The difference between a novice and a professional trader
What East forex cashback the difference bet cashbackforexbtcen a novice cashback forexr forexcashbackcalculator a professional trader? This is a question we are often asked and there are indeed many differences between the two, but the main one is Eastforexcashback a novice trader thinks about how much money he can make, while a professional trader thinks about how much money he will lose. But veteran traders understand that one of the keys to winning is to learn how to reduce losses. It is a fact of trading that if you trade for a long time, there is always the possibility of losing money at some point, and how to control such losses is quite important for long-term trading success or failure. If you are trading at a loss, your emotions will certainly be greatly affected so we must decide when to leave the market before entering the market if it is decided after the transaction according to the trading situation, it is easy to be affected by the emotions of investors who do not know the risks in advance usually go through three psychological stages, and finally lose money to the margin shortage First, when there is a loss, you may still have the hope of turning a loss into a win When this hope is dashed, you may expect the exchange rate to return to the entry price as far as possible to recover losses. If you are trading with real money, you may be greedy or fearful and make a decision, but we should base our decisions on good analysis, not on feelings. It may have happened to all of us, but only those who decide not to let it happen again can be better traders, so its important to keep learning from our experiences in order to be better at timing our trades, recognizing the risks and protecting potentially profitable trades in the future. What happens if we make $1 if we guess correctly and lose $1 if we guess incorrectly? We may play and therefore need to meet either of the following two conditions 1, we need to have a higher chance of winning when we flip a coin 2, we make more money when we win than we lose when we guess wrong Most investors want to make more money when they win than they lose when they guess wrong If we make $2 when we win and lose $1 when we guess wrong, what is the result? The answer is that we will probably have more room for lasting profit, and of course we want to bet on coins 24 hours a day, seven days a week. The coin itself is right, what I did is right, so Ill stick with the strategy of profitable traders who know there is no guarantee that any one trade will be profitable, so they take themselves out of any one trade outcome but they know that in a series of trades they are very likely to be profitable whether its 10 times, a month or a quarter, they know theyve won before, so since the strategy is the same, they are still likely to win in the future. So since the strategy is the same, they are still likely to win in the future. This is the strength of the professional investor. When trading is a business and not a pastime, it is easier to avoid emotions affecting the trading strategy. I have seen novice traders win only 10 pips on one trade and 10 pips on another, or on the third, 10 more pips, but on the fourth, when they try to make another 10 pips, the market reverses and they end up losing 50 pips. 20 points so the single pursuit of high chances of winning is also not working what is at play? I hope you have already found the answer to this question, the answer is to make $2 when you guess right, and the risk of loss is $1. This is the classic 1:2 risk-reward ratio, we take the risk of losing $1 and expect to make $2, or we risk losing 100 points when we expect to make 200 points We pursue 50% chance of profit and make more in the right direction. This can be done even for novice traders, but you must accept this concept and implement it into your trading strategy so that it serves you if the market turns before reaching our profit target. There is nothing worse than watching the currency retreat just a few pips away from our target, triggering a stop loss. To stop this from happening, we recommend moving the stop loss to the entry position when the market is halfway to your target as follows: 1, buy EUR/USD at 1.4500 2, set a stop loss of 100 pips at 1.4400 3, set a limit at 1.4700 to guarantee a 200 pips limit, i.e. use a stop loss of 100 pips at 1.4400 The limit price of 200 points, that is, using a risk-reward ratio of 1:2 4, when the market is halfway to your target, that is, the exchange rate reached 1.4600, we can move the stop loss from 1.4400 to the entry price of 1.4500, which means that we may hit and, or may earn 200 points so this is a good trade another focus of money management is how to manage the account so before entering the market you should Ask yourself: ” How many lots should I set up to trade? ” To better understand how to decide on the number of trades, consider the following question Lets say you have a balance of $5,000 and you set up 25 lots (250,000) of EUR/USD, which means you are trading at a pip value of $25 and lets say you are willing to risk losing 100 pips or $2,500 on this trade. With a $5,000 account balance, it is not reasonable to create 25 lots and risk losing half of your account balance on a single trade, is it? Do you remember the coin toss comparison? While we have a 50% chance of winning in the long run, what happens if we lose 5 trades in a row? The answer is that we will have lost all our money before the next possible win so lets think about losing a limited number of pips and losing a limited portion of our account balance so that we still have money to continue trading even after losing a few times in a row We recommend that you do not trade more than 5% of your account funds per trade In order to better calculate the trade size for this purpose, lets do the following calculation for $5000 To ensure that you do not exceed 5% each time, i.e. the risk of loss should not be greater than $250 each time, you can follow these two steps1, decide on the stop-loss distance of the trade. For example, if we are trading USD/JPY and we know from the trading platform that the pip value is 1.10, we multiply the pip value by 100 pips to get $110 and so on. This also means that the value of the pips we trade has doubled, from $1.1 to $2.2 per pip, so the loss of 100 pips on a 2-lot trade size is $220 - which is still less than $250. This increases the pip value to $3.30, and $3.30 multiplied by 100 pips is $330, which is more than $250 more than 5% of our account balance so we should only set up 2 lots in this trade. It is worth emphasizing that it is recommended that you do not risk more than 5% of your account balance at any time. This does not mean that you can set up 5 trades and risk losing 5% of your account balance on each trade, in which case you are risking 25% instead of 5% at the same time. Lets conclude with a summary: 1) Determine your exit position before establishing a trade 2) Set a good stop loss when trading 3) Use a 1:2 risk to reward ratio, even if half of your trades are profitable, you will be profitable 4) Never use more than 5% of your account balance to take risk at any time 5) Follow all the rules at all times!