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Is the rising Swap cost eating your trades for breakfast?

Raging Bull FX (Raging_Bull_FX)
Feb 11 2020 at 07:51
5 Posts
To be less emotional when trading requires you to have a high win ratio, the more you lose the more mistakes you will make…the more you lose, its a feedback loop.
The average monthly return trading Forex is generally negative. The Forex market is all about borrowed money. So a monthly return really depends on how much you borrow against your account size, the cost of that borrowed money is called the swap rate. The swap rate is calculated daily and costs triple one day a week, this is how the brokers make their money, they are in the lending money business.
So with an account size of $1000 or a large account size does not matter. If you trade a micro lot size which is $1000 you have a leveraged ratio of 1:1 (based on your account size of $1000) the broker will charge you interest on that lot size daily. Depending on the pair and trade direction you may receive or pay interest daily, the interest rate will vary depending on the pair.
As you can see we haven’t even developed a winning strategy yet and we are on the back foot with interest payments. Brokers are very happy for you to be a winning trader because the more money you make the more you borrow and they charge interest on a larger amount of money (Win / Win) There is more to learn about the back end of the broker business but I will keep it simple.
Now let us assume you have developed a winning strategy that has overcome the cost of trading Forex. What is the best time to start withdrawing profits? Realistically looking long term I would say you will make about 1.5% a month so you will want to compound that return. After 30 years your account will be $212,703.78 with an annual return of $34,801.01 Based on a starting capital of $1000 that is a very impressive return per annum. Depending on your financial goals plan accordingly. I can imagine traders saying 'Thirty years!....no way I need big cash now!!!'. Remember this is just starting at $1000, you can always add more over time....and sometimes the turtle does beat the hare.
Now the elephant in the room……how do you develop a successful trading system where you won’t become emotional and destroy your profits? I am extremely confident you will struggle to achieve that goal. Automation is the solution, use Mt5, not Mt4. Do all the backtesting and code up your own backtesting with variable parameters, have a minimum of a 1000 trade sample base, per currency pair. This becomes harder when choosing higher time frames, the data over a number of years can become unreliable from the broker. The reason for such a high test sample is to find the 0.01% outliers which can destroy a system. You will also need to find or become a very good and trusted coder. You may be asking right now 'so have you managed to climb this coding mountain?' The answer is yes but I can't share it with because of the forum rules.
I hope that is helpful for traders out there, good luck to you.
 

The lack of money is the root of all evil
SofieAndreasen
Aug 29 2020 at 15:29
614 Posts
Raging_Bull_FX posted:
To be less emotional when trading requires you to have a high win ratio, the more you lose the more mistakes you will make…the more you lose, its a feedback loop.
The average monthly return trading Forex is generally negative. The Forex market is all about borrowed money. So a monthly return really depends on how much you borrow against your account size, the cost of that borrowed money is called the swap rate. The swap rate is calculated daily and costs triple one day a week, this is how the brokers make their money, they are in the lending money business.
So with an account size of $1000 or a large account size does not matter. If you trade a micro lot size which is $1000 you have a leveraged ratio of 1:1 (based on your account size of $1000) the broker will charge you interest on that lot size daily. Depending on the pair and trade direction you may receive or pay interest daily, the interest rate will vary depending on the pair.
As you can see we haven’t even developed a winning strategy yet and we are on the back foot with interest payments. Brokers are very happy for you to be a winning trader because the more money you make the more you borrow and they charge interest on a larger amount of money (Win / Win) There is more to learn about the back end of the broker business but I will keep it simple.
Now let us assume you have developed a winning strategy that has overcome the cost of trading Forex. What is the best time to start withdrawing profits? Realistically looking long term I would say you will make about 1.5% a month so you will want to compound that return. After 30 years your account will be $212,703.78 with an annual return of $34,801.01 Based on a starting capital of $1000 that is a very impressive return per annum. Depending on your financial goals plan accordingly. I can imagine traders saying 'Thirty years!....no way I need big cash now!!!'. Remember this is just starting at $1000, you can always add more over time....and sometimes the turtle does beat the hare.
Now the elephant in the room……how do you develop a successful trading system where you won’t become emotional and destroy your profits? I am extremely confident you will struggle to achieve that goal. Automation is the solution, use Mt5, not Mt4. Do all the backtesting and code up your own backtesting with variable parameters, have a minimum of a 1000 trade sample base, per currency pair. This becomes harder when choosing higher time frames, the data over a number of years can become unreliable from the broker. The reason for such a high test sample is to find the 0.01% outliers which can destroy a system. You will also need to find or become a very good and trusted coder. You may be asking right now 'so have you managed to climb this coding mountain?' The answer is yes but I can't share it with because of the forum rules.
I hope that is helpful for traders out there, good luck to you.
 

Thanks for the information. But I don’t like swap. So I use swap free account.

Benjamin Van Tran (tranle447)
Aug 30 2020 at 07:56
120 Posts
Which regulated brokers offer swap free account ? I am talking about the islamic accounts .

Often , the best trade is no trade at all
Raging Bull FX (Raging_Bull_FX)
Sep 07 2020 at 00:59
5 Posts
Sofie, that's interesting about a swap-free account, I would assume you will have wider spreads to cover the broker's cost of borrowing on your behalf.
Worth noting since I did that last post RagingBullFX now sells the EA for traders on the website. So for all those traders who are struggling with coding, don't worry all the work has been done for you.
Reagrds

The lack of money is the root of all evil
radioactive
Sep 07 2020 at 07:13
47 Posts
That was an interesting read.

Raging Bull FX (Raging_Bull_FX)
Sep 09 2020 at 04:59
5 Posts
Thanks radioactive, if you have any questions contact me here or at the ragingbullfx website.

The lack of money is the root of all evil
Mikedevid
Oct 09 2020 at 11:23
3 Posts
Emotions are your enemy when you are trading. So, you must keep them aside and follow your strategies to make big profits.

Hyalinclay
Oct 23 2020 at 05:08
17 Posts
Try different strategies without investing so much in your emotions. This will allow you to learn and explore more and more.

blandpatsyy
Oct 26 2020 at 07:43
42 Posts
Keeping emotions aside while trading is difficult, yet the most difficult task to do. No matter what, every trader needs to learn this.

colininghrams
Nov 05 2020 at 07:39
29 Posts
That was interesting but always remember that you should trade using a strategy and not focus on your emotions. There is no place for emotions in trading. The application of your skill and knowledge will help you develop or use a strategy that is profitable.

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