Why 100% accuracy means your about to lose big: If you can't take a small loss, you won't take a big loss and you will end up being forced to take a massive loss!

Beginner Questions
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The biggest mistake new traders make is trying too hard to make a profit and being unwilling to a loss.

Imagine it like this, You learn that if you hold a trade open long enough, it will come back and show you a profit. This lesson is quickly confirmed because 9 out of 10 times it will. Particularly when you grab a profit as soon as it is on offer.

So as new traders do, you start with $1000 and open some trades and see some great success!

trade 1: $10 profit
trade 2: $5 profit
trade 3: $22 profit
trade 4: $2.50 profit

You realise at this point, that even if a trade moves -$100 against you, it can easily come back in your favor. So you tell yourself, all good, just don’t set a stop loss and the trade will always swing back in your favour. This is easy!

trade 5: $12 profit

Trade 6: $1.50 profit (WOW, that last one was a close one, it went -$250 against me. So you tell yourself if that happens again, you will close the trade in a loss. $250 is the MAX!).

trade 7: $80 profit (sh!t, is trading easy or am I just that dam good! I’ve got 100% accuracy and am thinking of quitting my job and trading for a living. Yer, maybe in Thailand on a beach!)
trade 8: $10 profit
trade 9: $25 profit

On the 10th trade, the market moves against you. A massive -$250 against you, (dam, maybe I should get out. Well, let’s see how it goes, I don’t want to lose $250, it’s too much money!)

You see the trade go further and further against you -$500 (you’re sweating bullets now), then -$750 (jezz, I’ll get out when it comes back to -$250, dear lord let this trade go back to -$250!)

Trump the comes out and jawbones the USD dollar. You were long and that trade goes soaring against you into a margin call - the entire account is GONE!

I am very happy to admit this is exactly what I did when I was new, and a few times after too.

I learnt if you cant take a small loss, you won’t take a big loss and you will end up being forced to take a massive loss!

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Interesting opinion. In my opinion, as I have said many times before. There is no one big mistake that traders make, it’s a combination of may mistakes.

Anyways. I’m not sure your what trading strategy are you referring to. Different strategies are built to achieve different goals. There are traders whose strategy is built strictly on a RR ratio.Example If they’re using a 2:1 RR and I’m right better than 50% of the time long term.that are profitable. Others strategy is build around profit; they never risk more than the profit they’ve made. Knowing where to place a limit on how much you’re willing to lose should be based on what you’re trying to accomplish. But at all times protecting your account against a “iTrump the comes out and jawbones the USD dollar” scenario.

if your straegy is swing trading, then you’d be more interested in the average swing of a pair. One pair could swing 100 pips a day compared to one that whose average swing is 50 pips a day. If you want to allow the pairs to breath, but protect against a margin call, then your stops would be different.

But overall you’re right much better to take a smaller loss than massive one. I think no matter what you’re strategy is you should protect against a margin call. The trick is learning the best way to do it , while maximizing profit.
Gp

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Extremely important point for all newbie traders!
Each one starting trading needs to place a sticker below his display: “Always Trade With Stops”. This should be a number one rule.

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The one-trick pony method is to go for the stop loss every single time… Even newbie traders in a beginners forum have to start to look around at other concepts, ideas and methods eventually…

The AUDUSD 1Hour Chart (Close Friday 26/10)

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Opened a long position Thursday evening (UTC+11) all good, my strategy indicated a BUY so I opened the position… Overnight the position retraces dramatically (like the AUDUSD always does) and my position is bouncing in and out of loss and profit for the next few hours… Finally (5.00am Friday) my cBot realises that price is off in the opposite direction so it opens a Hedge (SELL) with a 4 pip loss (the distance between Trade 1 BUY and Trade 2 SELL) which will now be held no matter how far price goes to the south… my total risk is 4 pips +spread +commission…

Price plummets over 60 pips in the next 24 hours or so, panic?.. sweat bullets…? No chance… my loss is still only 4 pips + fees… right?.. From observing my Charts and back checking, I am aware that AUDUSD has a level (Blue Line) it has been coming back to over the past week or so…

Sure enough price reverses hard from the downside… now I have a clear BUY signal… So I CLOSE the hedge… take a 26 pip+ profit and open a BUY, the uptrend is strong (note chart) and moves price back into the level from whence it came (who would have guessed?)… once price starts to stagger again I CLOSE ALL… with no loss and an 80 pip+ profit from a potentially losing situation… It’s not rocket science… just plain common sense… Had price continued down 100+ pips? my loss was still 4 pips +

New traders here in BP should be trialing this sort of alternative to a stop on DEMO and stop giving your money to the market… @Forex.com likes the OP’s example because you running for the Stop Loss each and every time is his bread and butter…

Like all games of chance it’s all about the percentage plays… Price hits your SL and it’s 100% loss each and every time… Hedge and its 50% you could make a slightly larger loss or 50% you could turn a losing position into a profit… Think about it… Trial it… the results will surprise you…

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Thanks for your reply @gp00053 . Some great points!

I’ve always been a big fan in RR. But I feel they are commonly mis-understood.

For example, if I’m running a risk reward ratio of 1:5, it’s going to have a big impact on my accuracy as a trader (all other things equal, I should have 20% accuracy). Very simply put, my stop loss is now 5 times more likely to be reached then my take profit.

Obviously, the above doesn’t consider support and resistance or using key levels to set your take profit levels (whole numbers are very useful too). I think focusing on where you will place your levels and not only the RR will go a long way to making RR a productive part of your strategy.

@gp00053 ow do you work out daily range? I’ve used ATR in the past, but am currently using an AutoChartist indicator that set’s daily ranges based on historic price movements.

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This is why, we all traders need to use the stop loss trading tool so carefully. Without SL the path is too much sticky.

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I do it 2 ways. I’m old so I get to use short cuts:roll_eyes: Anyway, First I go to the daily time frame. Using the previous 20 from the current 7pm EST opening I would draw a line on the highest high and the same for lowest low. Then divide by 2 draw a linr to see where price is in relation to that line.

I also use a free MT4 indicator t_s_r_mtf_range_calculator to compare to my manual analysis. I’m prejudiced, I do not trust my trading to anybody else’s indicators, scripts or advisors. Like I said I’m old.

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Great share!

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Hi @Trendswithbenefits,

Unfortunately, it seems your bias against brokers is clouding your judgement. Actually, our best clients are the ones who trade with us for many years, but it is unlikely a new trader will ever reach that level of consistency, if they lose most of their account on a few big trades due to poor risk management.

Studies show the majority of individual trades placed by retail traders are actually profitable, and yet only about 30% of retail traders are profitable overall (based on client profitability stats reported by the CFTC for US brokers). That is because many retail traders are using poor risk management by losing much more money on their losing trades than they make on their winning trades.

The solution is to keep the amount of money lost on losing trades smaller than the amount made on winning trades. A stop loss order is a way to enforce good money management practices by removing emotion from the decision making process when the time comes to close a losing trade, cut losses and move on rather than lose more money.

Stop losses can help enforce a good reward to risk ratio, where you seek at least as much in reward (money made on a winning trade) as you are willing to risk (money lost on a losing trade). The study linked above “shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.”

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Hi @FOREX.com, As I have posted over and over and over again… I’m not telling new traders in these forums not to use a stop loss… just look at alternative methods of risk management…

Unfortunately, Influencers like yourself and others in the BP forums are making a concerted effort to keep the newbies on the blinkered trail and to be successful, preach they must trade like the other 70%(??) that fail in Forex… How does that work BTW?.. It doesn’t… It’s a distortion of reality…

Traders who are really on top of what is going on in these markets won’t be posting in here… Price action algorithms designed to take out zones, defeat Indicators, stretch margins, widen spreads, etc. etc. all kinds of malevolent behaviour is what is taking money from newbies.

Most in the forums take the published success/failure rates by brokerages as gospel, but until I see verified reports by PWC, Andersons, Deloitte or any key auditors, I won’t be drinking the Kool Aid…

Biased definitely… Clouded, no chance, I think for myself and consistent results as posted over the last 5 weeks on my 25% in a month (BTW, That’s the thread to be avoided by Influencers at all cost!!) and my core FX trading accounts would not be achievable if a stop loss was applied for each and every position…

At the end of the day… I don’t give an airborne fornication…I am losing patience in trying to promote fresh, open, creative thinking for new traders in the BP forums, I have been accused of trying to sell product, get traders to do exactly as I do, sock puppeting…oh… and Clouded Judgement… all sorts of absolute crap…

Yet I am one of the very few to post results… solid results, consistent results, transparent results more than once in these forums… so everything I’m doing wrong according to a select few here… is far more profitable than what Industry Standard Forex Education will ever deliver new traders…

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Okay my friend, I think I understand what you’re trying to illustrate [ in your own weird way :grin:] You’re saying rather than protect your current trade with an order that takes you out of the trade, instead open a trade that counter balances your original trade then it doesn’t matter if word war 3 happens, you can only lose the spread between your original buy trade and your 2nd sell trade, do I have that right?

If that is the case, Do you have rules as to when you will open this counter trade and how much are you risking of your account on the orginal trade and the counter trade? And do you do all this before you enter your orginal trade?

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This method is applied only when you realise that 1. Price is going to move against you on the longer TF’s ie: 1 Hour, 4 Hour… 2. You are very confident that price will move back to a similar level.

You don’t enter a trade in expectation of applying a hedge… It’s like a SL… You don’t enter into a trade expecting to use your stop… it happens when the market changes direction… Normal trade entry and exit signals are applied… Conditions have been explained in my original post.

@gp00053, This is just one risk management strategy that experienced traders should…

  1. Be aware of

  2. Be all over…

Full description and method was discussed by me and others here over 10 months ago.

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That’s the part I’m having trouble with. (You know me, just slow :drooling_face: ) You should be entering a trade protecting your bankroll. Your first priority (in my opinion) is to protect your trading account. Without it, you can’t trade.

I think I know it’s for me anyway, that’s what other traders are telling newer traders, that don’t have the experience or emotional control to make decisions. I will say that in my opinion, no matter how much experience you have or emotional control you have, you still need to protect your trading account.

The way again in my opinion the best way for a new trader to do that, is to predetermine your entry risk, and potential profit. From their you review your trades and see what you did right and what you did wrong. As you gain experience, emotional control, patience and understanding, your win loss should improve over the long run.

Now back to your illustration. Can you explain the difference to me from entering your trade, and when market goes against you, you open your hedge and go the opposite way and you say the only loss is the spread in between. But the only way you only lose the spread is by closing both trades? So I don’t understand the difference if I place a stop at the same place you entered your hedge. The only thing I’ve lost is the spread or am I missing something.

In your example before you entered the trade you’re assuming the market is going to go your way, well everyone does that not matter the strategy. When it goes your way, you take your profit. If it doesn’t you get out of the trade. What this is all about is whether you believe you should protect your trading account against the unexpected whatever that can affect the market before you enter a trade. And I think most traders whether they post on BP or not would agree, take steps to protect your trading account before you enter the trade.
As always in my opinion
Gp

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Thank you for sharing. I have not blown an account so far but I have come close. I identify with your sentiments and will gladly accept your advice. Blessings!:v:

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Trading is a numbers game and you need to count the pips!

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Yes I am! And I always set my SL, TP according to the pips calculation.

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this was the first broker I ever had 20+ years ago, “the more things change the more they stay the same”.

as to your 100% accuracy fallacy, I know I am not there yet, that 99% keeps eluding me though. I dont need to be 100% 99% will be just fine. RT’s stop losses are my bread and butter too @Trendswithbenefits :slight_smile: Stephen System by rrram2 | Myfxbook

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actually informed traders count the percentage gains, per : day,week,month,year.

pips are meaningless except for huckters trying to sell you some shiznat
complete contest demonstration of pip counting : Contest - rrram2 System by rrram2 | Myfxbook

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unfortunately for @FOREX.com, they seem stirred up by the truth Trendswithbenefits shares :slight_smile:
@Trendswithbenefits post was excellent, and insightful, and its amazing no one really bothered to really read what was written and take it to heart, the post was bulletproof, and quite perfect.

and the main reason RT’s lose money is because their broker failed to educate them on these very things you are claiming as their shortcomings. I bet you folks @FOREX.com just love the kind folks at ESMA. https://www.esma.europa.eu/

How is the ESMA treating you @FOREX.com? I know its bad for brokers to be forced to be transparent. Due to ESMA, brokers are going to have to change, or go out of biz, its real simple.

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Another lovely, eloquent post!, bulletproof! We aren’t trying to concinve anyone of anything except to stop giving your money away in forex based on lies and misinformation. the herd goes off the cliff, you go with the herd, you too go off the cliff. way too many tales are taught and told about forex. Forget all the BS, and prove it everyday with your live equity curves. I dont need to even check your equity curves I can just listen to the lies you spew and see your equity curves. if you talk about trading and dont do it LOLZ!~
I too can show all the results but it will just make you ill when compared to your own.

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