9. Lack of understanding of why orders are needed
This problem is more related to the lack of education. But it’s not about the fact that you supposedly don’t know why you need and how restrictive orders work. It will be about the very understanding of the meaning of these orders. Any of you can easily answer the question of why a Take Profit order is needed. Are you sure that you understand its meaning correctly? Yes, we know that this is a profit lock. We know that this order closes our transaction without our participation. And when we install it, we reassure ourselves with the realization that even if we are not in place, this warrant will do all the work for us. All this is true. But we never think that this order can serve as a psychological barrier for us. When we constantly use this order, we get used to the fact that the transaction is closed without our participation. And now the question: how many transactions did you close in profit, because the price has not reached the level of your order just a penny? Many. And I have exactly the same. Why? This is not because there is a conspiracy against us, and the market acts against us. This is because we are getting used to the mechanical process. We kind of mentally drive the market into our framework, and we wish that the market always moves within the framework we set. But this does not happen. The market is a chaotic mechanism that cannot be boxed into. If you believe that he began to obey your rules, he will punish you. We kind of mentally drive the market into our framework, and we wish that the market always moves within the framework we set. But this does not happen. The market is a chaotic mechanism that cannot be boxed into. If you believe that he began to obey your rules, he will punish you. We kind of mentally drive the market into our framework, and we wish that the market always moves within the framework we set. But this does not happen. The market is a chaotic mechanism that cannot be boxed into. If you believe that he began to obey your rules, he will punish you.
I solved this problem as follows: Take Profit order should always be installed! But this does not mean that you should definitely wait until the price reaches its level. To this rule, I have several similar stories. Everyone knows the word “freebie.” This means that we get something easily and quickly. This factor is also present in the market. And this opportunity should not be ignored. You may be lucky too. I worked then on my favorite currency pair GBPSGD. Since the transactions are long-term, they stayed overnight when I was not at the monitor. Incidentally, I spend very little time directly observing the market, not more than an hour a day, almost always being in the market. So, for all transactions, I have set up “unrealistic takebacks” (neural takebacks are a situation when you place an order not where, in your opinion, it should take profits, but simply place it at random, far from the current price, calculated by chance). I woke up in the morning, opened the terminal and voila, that accident, which I did not really believe in, happened. I don’t know at night who did this, but for this currency pair, there was a candle with a shadow of 8500 points. “Unrealistic take” was at 6700 points and it worked, making a profit. This is such an accident. So after this incident, I absolutely always put a take on each transaction. The following rule: Do not use Stop Loss if its size is less than the average daily volatility level of a trading instrument. It just “takes off”. If you set a loss limiter, it should be justified. The likelihood that the “stop” you set of less than 1000 points will work before the “take” is almost 100%. Why? I already talked about this – a market maker.
10. Inability to think in percent
Oh, how long I went to realize this problem. We are all accustomed to counting money on deposit, profitable positions, losing positions – in dollars. That is, in money. Remember my screenshots above, where I write about profits and losses, I always talk about dollars. And you have the same. We get used to it. And this creates certain problems, just the same with trade. In order to assess the potential price movement for the expected transaction, we use points. Then we try to transfer points to money. And if the lot is not standard? This creates even greater problems in the calculations. Well, even if we all figured out, opened a deal, earned and closed the deal. How to evaluate the result? Suppose we had 1000 USD on deposit, we closed the deal and recorded a profit of 35 USD. How to evaluate this result? The only way we can. 35 USD in relation to 1000 USD is, to put it mildly, not enough. Especially if you took a deal, for example, a week. Need more. The last time it happened. We continue to trade so that the result is more or less acceptable. And what trading result with respect to 1000 USD will be acceptable? And in relation to 100 USD? No. This is not enough, we believe. If having 1000 USD, we earn 500 USD, it will already look like a normal trading result. Now let’s talk about the acceptability of return on investment. Most of us know that investment returns are generally estimated as a percentage. A yield of 20% per annum is a lot or a little. Those who have invested in business or projects at least once know that 20% per annum is an excellent return that you can only dream of. The yield of 20% per annum is approximately 1.7% per month. And now back to our 1000 USD and the profit of 35 USD is absolutely not interesting for us. This is 3.5% per week. Even if you do not trade before the end of the month, it is 3.5% per month, and therefore, 42% per year. Where will you be offered such profitability? If this is not outright deception, then nowhere. How much effort did you make to earn 35 USD while having 1000 USD? I think not much. We just don’t know how to think in% profitability. We simply do not understand when to stop and what profitability is acceptable. We just don’t know how to think in% profitability. We simply do not understand when to stop and what profitability is acceptable. We just don’t know how to think in% profitability. We simply do not understand when to stop and what profitability is acceptable.
And here is the promised end of that super-good period of profitable transactions. For a period of a little over a month, having 380 USD in the account, I managed to earn about 7000 USD. This is approximately 1842% of the profit. But I did not know and did not realize it. The final result is in the screenshot. The bill turned to dust in literally 3 days.
The answer again lies on the surface: Learn to think in percentages! Do not chase large numbers, chase only% yield. And it doesn’t matter how much money you have on deposit: 100,000 USD or 100 USD. If you want your 100 USD to turn into 1000 USD, this is only possible if you set yourself benchmarks in%, and not in money.
Of course, I could not parse all of my mistakes. I could not describe half. Of course, the most important mistake in this list cannot be – they are all significant and everything must be excluded from the competent trade of a successful market participant. I talked about the most important points. I really hope that my experience will be useful to you. After all, we remember the title of the article: Smart learns from the mistakes of others…
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