“(Trading) dividends are a result of measurable consistency, not hit rates.” – Sam Evans (brackets mine)

Hello:

I was offline for most part of the last week due to a plus experience, not a minus one. Orders were still placed based on our rules. The trades were generally entered late last Monday and closed at the end of the week. Trailing stops were applied according to our predetermined criteria, though their values aren’t displayed below. Here are the results:

AUDUSD

Order: Buy

Status: Closed

Profit/Loss: 293 pips

NZDUSD

Order: Buy

Status: Closed

Profit/Loss: 222 pips

EURAUD

Order: Sell

Status: Closed

Profit/Loss: 482 pips

EURNZD

Order: Sell

Status: Closed

Profit/Loss: 684 pips

EURCAD

Order: Sell

Status: Closed

Profit/Loss: 154 pips

AUDJPY

Order: Buy

Status: Closed

Profit/Loss: 325 pips

Specific entries and exits prices, times and dates would be highlighted on Wednesday. Our TS was hit on EURCAD. The initial risk on each position was 2% (-200 pips). If it were 1% (-100 pips), two trades would’ve closed with losses, thus making a maximum drawdown of 2%. However, our past experiences have made it clear to us that the wider the stop, the bigger the drawdown and the lesser the profit (though we’d still go ahead): and the tighter the stop, the lesser the drawdown and the bigger the profit. This is only on the condition that losers were aborted and winners were allowed to run (provided the losing trades are exited during strong movements). For example and for the sake of simplicity, with a 200-pip stop on each trade, an open account may show like this in the MT4 terminal:

Deposit: $100,000

Balance: $94,000

Equity: $102,000

Let’s now assume similar criteria were used to place trades at the same entry prices, but with a 100-pip stop on each trade, an open account in the MT4 Terminal may show like this:

Deposit: $100,000

Balance: $97,000

Equity: $105,000

The logical conclusion is that the factor that allows smaller drawdowns and bigger profits make more sense.

Grappling With Mr. Risk

Mr. Risk is a deadly enemy of any trader. Grappling with him without effective defensive risk control methods would simply leave a crimson gash across the neck of the trader. We want to be right about every trade, wanting to see only pluses, not minuses. This is unrealistic expectation. When you realistically acknowledge that each trade you place is only a probability, then a heavy load has been removed from your head.

Since many people start trading with the desire to get rich quickly, it’s difficult to accept this simple reality. If they don’t get rich quickly as they expect, they become angry. If you made 600% returns last month and lost 100% this month, then your trading capital is gone. High risk grows accounts fast; it also kills accounts fast. High risk is so attractive that for one successful high-risk gambler, there are 99 other gamblers willing to pay for a lottery ticket. And who is to say they’re wrong?

I conclude with this:

“We are often reminded: ‘Amateurs are concerned with how much they can make. Professionals are concerned with how much they will lose.”’

Your questions and opinions are highly welcome.

Thank you.

With best regards,

Azeez Mustapha

Forex Signals Strategist, Funds Manager &Coach

Email: amustapha@fxinstructor.com

NB: There is risk of loss in trading, but it is possible to be a successful trader.

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