The second trade of the day comes out after a market retrace and we are again advised to short EUR USD at 1.3500. The same targets are used as the first call and I think the trade looks good so I short 2 more lots at 3500. However, this time the trade moves against us and we are instructed to exit our trade at 1.3520, including spread. This equates to a loss of 20 pips (3520 3500 = 20). No further trades are made and the end of day performance is noted down as 10 pips (our 1st trade of 30 minus our 2nd trade of 20). The problem here is that my account does not reflect a profit of 10 pips, in reality it reflects a losing day. But how can this be? It can be explained as follows: My first trade was entered at 1.3500 on 2 lots or $200 000. It was closed out 50% at 1.3490 and 50% at 1.3480. 1.3500 1.3490 = 0.0010* 100 000 (1 lot, half of my position) = $100. 1.3500 1.3480 = 0.0020* 100 000 (the 2nd half of my position) = $200. Total profit $300. My second trade was entered at 1.3500 on 2 lots. It was closed out, 100% at 1.3520. 1.3520 1.3500 = 0.0020* 200 000 = $400. If we subtract my winnings from my loss I am left $100 dollars out of pocket. This example assumes the best case scenario and does not account for the slippage that can occur that can occur when opening and closing trades. In almost every case published results will not account for slippage making them even more unaccurate. Unfortunately it is common practice to report results in terms of pips without any weighting for the number of lots played. It is explained away with the excuse everyone plays a different number of lots depending on their account size but if scale outs are encouraged then results should be adjusted accordingly. You can achieve anywhere from 400 to 100 pips per month with this powerful strategy We have so many bones to pick with statements like the one above we dont know where to begin! Most poignantly, trading strategies are discretionary in their very nature. The best traders operate with a strict set of rules but they have the experience that enables them to read the market and apply the correct set of rules at the correct time. There is no market holy grail. A trading strategy may well be very profitable if employed at the optimum moments. Therefore the statement should read By taking the very best trades you can achieve anywhere from 400 to 100 pips per month with this powerful strategy. If you have not developed the experience required to apply discretion to your trading then it is impossible to take the best trades. Any way we are all different so who is to say what the best trades are in the first place. The statement also implies that you are guaranteed at least 400 pips per month just by turning up for work so to speak. That is an extremely favourable minimum implied return to say the least. The reader automatically thinks that the harder they work the higher up the 400 to 1000 scale they will come. However missing an opportunity because you were out at the store or getting some well deserved rest is not factored into the results and the minimum figure may seem like dream territory after a few weeks. In almost every case you will find that performance figures are based on hypothetical results. What this means is that the system owner hasnt actually carried out a trade but they have looked at their chart and noted down the results. The problem with this is that slippage and re-quotes (both of these are rife during times of important economic releases) are not accounted for, neither are the slight differences in price between the prices quoted by different brokers. For example, if broker ABC quotes the EURUSD and 1 pip higher than XYZ at any given moment in time it could be the difference between a limit order not being filled or a stop order being hit before a trade goes on to become a winner. Although it doesnt sound like much the odd trade here and there can make a great deal of difference. You will find that publishers are required to add a disclaimer to their hypothetical results page. You should read this statement very carefully and be aware that live trading conditions can and will make a large difference to reported results. Stocks are going down make money in both directions when you trade FX It is true that you can make money whether the price of a currency pair is moving higher or lower because in each transaction you are simultaneously buying one currency and selling another one. If you believe the value of the US Dollar will increase against the Euro you can go short EURUSD (selling Euros and buying Dollars) and vice versa if you believe the US Dollar to be weak. However, the statement implies that you cannot make money when the stock market is falling. This is not true. It is possible, and frequently exercised, to short shares. In fact some of the most famous traders of all time have made most of their money during bear markets. The idea that falling shares means losing, or certainly not gaining, money comes from the old buy and hold or traditional investment stereotype.
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