dumb newbie question. price only has two directions it can go, either up or down. If you just guess or flip a coin you should have a 50:50 chance of getting it right. With a little analysis your odds should be greater than 50 50.
So why does it seem so much easier to loose trades than to win them?
Its not so much about the number of trades one lose its how they manages the risks involved. Winning a number of small battles will result in you winning the war.
The way I’ve seen it, I think a lot of it has to do with psychology. It’s easier to close the trade when I know I’m in the minus and DON’t want to go any further down. But will I close a trade in the positive because I don’t want it to go further in my direction? Nope.
Watching a trade progress can be hair-raising, price may sit in the minus before making the move you’d predicted. I myself have closed out a trade in the minus which soon did what I expected it to do and lost a trade that was valid.
What I’ve started doing is placing a trade, placing SLs and TPs, then just letting it go. Don’t watch it. That way there’s none of the “well I don’t want to be any more in the minus…I’ll close it for a loss”. Sometimes your initial analysis is correct, your emotions kill you.
Price will move up or down, how much will it move is the real question. Stop loss and take profit are where it gets harder. Once you add in the spread odds are further against you.
You are right its not that hard to be on the winning side of most trades with a little analysis. The key thing is when you are on the losing side to keep it small. I have found money management is the most important thing in trading, especially if your flipping a coin and making an educated guess:D.
A little of topic but keeping with flip a coin idea.
I have a few demo accounts and I have been thinking about sort of testing this coin flip and money management strategy. Every night before bed I will make a trade with a 12 pip stop and an 18 pip goal. I will trade eur/usd to start no charts:eek: I will literally flip a coin, heads buy, tails sell. Every morning I will close the trade if its open and repeat. What should happen? What will happen? I expect a slow equity drawdown. After some consistent following of the flip plan a with a set risk reward(1:1.5) you will have a win probability established for that level of r/r. Tweek the r/r and see what happens I think you could minimize the slow drain this way.When you get the loss low as possible by only changing r/r start adding some really simple TA to raise the probability of a win.
I just found this http://forums.babypips.com/newbie-island/4253-let-do-experiment-part-two.html
On further thought to keep the odds as close to 50/50 wouldn’t you have to always buy or always sell. If the market will do 1 of 2 things and the coin can do 1 of 2 things isn’t that 4 possible outcomes with only 1 winner?
I know a random approach to trading shouldn’t really work. But then why is it easier to lose money than make it? or is that problem just in our heads? Can a super simple plan that increases your win probability to a little over 50% and strictly followed MM rules be all you need to slowly compound an account? Is it that simple? Why does every one screw it up?
I think SOME people ‘screw up’ and leave it at that. Never give themselves a chance to turn it around and become profitable. Thus, they’re another of the fallen traders.
It takes a bit of losing to realize what you’re really doing wrong, thus you can fix it.
People also tend to accept what they [B]want[B]to see on their charts.
As Tymen quoted it’s like wrestling alligators. Rememeber that everyone on here is competeing against everyone else in this game. My winning trade may be your losing trade. It is a zero sum game. That is why I am sometimes sceptical about the “experts”. Whose side are they really on?
It was Bazooko who posted the coin tossing threads, “Lets do an experiment” parts 1 and 2.
Plenty of room for thought about money management!!
[B]Cas [/B]has hit the nail on the head with her comments about reading into the charts what is not there.
And [B]Merchantprince [/B]has shown his usual brilliance with that most effective little flash player comic!!
Is there any way we can we help you with your losing trades?
Can a super simple plan that increases your win probability to a little over 50% and strictly followed MM rules be all you need to slowly compound an account? Is it that simple?
It is indeed that simple!!
(although a good trading strategy helps).
Why does every one screw it up?
Just go to that newly posted thread “A system that can’t lose” and you will find out why!!