this one is floating around online, I’m told);

  • [I]Profitability & Systematic Trading[/I] by Michael Harris (Wiley, 2007 - I’d advise nobody to trade with real money until they’ve read this one - also available in PDF form, I think);

  • [I]The Mathematics of Money Management: Risk Analysis Techniques for Traders[/I] by Ralph Vince (oustanding book- I think it’s actually the best of the three).

None of three books listed above is specific to [I]forex[/I] trading - but that isn’t relevant at all.

It doesn’t matter whether they’re correct.

“40% growth per month” is dreamworld stuff (sorry!).

Here are two things you need to know …

  1. The most successful among the world’s top, professional, trading-floor traders (the ones who start with two maths degrees and then get hundreds of hours of highly-targeted professional education followed by thousands of hours of screen-time and practice with a risk manager standing over their shoulders) are generally expected to make around 6.0% - 6.5% per month, to earn their 7-figures annual salaries and bonuses

  2. The proportion of [U]retail[/U] forex traders who (following their own long learning-curve, home-based education and [I][U]plenty[/U][/I] of practice on demo accounts) ever manage to achieve a steady-ish [B]5%[/B] growth per month is absolutely [B]tiny[/B] (probably well under 2% - maybe under 0.5%, of those who try)

Possibly taking this information into account will help you to appreciate that it isn’t productive or sensible to base [I]anything[/I] on assumptions about making 40% growth monthly? I hope so …

This thread will also help you: [B]301 Moved Permanently.

Above all that, you need to test this out in detail before trying to trade it with real money.

22

Good information keep it coming i am learning especially the demo account this is what i have started doing , thanks

"It means something more like working out from your own practical experience (on a demo account) what you’re going to do, and then after that doing 300+ consecutive trades, also on a demo account, monitoring all the monitorable parameters and then calculating from them what your expectancy is.

Without doing this, you can’t tell (a) whether what you’re doing actually has an edge at all, (b) how big it is, © what the appropriate position-size is (and by the way it’s not going to be anywhere near 5%!), or (d) any of the other things you need to know before trading it with real money.

Read more: 301 Moved Permanently"

23

hmmmm… is it me or did you loose weight? you should gain a kilo or two again like on your other pictures :slight_smile:

24

Lol, I hope not (I was only skinny to start with!)

25

I pay $28 per month for Virtual terminal and $30 per month for a signal service form one trader where his trdaes get copied, who is achieving 10% per month, i do not use my real account only demo account at moment.

.10 trades some profit $23 , $12, $9.40 etc

Subscribers: 862
Subscribers’ funds: 3.5M USD
Maximum drawdown: 43.70%
Weeks: 72
Latest trade: 1 hour ago
Trades per week: 24
Avg holding time: 1 day

Is this a bad idea to switch the signal service to a live account of $500 or shall i just write off the $500 if lost and learn from the probabilities and trades and sell/buy history of his trades, he comments on what he does in the trades fairly regular

26

To be fair, and this might be where me and Lexys disagree, I do also feel that 10% gain per month (on average) is achievable. I could have obtained this if my risk per trade was up to 2% per trade. It all comes down to your risk appetite.

And just for the record I place on average 10 trades per month with the average risk to reward being 1 to 2.5 respectively.

27

No - I don’t really disagree.

It all comes down to your degree of risk aversion, as you say. I’m “averse” to risking 2% of my own account on a trade, because I can’t/won’t tolerate real drawdowns.

My contention (and I know it’s not to everyone’s taste) is that people who have had a drawdown of 43.7% [I][U][B]will[/B][/U][/I] at some point have a drawdown of 100%, and be out of the game, because they don’t understand that all long-term, successful trading is primarily about risk management and not profit maximisation. Of course, if they’re selling signals for a living, that doesn’t matter to them: they can (and do) just start up again the next day under another name.

Drawdowns of 43% are typical of “traders” at places like Zulutrade, where the people are often making their money - for the most part - by selling signals, rather than by trading themselves, and have “systems” which are designed to qualify highly on Zulutrade’s ranking algorithm, which entails taking huge risks and explains why all their top-ranked “services” eventually crash and burn.

It’s dead easy to have a little account which makes 10% per month, as a signal seller (and to have another 5 little accounts which lose money - you just have to [I]select the winning one to show[/I] potential customers).

My thoughts on signal services in general, together with a little explanation of “selection-bias” are here, if anyone wants them (but very few do, I know - and that’s ok, too).

Learning to trade successfully is long, slow, difficult, demanding and time-consuming, and it’s typically when people decide to take short-cuts by trying just to “copy something that just ‘works’,” that many of the “accidents” tend to happen. This approach is for people who want the [I]outcome[/I] without the [I]process[/I]. I’m not trying to imply in any way that I [I]blame[/I] them for wanting that, but the reality is that I’ve never known anyone manage to achieve it that way, and that doesn’t surprise me, to be honest.

Edited to add one more link: 301 Moved Permanently

28

okay thanks for valuable info will post my answers soon, math not my best subject but will take a paracetemol and clear head to force my brain to work the maths

29

okay thanks for advice it is more clear to me know as newbie will reply after some math and thoughts usually better after 2 pints real ale or german/czch lager

30

Thanks awesome info will digest it and reply asap.

31

Understanding the importance of each or these trading laws, and how they work together, can help traders establish a viable trading business. Trading is hard work, and traders who have the discipline and patience to follow these laws can increase their success.