Way too many traders trade with very little capital and they do this because their brokers allow them to by offering them insane amounts of leverage. We really don't understand it because you would think that these brokers would want their clients to succeed in order to continue placing trades which yields the broker revenue from commissions and spreads. It is inevitable that with such little capital ($50-$100) these traders will go bust and blow their accounts, especially if they are allowed to take position sizes of upwards of 500 times their account value. These retail traders have been conditioned to believe that this is the way Forex trading is and quite frankly it isn't. The most successful Forex traders in the game use little to NO leverage at all and they only return a small consistent return of 1-3% per month. It seems impossible to make money with such small returns but if you actually take the time to break out a calculator and calculate how much such a return yields over extended periods of time like 5 years or 10 years you will see it is immense. Take $10,000... in 8 years with a consistent 5% a month return... that $10,000 will become $1,000,000.
So please guys read through the information on the chart. It is long but it is very valuable!
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This post has a point, but seriously, nothing is really going to stop a "lousy-trader" from losing all the money anyway...; Lets compare "Lousy-Trader A" versus "Lousy-Trader B";
"Lousy-Trader A" decided to deposit just only $1000 into his trading account (because he/she does not feel confident yet to deposit more) ... But "Lousy-Trader B" decided to deposit all $10,000 into his trading account (which is definitely 10 times more cool yeah!)... So they both started to trade the same currency pair (using the exact same leverage & exact same amount to risk);
"Lousy-Trader A" risked $500 per-trade; but his prediction went wrong & he lost it... (SL hit)
"Lousy-Trader B" also risked $500 per-trade; & he also got it wrong & lost it... (SL hit)
On the second trade attempt; the exact same thing happened; both traders got it wrong & lost another $500 once again... (SL hit)
Right now "Lousy-Trader B" still has $9000 left inside his trading account (still looking very strong yeah!)
But "Lousy-Trader A" already has nothing left so he has to go & make deposit once again; he decided to deposit another $1000 again...
Once again both of them risked $500 for another new trade, but they both got it wrong & lost another $500 once again... (SL hit)
They went on to try another different trade, risked $500 for that trade again, but both traders got it wrong & lost $500 yet again... (SL hit)
So "Lousy-Trader A" (as usual) has to go to top-up (another $1000) into his trading account yet again (because there's nothing left in it), but "Lousy-Trader B" is still boasting that he still has alot ($8000 left inside his trading account right now)!
Well, as both traders continued to trade; the same s**t kept on happening & they both still kept on losing $500 (yet again & again per-trade) for every new trade attempts made...
So what happened in the end...? Well it really doesn't matter; whether you have $1000 or (10-times more than that) inside your trading account; because at the end of the day; nothing can really stop a "lousy-trader" from ultimately losing everything at the end of the day anyway; (so no point in talking about having big $50,000 or $100,000 amount inside one's trading account as well; because it will just make "a lousy trader" die much slower actually...; with more reasons to continue losing even more $$$$ in the long run...?)...
Have a good day.
Best regards.
UnknownUnicorn261897
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Thank you for taking the time here and I respect your thoughts although they are fundamentally flawed. The essence of this write-up, if it wasn't clear I apologize, was to show how the risk parameters of a given trader should be proportionate to their account valuation; roughly 1-3% per trade. With this in mind the amount that a given trader will risk per trade could not possibly be the same if one has $1,000 in his or her account and the other has $10,000. Say we agreed both would only be willing to risk 1% per trade then trader A with $1,000 should only be risking $10 per trade and thus would have to adjust his or her position size accordingly depending on the size of the stop loss that is required for the trade. On the other hand trade B should only be risking $100 per trade and would too have to adjust his or her position size accordingly depending on the size of the stop loss that is required for the trade. This in effect results in leverage ranging from anywhere between 1:1 to 5:1 but it very rarely ever goes beyond that. Proving our point that most traders are over leverage because to risk more than 5% at the absolute MAX per any given trade is a recipe for disaster.
ProFX_Strategist
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Thank you, I perfectly understand that you are speaking very strictly in-terms of only risking 1% - 5% of one's trading capital...; but still, nothing can really stop a "lousy-trader" from losing money anyway... The trader with the bigger $10,000 account will be losing $100 per-trade, & the trader with the $1000 small account will be losing $10 per-trade as such... (If both of them keeps on losing, then both traders will still "perish" on the exact same date with depleted account, at the exact same number of trades, if both have been trading the exact same currency pair with the exact same price point position & time...)
Finally, nothing's really gonna stop both traders from risking more (say like $150 per-trade) as well (including the small $1000 account holder; simply because if he loses this round, then he can still go on for a few more rounds; until he needs to top-up his account with more $$$ if he has been losing in the trades)...
I understand the advice to adhere strictly to the 1% - 5% rule though...
But there is always the temptation for the bigger account holder to play bigger/risk more, & end up losing even more (compared to the smaller account holder) as a result... So if a trader is comfortable say in making/losing just $10 per-trade, then he/she doesn't really need to deposit anything bigger than a small $1000 account I reckon (depositing anything bigger would be redundant with more temptation to go out of control I guess)... E.g., some heros with big-fat accounts thinks that they are macho enough to hold losing positions in FX (e.g. letting losses go astray)..., guess what, they ended up losing way much more than smaller accounts that has already been stopped out long ago by margin-calls (basically they just took a much longer period of time to be opted out of the market, at the much greater lost at the end)...
Best regards.
Have a nice day.
UnknownUnicorn261897
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If you are at risk of blowing your account in a handful of trades you are over leveraged and you are taking position sizes that are too large. Your risk parameters should allow you to lose at the very least 50-100 trades in a row before going bust and if you are losing that often you clearly don't know how to trade and therefore you should not be trading with real capital. The fact of the matter is that if you learn how to trade and at such time you feel confident to trade with real money it is likely because you have proven to yourself that you have a winning strategy. Thus if you then employ proper use of leverage you should be able to make money over time with consistency because your strategy is a winner and your properly managing your money. I'll conclude in saying that it is absolutely possible to stop a "lousy-trader". If you are a "lousy-trader" it is because you don't know how to trade or your not disciplined or the combination of the two. If you can be taught how to trade, how to be disciplined, how to use leverage, and how to manage your money through write-ups like this one then yes you can stop being a "lousy-trader" and start being a good trader over time that eventually becomes profitable. Your argument is essentially saying that professionals are just born that way... which is entirely false. Any professional in any field became a professional because of hard work and dedication and many failures along the way.
ProFX_Strategist
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Thank you very much, really appreciate your reply (I concur/agree)...
Anyway, just some observations of mine...; I've witness many traders who are seriously good... (E.g. have you participated in Forex contest/competitions before?) Well, I see those traders starting out with $10,000 (with 1: 50 leverage); & within just a day, they are able to double up that capital more or less...; I've seen it happening countless times (& wondering how did they performed it that rapidly)... I frankly find it impossible to catch up with those guys (on equal-level playing field)...
Additionally there are also "normal traders" who are easily making $100+ in just 2 - 4 trades only (in $1000 account)... (In other words; they didn't need to have a really big $10,000 account in order to be able to accomplish that...)
I also know another guy (he was trading GBPUSD when it was on the downtrend at the beginning of this year); he only had $1000+ inside his trading account...; but guess what, his unrealized floating net profit was at a staggering $5000+...! (Looks like very big lot positions opened & in profit for few hundred pips...)
I've also seen some Gold (XAUUSD) scalpers who made few-hundred-thousands of profit just scalping Gold alone (very tight positions of few pips only)...; they are playing seriously darn big...
There are others...
I am just seeing so much potential in Forex/commodity trading...
Best regards.
All the best.
UnknownUnicorn261897
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The reason these traders are able to see such returns is because they are over leveraging their account. The upside potential is great with the amount of leverage that they use to achieve these returns however if they are wrong they will lose 20.. 30... 40... 50% of their account in one trade. One doesn't sustain lengthy trading career trading like that.
ProFX_Strategist
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Yeah..., I can agree to that...
One strategy I can suggest is to immediately withdraw the new-profits as one makes it. (In other words, it is a better idea not to leave the profits inside the trading account...) The reason is, to prevent one (who could potentially get out of control) & attempt to make bigger trades just because the account-capital is now bigger...
This way, (for example) if a trader is feeling comfortable in making $50 a day trading 0.1 lot sizes (with $1000) account, then he/she really doesn't need anything more than that; (so if he/she has successfully doubled the trading-account at the end of the month to $2000, then he/she can withdraw the profits & just leave the initial $1000 inside the trading-account to continue trading with the same methods & 0.1 lot sizes as before...)
So in the (unforeseen) event if this trader (above) should lose the $1000 inside the trading-account (maybe because of taking a crazy big-risk & failed badly); then at-least he/she would still be having the other $1000 (+ with more common sense to learn & improve & stick to the rules perhaps)...
So it is wise to quickly withdraw the profits (in my opinion)...
P.s.;
Give a "lousy-trader" $100,000 to trade (& he will lose hell lots of $$$$ at the end of the day)...
Give a "expert-trader" $1000 to trade (& he/she will double that at the end of the day)...
If both traders adheres strictly to a 5% rule, then the "lousy-trader" will still be losing (in much bigger amounts), but the "expert-trader" will be profiting consistently (even with $1000)...
Best regards.
Tampax
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if newbies start with 100€ accounts and only trade 0.01% is pointless, you wont make anything, unless have a +10k capital
"Lousy-Trader A" decided to deposit just only $1000 into his trading account (because he/she does not feel confident yet to deposit more) ... But "Lousy-Trader B" decided to deposit all $10,000 into his trading account (which is definitely 10 times more cool yeah!)... So they both started to trade the same currency pair (using the exact same leverage & exact same amount to risk);
"Lousy-Trader A" risked $500 per-trade; but his prediction went wrong & he lost it... (SL hit)
"Lousy-Trader B" also risked $500 per-trade; & he also got it wrong & lost it... (SL hit)
On the second trade attempt; the exact same thing happened; both traders got it wrong & lost another $500 once again... (SL hit)
Right now "Lousy-Trader B" still has $9000 left inside his trading account (still looking very strong yeah!)
But "Lousy-Trader A" already has nothing left so he has to go & make deposit once again; he decided to deposit another $1000 again...
Once again both of them risked $500 for another new trade, but they both got it wrong & lost another $500 once again... (SL hit)
They went on to try another different trade, risked $500 for that trade again, but both traders got it wrong & lost $500 yet again... (SL hit)
So "Lousy-Trader A" (as usual) has to go to top-up (another $1000) into his trading account yet again (because there's nothing left in it), but "Lousy-Trader B" is still boasting that he still has alot ($8000 left inside his trading account right now)!
Well, as both traders continued to trade; the same s**t kept on happening & they both still kept on losing $500 (yet again & again per-trade) for every new trade attempts made...
So what happened in the end...? Well it really doesn't matter; whether you have $1000 or (10-times more than that) inside your trading account; because at the end of the day; nothing can really stop a "lousy-trader" from ultimately losing everything at the end of the day anyway; (so no point in talking about having big $50,000 or $100,000 amount inside one's trading account as well; because it will just make "a lousy trader" die much slower actually...; with more reasons to continue losing even more $$$$ in the long run...?)...
Have a good day.
Best regards.