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Demystifying Forex Investment Money Myths

Bor cashbackforexexness Schlossberg has adapted two articles from his new book "Technical Analysis of the Forex Market", forexrebateclub the first of which he talks about investment money myths forex rebate club describes ways to trade for profit in the real world Investment money strategies cashback forex very sacred, and to be successful, all traders must follow the same investment money rules For the trading public, this is one of the most harmful One of the most harmful myths in trading is that there are really only two choices, follow the trend or go against the trend, and similarly, there are two strategies to follow in investment finance: one, constantly small losses, hoping for a chance of huge gains, a clean slate and ultimately profitable; two, constantly small gains, and suddenly suffer a chance of huge losses, hoping that this loss did not eclipse the capital of course, novice traders rarely have this choice of opportunity Some will lose money slowly, little by little, over a long period of time, while others will lose money in staggering amounts, even before they learn to use the trading software out of the game Why do novice traders inevitably lose money? Because they all trade randomly they rarely use the principle of consistency in their plans they barely understand the Dynamicsofpriceflow and even if they do, they often misunderstand the nature of technical analysis random trading is one of the fastest ways to lose money in forex there are publicized on the trading software many trading varieties, are starting to use the random coin toss method and some basic For example, a $2 profit for a $ cashbackforexbroker risk; then, within weeks or months, the issuer of those trades will be in deep loss or completely bankrupt. Ironically, practitioners of the random entry method have accidentally proven that market behavior is not random, and if it were, they would probably be on par with good traders. But, sadly, just as the lucky guy who scores a half-court field goal in a game can never beat a professional basketball player in a one-on-one match, so too will the novice trader lose when he meets a professional technical trader. However, it is an important addition to any wise technical plan. Because Forex offers retail traders unprecedented liquidity and unlimited trading methods, the investment strategy in Forex is completely changeable 1:2 Myth Every trading book published and printed touts one of the most classic investment tips: the risk-reward ratio must be at least 1:2 in every trade. In other words, for every point of investment risk, you must try to get 2 points of return so that the trader only needs to be correct 40% of the time and still have excellent expectations of the trade. In the smallest time frame, the forex trader is faced with a huge impact of spreads even for the most liquid instrument in the world, the EUR/USD pair has a spread of as much as 3 points, so the trader actually has to get a return of 5 points to guarantee earning 2 points, so in order to achieve his goal, he has to set the risk-return ratio at an unrealistic 1 In fact, this means that the trader must earn 3 points of profit for every 1 point of investment risk to achieve a 1:2 risk-return ratio that extends over a longer period of time, with 100 points of investment risk to earn 200 points of profit. The target of 200 points of profit with 100 points of investment risk may have a better chance of being a little bit bigger, when the impact of the spread is very small, only 203 points of profit, allowing 97 points of loss, so the risk-reward ratio is very close to 1:2. If you are very impatient, then you are not likely to take profits too early to close? For example, at 100 pips, or even 50 pips, so that the actual risk-reward ratio of the trade goes from the previously expected 1:2 to 1:1 or 2:1 You wouldnt do what the books teach you to do, you would lower your profits and not let them go but given your character, would you really do anything differently? Lets assume that you are different you have the patience of a sage and you are able to fully comply with this rule Imagine the following scenario: you are trading in the EUR/USD pair Suppose you decide to short Europe and the US at 1.2500 with a stop loss at 1.2600 and a target of 1.2300 The trade goes well and the price moves just as you want EUR/USD to fall first to 1.2400, then to 1.2350 and slowly approaching 1.2300 Price stops at 1.2335 and slowly shows signs of a rebound, first to 1.2350 and then to 1.2375 However, you are patient, you have a will of steel and insist on waiting for a 1:2 risk-reward ratio Price starts to fall again and you start to feel right Price falls back to 1.2350, 1.2325 The drop is slow but you can definitely see the light of victory 1.2320, 1.2310, 1.2305……… you are ready to fill the arbitrage order the price drops a few more points and keeps probing to 1.2301, but then it starts to rebound, slowly at first, then climbs sharply and in a few seconds it reaches 1.2350 and finally to 1.2370 You kept your composure, the price almost reached your target and it will surely go back to that level again You will not make the same mistake as others to reduce your profit You will continue to trade and follow the classic rules of investment finance Of course, the price never reached 1.2300 On the contrary, the EUR/USD rate rose in a straight line and soon reached 1.2600, which will easily trigger your stop loss Now the situation is that you had a chance to gain 199 points of profit, but you ended up losing 100 points This is the reality! ImprovementsHow many similar experiences do you think novice traders go through before they can discard all the laws and proper investment management? Therefore, a 1:2 risk-reward strategy is basically a daydream, an ideal state of affairs In fact, most traders improve their trading strategy in one of the following two ways First, once the price exceeds the risky investment pips along the favorable direction of the trade, the professional trader will adjust his stop to the break-even point in order to ensure that his trade is profitable, this is called profit protection So, in the above EUR/USD case Once the price breaks below 1.2400, the trader should adjust his stop to 1.2500 However, for most traders there is still a dilemma assuming that the price rallies all the way to 1.2500 again and the trader exits the trade then the trader does not lose but also does not have any return, the trade just preserves its capital everything is going well and in the end there is no gain, there is nothing more frustrating and uncomfortable in trading than this This is the same as working hard all day and having your paycheck leak through a hole in your pocket, so many traders use the scale-outapproach. This approach allows the trader to continue trading for as long as necessary because it satisfies the most basic desire to trade for a return. However, trading is not a numbers game, but a psychological game, and what is literally beautiful is often a psychological disaster professional traders understand this fact they also know that market dynamics are flexible and rarely follow a rigid risk-reward ratio always pay attention to the volume of holdings and adjust the risk parameters according to market conditions, through these methods, professional By these methods, professional traders are not only able to get excellent risk-reward ratios, but are also able to create more profitable trades

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