# How to Win in Forex Arenas

If you were to watch cashbackforexbtc understand American soccer, you would understand the subtleties of the sport You would also understand the importance of smart playcall Eastforexcashbackg, the deception of faking a blitz, and the unique role of special teams players If you dont understand th East forex cashback, you forexcashbackcalculator watching a bunch of big guys running around the field, rushing each other nbsp;If you were to watch and understand auto racing, you would know fuel mileage strategies, the aerodynamics of wake at 200 mph, and the impact of adding an extra 1/4 pound of air pressure to the right rear wheel If you dont understand this, then you are watching a team of vehicles running laps If you understand the dynamics of the Forex arena, you would understand the calculation of If you dont understand this, you are playing with fire The odds of winning and losing are equal Trading is very hard, and to make it easier, some traders have adopted a quick exit strategy to make 100 pips is hard, and these traders expound cashback forex I will only make 10 pips on each trade This may seem reasonable of course, making 10 pips is easier than making 50 or 100 pips Traders dont want to take risks, they just want to win, which seems to be a commendable trait in the trading world but what would you think if I told you that the result of this trader doing this is not to make things easier, but to make his life more difficult? To understand this, we need to delve a little deeper into game theory the dealer has an advantage suppose there is a casino roulette wheel and you approach the table and place a bet on the red or black numbers what are your chances of winning? If youve never played roulette before, you might think the odds are 50% After all, half of the grid numbers are red and the other half are black Is that right? No! In addition to the red and black squares, there is at least one other square that is neither red nor black This square with a 0 number slightly changes the odds of us winning or losing In European roulette, there is only one 0 square, which gives the dealer a slight advantage At this type of table, the ratio of us players winning or losing is 53:47 In American roulette, there are two 0 squares, 0 and 00, which Increases the house edge by about 5.3% This will further disadvantage our players, reducing the chances of player success In the world of forex trading, this 0 grid represents the spread the chances of success will always be slightly in favor of the house, that is, the greater the market maker spread in forex, the more 0 squares the trader must overcome Just as each additional 0 grid reduces the chances of winning for roulette players, so does Each increase in the spread will also reduce the traders chances of winning expand the playing field in the forex market, the spread is determined by the dealer, the spread is equivalent to 0 cells in the roulette wheel we have no way to control this spread it is only determined by the market maker, just as the number of 0 cells in the roulette wheel is determined by the casino alas, but if we could control the number of red and black cells What if we could control the number of red and black squares? Suppose we substantially increase the number of red and black squares in the wheel and keep the number of 0 squares constant, what effect would this have on the odds of winning or losing? The odds of winning will increase because the proportion of 0s to the potential outcome will shrink as long as there are 0s in the wheel, the chances of success will never favor us but by adding additional red and black squares to the wheel, we can reduce the casinos advantage and push the win-lose ratio to 50% The more red and black squares we add, the higher our chances of winning are in a sense In a sense, we can make this roulette wheel in this section, which means that the forex arena becomes larger Of course, we cannot add grids to the roulette wheel the casino is too smart to allow us to reduce his advantage Although this advantage is not invincible, it is enough to ensure that the casino wins more often than it loses in a large enough sample But in forex trading, we can expand the size of the arena, thus increasing the chances of winning our trades unlike in the casino, where we can only passively accept the rules set by the dealer How is this done? We expand the arena by widening the profit margin and the stop loss margin, by using longer time frames, and by seeking larger profits Youve learned the essentials of the various techniques described in this book, so let me ask you a question: Have I ever set a 10-point profit as a goal before? Other Trading Instructors Perspectives No, but I know a lot of traders who are pursuing just that goal In fact, there are some outstanding trading instructors who do teach their students to pursue a small 10 or 15 point profit before closing a position What is their motivation for teaching their students to trade this way? Well, maybe your trading coach has asked you to open an account with a broker or market maker, and if thats the case, you may have signed a commission commission letter, something that allows the trading coach to earn a small fee each time you place an order, as payment for introducing you to the market maker If you place only a few orders, your trading coach will only earn a small fee. So, the more orders you place, the better it is for the trading coach (and the market maker), even if its not so good for you. So if the next time a so-called trading coach tries to convince you to take 10 or 15 points per order as a profit target, think about it lets do the math What are the chances of success when a trade has a very small profit target? The following example will give short term traders a clear idea of what they are up against Lets assume we are trading a currency pair with a 3 pip spread, as spreads of this size are very common in the forex market Our trader only wants to make a profit of 10 pips This goal should be easy to achieve, right? To be sure, the trader loses the spread (3 pips) immediately after entering the market, so in order to turn a losing position into a profit of 10 pips, the trader actually needs the exchange rate to move 13 pips in his favor 10+3=13 We already know what it takes to create a profitable trade, now lets look at what it must be like to create an equal amount of loss which is This is how we determine the odds of success or failure In order to generate a 10 point loss, a trader only needs a 7 point unfavorable swing This is because as soon as a position is opened it immediately suffers a 3 point loss, which stems from a 3 point spread 10-3=7 We have calculated that our trader needs a 13 point favorable swing to make a 10 point profit But an unfavorable swing of only 7 pips will result in the same 10 pips loss The initial ratio of 10 pips profit to 10 pips loss originally thought should now be expressed like this: 3/7=1.857:1 So, the actual win-lose ratio is 1.857:1, or approximately 2:1 This is really an eye opener, isnt it? Now, you know why its hard to make money trading with small profit targets arena size! Its the same as placing a bet on the red square of a roulette wheel, and nearly 2/3 of the squares are either black or 0 We can certainly improve the odds of winning any trade by using a good strategy and fixed risk management, but its hard to see how anyone can consistently beat that initial profit/loss ratio If youve ever traded this way and failed, then now you know what Whats going on is that you are making the market maker rich, and probably the broker rich, but you are probably one of many losing traders changing the disadvantage How do we change this win-lose ratio so that we have a higher chance of winning at Forex trading? How can we make this playing field fair? By widening the playing field you know that if we aim for a larger profit target, the spread in the trade becomes a smaller ratio This is like adding more black and red squares to a roulette wheel but unlike a roulette wheel, we can choose the size of the playing field in forex trading Lets review the previous trading situation, only this time we will widen the playing field Lets assume once again that the spread is 3 pips, only this time the trader will try to take a profit of 100 pips, not just 10 pips In order to turn an initial losing position into a profit of 100 pips, the trader actually needs the exchange rate to move 103 pips in his favor: 100+3=103 To generate a loss of 100 pips, the trader only needs an unfavorable movement of 97 pips in the exchange rate This is because The trader suffered an immediate loss of 3 points as soon as the position was opened 100-3=97 We have determined that the trader needs a favorable movement of 103 points to make a profit of 100 points, while only an unfavorable movement of 97 points is needed to cause a loss of 100 points The original thought of an initial ratio of 100 points profit to 100 points loss can now be expressed as: ;103/97=1.06:1 Now this win-lose ratio is much better for the trader because they are closer to 50-50 As we said before, the initial win-lose ratio for each trade will be higher than 50-50 as long as there are spreads but, if we use good trading techniques and risk management or if we earn spreads on the trade, we can ignore this The win-lose ratio is slightly against us Of course, Im not saying you have to aim for a profit target of 100 pips or more per trade, but I hope you understand that if the arena of forex trading is larger, then your chances of winning will be much higher In addition, traders who aim for larger profit targets tend to hold their positions longer and so enter and exit (and pay spreads) less frequently nbsp;Your market maker and your broker may love you less, but your account money will thank you in the end and youll be the only one enjoying the profits or suffering the losses Why doesnt the public do the same? So why doesnt everyone trade with the goal of greater profits? Why do so many traders fall into the trap of this astounding win-lose ratio? There are two possible answers: 1. They dont know they are accumulating a win-lose ratio that is bad for them 2. They have harmful preconceived ideas about the nature of trading The problem is that trading will not always be what we think it is, or want it to be I know exactly what I want trading to be like, which is: I get up in the morning, trade for an The more time we spend playing the game, the higher our score will be. The problem is that many traders dont realize that their perception of trading is not based on facts and that the markets they are trading exist in their dreams, not in reality Minimum effort for maximum gain! How did we develop this bad perception of trading? I think the culprit is those TV shows that advocate making huge profits in just a few minutes a day You may have seen these lengthy commercials, which are often produced to look like regular TV shows in which some wide-eyed investors proudly proclaim that they have made the biggest gains with only minimal effort Minimum effort for maximum gain! That sounds great, and its no coincidence youre being told exactly what you want to hear right now, and Im not going to say what you like to hear, Im going to tell you the truth trading is hard work short term traders are accumulating win-lose ratios that are bad for them theres no such thing as maximum gains with minimum effort When I say we need to expand the arena, so hold When I say we need to expand the arena and hold positions longer, thats probably not what you want to hear Why is that? Because we want to get the most bang for our buck with the least amount of effort Why is the radio full of promises of maximum bang for the buck with the least amount of effort? Because salesmen know that this is exactly what you want to hear, and they also know how to get you to pay big, no matter what, if someone tells you exactly what you want to hear, get away from him What can we learn from smart money? Think about the way the so-called smart money trades in the market. Will those hedge funds and institutional traders go after 10 or 15 points of profit? Of course not they understand the dynamics at work here not only will they not be interested in 10 point profits, they will not be chasing 100 point profits many of these big guys will only be satisfied with a few thousand points of profit this kind of trading will push the win-lose ratio as far as possible to 50-50 institutional investors not only understand the value of operating in a much larger arena, they can also earn spreads by making such trades If this were a casino, they would be out of there in no time. Now you know why they are called smart money! Now get out of there and win The good news is that we too can trade like smart money and avoid trading the opposite way Now that you understand the dynamics of the forex arena, you understand more about trading than most people do Most people enter, fail, and leave without taking away a bit of knowledge about the nature of the game they are involved in This game Not the kind of game that doesnt need to be taken seriously, but the kind of game where participation is about winning What does participation is about winning mean to you? Does it mean that youll do things your way, play the game the way you like, and if everything goes well, its great? Or does it mean that you are willing to do whatever it takes to get on the podium including giving up your preconceived ideas about the game you are participating in? If you are serious about making money, you better be willing to put in more effort than anyone else