The most important chart for trading
Thanks Cap.
Who would have thought that it turns out that the Volga flows into the Caspian Sea after a 50% drawdown, you have to earn 100% in order to get your deposit back...
You're blessed with sacred knowledge... Well, now everyone will be happy...
... This is the "ultra-optimism" chart required after the careless use of leverage. ...
You have a typo. Not after careless use of leverage, but after careless/self-reliant use of lots/lots.
It's not the same thing.
P./S.: And it's not "ultra-optimism" that's required, imho.
You have a typo. Not after careless use of leverage, but after careless use of lots/lots.
It's a different story.
There is no typo there. If you have 1:1 leverage, it will take you several weeks to reach 80% drawdown. But with 1:100 leverage it's easy, in a couple of hours (or even minutes). The danger is just the high leverage. That's why in the USA and some other countries leverage for trading is legally limited to 1:50.
There is a rule "90/90/90" - 90% of traders lose 90% of their deposit in the first 90 days.
Here is a detailed lecture on the subject by an experienced trader:
Anton Kreil.
Professional Traders vs Retail Traders 101 - Part 1
In English:
https://www.youtube.com/watch?v=SK0FJfkWzyY
This site was also available in Russian, but now it is missing.
In general, you can trade quite normally and profitably with leverage of 1:100 and even 1:500, but to do this you have to subtly manage the RISK, that is, the ratio "position size - lot - leverage - risk per trade". I published the full text of sub-programs for such management for MT4 a long time ago. Everything works properly in MT4 - and with any leverage. See them in my profile, on my blog and in CodeBase. Everything is Public Domain. Feel free to use them.
- 2014.02.17
- www.youtube.com
Useful information.
Thank you!
There is no typo there. With 1:1 leverage, it takes a lot of effort to achieve an 80% drawdown, and it takes a few weeks. But with 1:100 leverage it's easy, in a couple of hours (or even minutes). The danger is just the high leverage. That's why in the USA and some other countries leverage for trading is legally limited to 1:50.
There is a "90/90/90" rule - 90% of traders lose 90% of their deposit in the first 90 days.
Here is a detailed lecture on the subject by an experienced trader:
Anton Kreil
Professional Traders vs Retail Traders 101 - Part 1
In Russian:
https://www.youtube.com/watch?v=XpPjBnUG7DY
In general, you can trade quite normally and profitably with 1:100 or even 1:500 leverage, but you have to subtly manage the RISK, that is, the ratio of "position size - lot volume - leverage - risk per trade". I published the full text of sub-programs for such management for MT4 a long time ago. Everything works properly in MT4 - and with any leverage. See them in my profile, on my blog and in CodeBase. Everything is Public Domain. Feel free to use them.
"The danger is in the pads between the monitor and the chair/chair."(c)
I don't need links to stories about the dangers of credit shoulders. I don't need your software.
The deposit is greater with less leverage. The point value is the same at different leverage sizes and depends on the size of the lot. Not leverage.
If you are not an enemy with simple mathematics, you should realize that Uncle Kolya (warning about the need to deposit) and stop out (irretrievable loss of funds) may come sooner with less leverage.
The dangers are in the lot sizes used, trading strategies and tactics (or lack of them), not respecting the MM.
Managing risk with subtle and not-so-subtle is required regardless of the size of the leverage.
The danger is in the lot sizes used, the trading strategies and tactics (or lack thereof), and not respecting MM.
I have not noticed any logic in what you are saying. Your "applicable lot sizes" are EXACTLY dependent on the leverage your broker gives you. If you open a position with your entire deposit at 1:1 leverage, your deposit will only fluctuate by 1-2% per day (normal market volatility). No "Uncle Kolya", i.e. no margin call there for a couple of months.
It's almost like high school maths.
But as this forum shows, even traders don't understand it. That's exactly why I opened this explanatory thread.
Thank you for separately informing me that you don't need my programs. I am very "interested" (sarcasm).
I didn't notice any logic in your statements. Your "applicable lot sizes" are EXACTLY dependent on the leverage your broker gives you. If you open a position with your entire deposit at 1:1 leverage, your deposit will only fluctuate by 1-2% per day (normal market volatility). No "Uncle Kolya", i.e. no margin call there for a couple of months.
It's almost like high school maths.
But as this forum shows, even traders don't understand it. That's exactly why I opened this explanatory thread.
Thank you for separately informing me that you don't need my programs. I am very "interested" (sarcasm).
Once again, you are deliberately or accidentally confused.
Besides, if you were objective, you wouldn't speak for traders either (incl., firstly, not authorised, secondly, not everyone who calls themselves a trader or who is called a trader is in fact a trader).
Regarding your programs - you have offered me your programs in the post above, as well as look at your profile and blog:https://www.mql5.com/ru/forum/166224#comment_3985331
My polite refusal was quite legitimate. And it wasn't separate. It went along with my refusal to listen to the video you offered: https://www.mql5.com/ru/forum/166224#comment_3985378.
Besides, my mathematical knowledge is enough to be sceptical about claims such as yours.
P./S.: So, if anything, this was originally a technical forum. I.e., please keep in mind that this is not a very appropriate place"to noodle your interlocutors' ears" for preconceived "explanations".
There is a very good saying by Abraham Lincoln. Translated into Russian, the meaning goes like this:"You can fool all people for a while and some people all the time, but you cannot fool all people all the time."
"You can fool all the people some of the time, and some of the people all of the time, but you cannot fool all the people all of the time."
Besides, my mathematical knowledge is enough to be sceptical about claims such as yours.
Really? "Enough maths"?
In fact, I haven't claimed anything of my own here, but simply cited well-known pictures from explanatory articles on well-known investment websites.
These cited sites have a rank (that is standing in the world ranking at position # of 50 million sites) of about: 580 000 top sites, 1.6 top million, 8.0 mio, respectively. Those are pretty high numbers. If you are not lazy, if you want to become a trader, and you speak English, you can go there and read more. The links are at the top. Corrected the link to the video.
Md-ah-ah-ah-ah-ah....
I started this thread here on the forum for a reason.
Here's more, for those who still haven't heard about the risks of increased leverage, even Wikipedia says straight up:
https://en.wikipedia.org/wiki/Leverage_(finance)
Lehman bank bankruptcy, also because of high leverage of 1:31 (and banks should have no more than 1:8...1:12 leverage, that's the Basel norm):
http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp
https://hbr.org/2009/09/lessons-from-lehman
Once again, normal trading can be done with 1:100, 1:200 and even 1:500 leverage (if a broker gives small lots for trading). Terminal MT4 gives all necessary information to organize proper Money Management, i.e. position size management in order not to exceed the risk limit per one trade (usually 1% ... 2% of your deposit).
By the way, other trading terminals do not provide such information, and there the calculation for MM is much more difficult.
Md-ah-ah-ah-ah-ah....
I started this thread here on the forum for a reason.
Here's more, for those who still haven't heard about the risks of increased leverage, even Wikipedia says straight up:
https://en.wikipedia.org/wiki/Leverage_(finance)
Lehman bank bankruptcy, also because of high leverage of 1:31 (and banks should have no more than 1:8...1:12 leverage, that's the Basel norm):
http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp
https://hbr.org/2009/09/lessons-from-lehman
Once again, normal trading can be done with 1:100, 1:200 and even 1:500 leverage (if a broker gives small lots for trading). Terminal MT4 gives all necessary information to organize proper Money Management, i.e. position size management in order not to exceed the risk limit per one trade (usually 1% ... 2% of your deposit).
By the way, other trading terminals do not provide such information, and there the calculation for MM is much more difficult.
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Here it is, the most important chart for trading.
This is not a currency pair chart, nor is it a testing or optimisation chart.
It is a graph of exponential dependence of the required return after a drawdown, a recovery graph.
This dependence is non-linear, i.e. roughly speaking, it is asymmetrical. The larger the drawdown, the larger the subsequent profitability should be. This is the graph of "ultra-optimism" required after careless use of leverage.
More explanatory tables:
References:
https://www.hedgeable.com/hedgeable-investment-philosophy-white-paper
http://www.financialtrading.com/cfds/drawdown-recovery/
http://www.bsam.com/research/whitepapers/the-importance-of-managing-risk-in-retirement/