nickz

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16 príspevkov
Mar 09 2015 at 07:55

Whenever you read of a system that uses scalping..run away, to know why..keep reading:

Imagine a roulette wheel in a casino. You walk up to the table and place a bet on either red or black. What are your chances of success?

If you’ve never played roulette, you might think the odds are 50–50. After all, half of the numbered pockets are red, and the other half are black, right?

WRONG. In addition to the red and black pockets, there is at least one pocket that is neither red nor black. This “zero” pocket tilts the odds slightly against our player. In European roulette there is only one zero pocket, giving the house aslight advantage. On this table, the odds are about 53:47 against our player.

American roulette wheels have two 0s, zero and double zero, and this increases the house advantage to about 5.3 percent. This further stacks the odds against our player, reducing his chances for success.

In the world of forex trading, the zero pockets represent the spread. The odds are always going to be at least slightly in favor of the “house,” which in this case is the market maker. The wider the spread, the more “zero pockets” the trader must overcome. Just as each additional zero pocket lowers the roulette player’s chances of success, every additional pip in the spread lessens the trader’s chances of success.

Doing the Math:

Let’s assume that we are trading a currency pair that has a 3-pip spread, since a spread of that size is very common in the forex market.

Our trader just wants to gain 10 pips. That should be easy, right? It’s understood that the trader will lose the spread (3 pips) upon entering the trade. So, in order to turn a profit of 10 pips, the trader actually needs the exchange rate to move 13 pips in his or her favor: 10 + 3 = 13

Now that we know what is required to create a winning trade, let’s see what would have to happen to create an equivalent loss. This is how we will determine the odds of success or failure.

In order to generate a loss of 10 pips, the trader would only need an adverse move of 7 pips. This is because a loss of 3 pips is incurred immediately upon entering the trade, again due to the 3-pip spread: 10 - 3 = 7

We’ve determined that our trader needs a positive move of 13 pips to gain 10 pips, but an adverse move of just 7 pips will result in an equivalent loss of 10 pips. The “raw odds” of 10-pip win versus a 10-pip loss for this trade can be expressed as:

13/7 = 1.857 : 1

The odds of success in this case are 1.857:1, or nearly 2:1 against. That’s a real eye-opener, isn’t it?

Now you know why it’s so difficult to make money trading for small gains.

Imagine a roulette wheel in a casino. You walk up to the table and place a bet on either red or black. What are your chances of success?

If you’ve never played roulette, you might think the odds are 50–50. After all, half of the numbered pockets are red, and the other half are black, right?

WRONG. In addition to the red and black pockets, there is at least one pocket that is neither red nor black. This “zero” pocket tilts the odds slightly against our player. In European roulette there is only one zero pocket, giving the house aslight advantage. On this table, the odds are about 53:47 against our player.

American roulette wheels have two 0s, zero and double zero, and this increases the house advantage to about 5.3 percent. This further stacks the odds against our player, reducing his chances for success.

In the world of forex trading, the zero pockets represent the spread. The odds are always going to be at least slightly in favor of the “house,” which in this case is the market maker. The wider the spread, the more “zero pockets” the trader must overcome. Just as each additional zero pocket lowers the roulette player’s chances of success, every additional pip in the spread lessens the trader’s chances of success.

Doing the Math:

Let’s assume that we are trading a currency pair that has a 3-pip spread, since a spread of that size is very common in the forex market.

Our trader just wants to gain 10 pips. That should be easy, right? It’s understood that the trader will lose the spread (3 pips) upon entering the trade. So, in order to turn a profit of 10 pips, the trader actually needs the exchange rate to move 13 pips in his or her favor: 10 + 3 = 13

Now that we know what is required to create a winning trade, let’s see what would have to happen to create an equivalent loss. This is how we will determine the odds of success or failure.

In order to generate a loss of 10 pips, the trader would only need an adverse move of 7 pips. This is because a loss of 3 pips is incurred immediately upon entering the trade, again due to the 3-pip spread: 10 - 3 = 7

We’ve determined that our trader needs a positive move of 13 pips to gain 10 pips, but an adverse move of just 7 pips will result in an equivalent loss of 10 pips. The “raw odds” of 10-pip win versus a 10-pip loss for this trade can be expressed as:

13/7 = 1.857 : 1

The odds of success in this case are 1.857:1, or nearly 2:1 against. That’s a real eye-opener, isn’t it?

Now you know why it’s so difficult to make money trading for small gains.

*Do your best then blame luck.*

otprofit

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20 príspevkov
Mar 09 2015 at 12:14

Hi, all,

my recent LiteForex results,

Judge by yourselves any case what might will happen to you soon.

Stop Loss order I made was no meaning , just leaded to huge loss.

Anyway, I think sharing information is very important with you all.

https://www.myfxbook.com/members/otprofit/my-ea-liteforex/1167823

my recent LiteForex results,

Judge by yourselves any case what might will happen to you soon.

Stop Loss order I made was no meaning , just leaded to huge loss.

Anyway, I think sharing information is very important with you all.

https://www.myfxbook.com/members/otprofit/my-ea-liteforex/1167823

*Your life is yours*

Forex21

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416 príspevkov
Mar 09 2015 at 12:22

I don't think that scalping has much to do with a Roulette table. 😄

alexforex007

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774 príspevkov
Mar 09 2015 at 12:27

Scalping is not for beginners. You need a lot of discipline and learn how to really scalp. Going in the direction of the momentum of the market is how traders usually scalp, but there should be some rules and place and apply them with discipline. In reallity, most of the big traders are scalping, most of the trading volume is not held overnight.

Mar 09 2015 at 12:36

I would say that you are wrong. Scalping with high accuracy allows you to have a draw - down of less then 20% and earn more then 400% profit using the same money management no matter account size.. The world doesn't move in maths the way you are suggesting it does in forex.

BenNathanFX
(BenNathanFX)

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137 príspevkov
Mar 09 2015 at 14:18

Scalping can be lucrative but it requires intense focus and you must scalp in line with fundamentals - otherwise youll lose out . you also need a system that accounts for things such as slippage and spread.

*HOLY GRAIL: Fundamental Analysis to chose your pairs/direction, Technical Entry/SL/TP for consistent Management of those decisions*

5astelija

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52 príspevkov
Mar 09 2015 at 14:25

Very good points by nickz, I hope all starting traders see this thread. Yes, many scalping systems have small draw down - this is usually achieved with big sl or martingale. This way the risk is hidden: there are lots of small profits and never losing trades. Until the big lose happens, wiping out all the profits.

You can't remove laws of probability with martingale, but you can hide them.

You can't remove laws of probability with martingale, but you can hide them.

Mar 09 2015 at 14:26

Things like slippage and spread are very very important to being a good scalper. You should also have an EA to manager your tp and trail as brokers set limits to how far from market you can hedge, etc. For the most part 5% a day in scalping should be a walk in the park. Many want to compare forex to things like casino games, but casino games are RANDOM! Where has odds determines more your chance of winning then in forex. Since forex trades in a loop, if you decide to only trades those loops, then scalping is much more clear cut, and you can take in a small amount of pips but a decent size of % change.

keffster

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2 príspevkov
Mar 09 2015 at 17:48

Well, keep on doing the mass and don't stop in the middle:

In other words: You (only) need to be right in 2 out of 3 trades to be profitable. I've seen people doing this. ;)

In addition we could now discuss whether prices in near future are easier to predict then prices in the further future...

In other words: You (only) need to be right in 2 out of 3 trades to be profitable. I've seen people doing this. ;)

In addition we could now discuss whether prices in near future are easier to predict then prices in the further future...