Im planning to become awsome at forex trading. Ive been reading alot and making my way through the fantastic school section this site has. Awsome job guys!
As far as I can make out, the thing that sets forex apart from a casino is the odds are 50/50. There is no house edge. With practice and skill, all you’d need to do is make the odds 50.1% to 49.9% in your favour and you are onto a winner.
I am aware things get a little more complicated that that, but in essence, you have a 50/50 chance, which is good odds i reckon.
With this in mind, how come so many people fail so much?
I read that its emotion that is the greatest downfall. Suppose then, you remove emotion totally. By probability, you would break even over time. Only by adding skill can you make a profit and only by lack of it can you make a loss.
So, without wanting to sound evil and without wanting to upset anyone, do the people that lose all thier money just lack skill or is there some other variable that i have overlooked? (bear in mind im using a very simplistic 50/50 approach in this hypothesis.)
Essentially what i am trying to work out is what i need to do to not fail.
Im stripping right back to the core. The price will go up or it will go down. Choose and cross your fingers.
Sorry its so long, i was thinking of more stuff as i was writing. hope it all makes sense.
The main difference between this, and say casino odds is the fact that forex is dynamic.
Meaning, in a casino, it is pay per play. Even at the craps table where you can let iit ride, you roll the dice once, the game is over.
Not so in forex, and that is why most lose.
You get in a trade, and you have choices that affect your bottom line.
Since this DOES only go up and down, you would assume that you could be right fifty percent of the time. But the key word there is TIME. In time,things happen. Losing trades might become winners, and winning trades might become losers.
But usually losers become bigger losers, and winners get taken off the table with very little profit, so the imbalance eats up accounts. Combine that with leverage that is improperly applied, and the accounts get decimated quickly.
I like the way you worded this Master Tang, I think you are exactly right. The problem is that the emotions of fear and greed get in the way, and this is what causes the human to screw it all up. Winners are taken too quickly, and losses are allowed to bleed to deeply.
Also ReaperKK has a good point – so in a sense, the broker is like “the house” and they always get their take. Except I would argue that trading is more a game of skill and less of chance. If you can learn to control your emotional execution and find a small edge (or patterns), then you can beat the game.
Btw, the “skill” I’m referring to is more about controlling YOUR OWN emotions and less about finding some magical formula, indicator or edge. There are a million-and-one winning edges to be had, but none of them will work long-term if the psychology of the trader is off.
i would say in case of most broker not “like” the house, but the BROKER IS the house. MOst orders from online brokers (if not ECN) dont get anywhere, but executed within the house.
Do they have an edge? indeed, a huge one. they have their stat to see the % of losers within all their traders, they have the spread, and they have the freedom from the uncentralized pricing to sometimes make a few pips here and their on little chart spikes, stop huntung, etc. on top often the case just like with casinos, that they try to ban the “skilled” players.
To be honest I think this is common paranoia. Whilst there is no doubt small manipulation, any reputable broker shouldn’t be able to affect whether you are profitable overall or not. When was the last time you heard a successful trader slam their broker?
I agree, I just don’t think that the spread accounts for enough pips for that to a major reason why trading accounts get blown. Anyway, if you run trade as your primary source of income, aside from buying the computer and paying for the internet connection, the spread is just about your only cost, so compared with most businesses (particularly those with this income potential) the costs here are amazingly low. A business model that is going to be derailed by the broker’s few pips is not a workable business model in the first place, surely?
then i know some who fell victim to the holiday leverage change to broker too, for example FXopen managed to post a last minute 24th Dec memo about holiday leverages, cant really call a fair practice with little to no time to adjust, and they dont auto set back in January they way they adjust down, and they dont auto adjust back, what you might learn the hard way.
there are examples, sometimes it is enough to put 2 MT4 from different brokers side by side to see that the price sometimes seem to differ quete more than the market normally does broker to broker.