Break-even forex trading
As a rule, Forex trading for beginners is inextricably linked to the hope of finding your Grail by all means.
It is doubtful that anyone was able to do it. In any case there is no supporting evidence of a 100% lossless trading system used for gaining profit on Forex nowadays.
Most likely, break-even Forex trading is a myth, a dream, which has about the same chance of realization as when you are looking for pirate treasure or Incan gold.
But let us not jump to conclusions and consider the matter in more detail.
Lossless Forex trading
Very often you can see on the Internet advertisements that offer to buy some contrived strategy that guarantees a win-win Forex trading. In most cases the advertisement is meant for an uninitiated person or a beginning trader.
But the reality is that in trading activity the trader always proceeds from probabilistic correlation of risk and profit. The risk in this case implies a possibility of getting a loss of some kind, which means that one cannot count on a 100% lossless trade. One can only speak about reduction of risk component in trading and, as a result, increase of profitability of the trading system.
It is typical mistake of a beginning trader to hope that break-even trading is possible. That is why after starting to work with some forex strategy and successful completion of some deals they start to think it will last forever. But the loss does not take long, and panic sets in, as a result of which the whole trading turns into a nightmare, and the trading system is considered to be useless.
All this happens because the trader has not been warned of the possibility of losing, the fact that any trading system involves the presence of profitable deals and deals completed with a loss.
If you are aware of it, you can calculate the risk component present in one or another trading strategy and based on this you will reach the level, when trading will not be a win-win, but profitable.
How to calculate the risks of a trading system
1. Firstly, it is necessary to check the trading strategy based on the market data in the historical perspective. Thus for a certain period of time it is possible to get statistics of trades that could have ended in profit and trades that ended in loss.
2. As a result, on the basis of the obtained information the calculation is made. Knowing the amount of price points of profit and loss, you can determine the percentage of profit of the trading system.
3. If the obtained value of the risk is satisfactory for the trader, he/she should definitively check its performance by testing.
Test analysis of the trading system
To really determine the profitability of the trading system and specify the possible risks of its usage one has to test it. As a result of such testing you will get
- An idea about the real ratio of risk to profit.
- The number of trading signals, clearly visible on the chart.
- The final decision as to further use of the trading strategy in the Forex market.
As we can see, we should not expect miracles in Forex trading activity. You should not rely on a super strategy that supposedly allows you to operate in the market without losses, but on your own strength and the ability to correctly calculate the possible risk of trading and the possible profit.