Tell Me Why This Wouldn't Work

Beginner Questions
1

O.k. so I’ve been doing Forex for several months now and have been learning a lot of hard lessons.

I finally learned how to implement a real stop loss. Not a 200 pip stop loss hoping that things turn out o.k. but a tight 20 pip stop loss that gives me a chance to not lose money. The more I do this I think it’s not about how much you gain but about how much you don’t lose.

So since i’ve come to the realization of the 20 pip stop loss I’ve been averaging aobut 3% of gains per week.

If you started with 1,000 and averaged 3% per week then you don’t really make that much in the first year or 2 years. Not enough to live on anyway. In year 3 you start to make a little bit but you need to keep rolling it over into your investment. By year 7 the amount is like $33 million!!!

You are still doing the same number of pips per day that you were doing at $1,000 but instead of $.50 pips you are doing $5,000 pips or whatever the number is.

O.k. so the question is…i know you can make numbers say anything you want but is that realistic? If not then why? Why couldn’t you end up making $33 million in 7 years of constant 3% gains?

2

because emotions will kick hard… really hard

3

Ok. i can deal with emotions. I’ve been dealing with them for months and months. i finally learned how to become robotic with letting my trades hit stop losses and knowing that it’s about not losing more than it’s about gaining.

I can overcome emotions.

Give me some other reason, like “that much money by year 7 wouldn’t work in the market because it would shift the price too much or something like that. That’s something I can’t control”…emotions can be controlled.

4

It’s easy to overcome emotion when you are risking $1 per pip. Every time you make the pip more expensive, like it or not, more emotion will creep in. At my current trade level, I can’t imagine trading where pips are $5,000 each and seeing it creep down :eek:

But everyone is different. If you have a good system that works for you and you can control the emotional faction without problems, there is no limit on what you can achieve.

5

i am not sure about a thing:

that you can handle your emotions. one thing to handle a relative not that large 1000$ account…what if you hit some hard time, and lose 50%…well, 500$, bad, but not really life threataning.
Is it the same to lose 15 million from your 30 million as well? yes, sure, NOT!! even though it is not a life threatening amount that level neither, but you will have some real money, and i mean real!! when you grow up with a 1000$ being not much to risk, 30 million definately will mean something…great life, travel the world, big house, help the poor family members…whatever, but a lot more than 1000$ does. And yes, it has emotional effects. When i made a great month and had +6000$, it was having on me some effect. When i lost the same amount, sure did too!! After all 6000$ is more than my father makes in a year work!! lose it in a day? indeed, there are some promises for next time.

but of course things can be learned. No one start out running the marathon instead of first steps. To handle the different emotions, one needs time at each level to get confortable with.

6

You could if your broker would allow you to trade 500 lot trades and you didnt lose your nerve and of course if the IRS didnt find out how much you owe them in capital gains tax lol

7

You want something that has nothing to do with emotions? very well.

First, this wouldn’t work because there is, at some point, a limitation to how much leverage u can get.
making your 1000$ initial account “weigh” like 1M$ is one thing, but when u have, say, 8 digits in your account, making them “weigh” like hunders of billions (in order to maintain initial pip:% ratio) is another.

Second, I beleive you’ve had an amazing run during the weeks of your trading account\demo, but there’s a difference between doing it for a number of weeks and doing it 7 years steadily.
On the longer timeframes, The market sometimes changes its behavior, going from trends to swings, etc.
most systems are often successful at specific market conditions only, and you sustain severe losses before you realize modifications should be made.
I, for instance, had a very nice winning streak for a while, was sure I’ve had it all figured out, even gone a bit greedy raising the stakes, just to find it out the hard way.:mad:

Third, emotions. sorry, but this had to come up eventually :rolleyes:
except for the correct things others said before me, I’d like to relate it to the drawdowns I was talking about. When you have serious amounts of money, and you lose much of it as a part of a massive losing streak, keeping cool is not at all the same as keeping cool when you lose a single trade or two. Take it from me, when you lose much, you start making mistakes. and pay dearly.:eek:

I’d also like to point out that’s it’s recommanded to CASH OUT every now and then, even if you don’t need the money, just as a measure of safty.
after all, you wouldn’t wanna risk gettin to the last week before year 7 and then blowing up the account, would ya? :wink:

8

Providing your strategy holds up over time, t’s not the earnings that will hinder.
If you had a million in your account, that new Shelby Mustang wouldn’t be so far away now would it?

Your compounding gains would be limited only by your compounding expenditures.

Also, there’s the issue of your broker. $5k pips would probably have some serious slippage issues as price moves. You would most likely have to swap out to an institutional account.

Fun to think about though huh?

9

I don’t think emotions would be the problem, but rather making a consistent 3% per week. Thats pretty hard to do. It seems like you would be in top 5% of all traders if you could do that every year for 7 years.

10

Everything looks good in calculations. But in reality you can suffer significant drawn downs, dry spells in profitable trades, time off from trading, emotions, volatility in the market. There are tonnes of things that can happen which will stop 1,000 turning into millions.

11

Probably one of the ways it would work successfully, asuming you have a trading strategy that is consistantly profitable and mechanically repeatable, is to build an EA to trade it automatically, that way you wouldnt have to see the amount of money involved in the larger trades when your account balance is high so the emotion factor would be removed.
EA’s are not that easy to do though as I have been finding out recently, you can write code that compiles succesfully and appears to be correct but doesnt make the expected trades due to a tiny error in implementing the theory to code.

12

Hello everyone,

Well: there is a very simple way around this (I read about this somewhere some time ago). Hide any columns in your platform that show your profit or loss on a position and any columns that show your account balance etc. If your platform does not allow for this then use some electrical tape to cover up that information. Then, simply, keep trading as you have been trading!!! LOL!!! I ‘kid you not’: this has been done (with success I believe)!!!

The above being said: emotions will STILL ‘come in to play’ i.e. you’ll have to constantly fight the urge to unhide the columns or remove the tape!!! LOL!!!

Not to be negative though: just be very careful in this business is all. I’m ALSO one of those people who thought that they had ‘cracked’ this business (my ‘story’ is pretty well known around these parts). For many months I did well and traded with no emotions. I went from $700 to around $15 000 in a matter of (a very few) months. Thinking that it had become easy and that I’d ‘finally cracked it’: I started taking on investment funds. That’s when ‘the wheels came off’. Why??? No longer was I looking at $1 per pip i.e. now the stakes were a lot higher and that DID make a difference to my ‘psyche’ for sure. No longer was it possible to take a loss ‘like a gentleman’ i.e. there’s a big difference between getting stopped out for a loss of a few $$$ and getting stopped out for a loss of a few THOUSAND $$$ EVEN ALTHOUGH those few THOUSAND $$$ still only represent a certain (the same) percentage loss of the account. My ‘loss record’ was around $28 000 in ONE DAY if I remember correctly (and that was just ‘the tip of the iceberg’ i.e. things went progressively ‘downhill’ from there). I remember that day well!!! Because the losses were so big I could not ‘take the pain’ anymore and closed out the positions totally ignoring what my trading system was telling me (needless to say: no sooner had I closed out those positions and taken the loss than price did indeed move where my trading system was telling me it would move). Had that been a $28 loss showing: I’d not have even ‘flinched’ and would have waited to either be stopped out as per my trading system or let the trades run. It’s taken a a long time to recover EMOTIONALLY since then and I’ve still not recovered FINANCIALLY since then. I believe I’ve learned the hard way though!!! That being said: NEVER LET YOUR GUARD DOWN!!!

One other thing that’s not yet been mentioned: having a HUGE capital balance can affect your ‘psyche’ in a DIFFERENT way i.e. it’s very easy to believe that, given a HUGE capital balance, you’re entitled to ‘bend the rules’ and ‘take a few chances’ because, it’s easy to believe that, with such a HUGE capital balance, if you DO make a BIG mistake, you will still have funds to recover and ‘make up’ for your mistake. NOT SO!!! $28 000 can dissapear AS QUICKLY as $28!!!

Nobody is trying to discourage you or say that it’s impossible. I guess you just need to be aware of the POSSIBLE ‘pitfalls’ is all.

I hope you DO make that amount in that time though (and I hope you ‘remember your friends’ WHEN you do)!!! LOL!!!

Regards,

Dale.

P.S. One other thing: NEVER GIVE UP!!!

13

Wouldn’t it be nice to have a platform that allows you to specify SL and TP as percentage of your account rather than amount of money?

Like say, SL = 1%, TP = 2%

A person starting from 1000 USD can remain emotionless for many years because he does not ever see the acutal numbers!

But then again, we would have a motivational crisis.