Unique4xPro

Why Most Forex Traders Fail... LEVERAGE

FX:EURUSD   Euro Fx/U.S. Dollar
Way too many traders trade with very little capital and they do this because their brokers allow them to by offering them insane amounts of leverage. We really don't understand it because you would think that these brokers would want their clients to succeed in order to continue placing trades which yields the broker revenue from commissions and spreads. It is inevitable that with such little capital ($50-$100) these traders will go bust and blow their accounts, especially if they are allowed to take position sizes of upwards of 500 times their account value. These retail traders have been conditioned to believe that this is the way Forex trading is and quite frankly it isn't. The most successful Forex traders in the game use little to NO leverage at all and they only return a small consistent return of 1-3% per month. It seems impossible to make money with such small returns but if you actually take the time to break out a calculator and calculate how much such a return yields over extended periods of time like 5 years or 10 years you will see it is immense. Take $10,000... in 8 years with a consistent 5% a month return... that $10,000 will become $1,000,000.

So please guys read through the information on the chart. It is long but it is very valuable!

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occulti
5 months ago
Not just leverage... Why didn't you mention the practises of DD brokers ? (dealing desks/market makers) That's also a very important thing to know for beginners.. I think that for a beginner, getting to know how the brokers work is even more important than forex itself..
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Unique4xPro occulti
5 months ago
These practiced are not nearly as important in our opinion for many reasons. ECN brokers are a recent creation within the last decade or so and people have been trading successfully for much longer than that. With that being said it isn't DD brokers that are causing traders to lose.
+1 Reply
_VincentP_
5 months ago
2% to 3% is really low, in forex I'd say at most 5% is also still doable, you'd need 20 losing trades in a row before you go broke. This is very unlikely if you have even a few years of experience and follow your own rules.
You should be able to make at least a few profitable trades after say 3 - 5 losing ones, max.
It is true that people use way too much leverage on too small accounts. IMO if you wish to see above average salary level monthly returns (i.e. being able to make at least a basic net income of about €4K - €5K), with a max risk of 5% and with the possibility to take swings of 100 - 150 pips you need at least 40K - 50K.
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Unique4xPro _VincentP_
5 months ago
The expectation to consistently make 10% per month is unrealistic my friend I'm sorry. Is it possible? Yes. Do people do it? Yes. If you look at the most successful traders and or funds in the world however you will notice something in common: that their annual return is not staggering. A 12-36% annual return is almost unheard of in the investment world.
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_VincentP_ Unique4xPro
5 months ago
There is no need to if you have 1M or more or even 500K. No need to risk much if you only have to risk 1% to allow you to easily earn a nice yearly return that allows you to live off of.
Also, a good amount of the return gets eaten up by the salary of the managers in active funds at least.
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Gekko.uk Unique4xPro
5 months ago
As a retailer, 20-30% is what you should aim for. You are confusing institution with retail. Also, the average hedge fund uses an average of 1:88 leverage.
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avento Gekko.uk
5 months ago
where did you get such statistics from?
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avento avento
5 months ago
... bizzare and crazy statistics, I would say!
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Unique4xPro avento
5 months ago
These statistics were made public by FXCM
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avento Unique4xPro
5 months ago
I was asking Gekko.uk about hedgefunds leverage statistics, because I think he is very wrong about it.
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Unique4xPro avento
5 months ago
What was said?
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avento Unique4xPro
5 months ago
emm, haven't you seen his comment: "the average hedge fund uses an average of 1:88 leverage" ?
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Unique4xPro avento
5 months ago
Most funds and professional traders use under 5:1 leverage
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Gekko.uk avento
5 months ago
emm, it's true?
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mustard _VincentP_
5 months ago
Your comment '..20 losing trades in a row before you go broke' is completely flawed.

After each successive losing trade, your trading balance reduces, so your 5% risk on each subsequent trade also reduces.

You think 40K-50K with a 5% risk per trade will make you an income of 4-5K a month, or 120% return on capital per annum.

I would love to see the trading plan behind this, care to elaborate?

Sorry but that just sounds like a wild, madcap statement and is the reason why 95% plus of forex retail traders fail.

Leverage is the way that brokers make money, it encourages GREED and a get-rich-quick mentality.
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Unique4xPro mustard
5 months ago
I couldn't have said it better myself
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ProFX_Strategist
5 months ago
This post has a point, but seriously, nothing is really going to stop a "lousy-trader" from losing all the money anyway...; Lets compare "Lousy-Trader A" versus "Lousy-Trader B";

"Lousy-Trader A" decided to deposit just only $1000 into his trading account (because he/she does not feel confident yet to deposit more) ... But "Lousy-Trader B" decided to deposit all $10,000 into his trading account (which is definitely 10 times more cool yeah!)... So they both started to trade the same currency pair (using the exact same leverage & exact same amount to risk);

"Lousy-Trader A" risked $500 per-trade; but his prediction went wrong & he lost it... (SL hit)
"Lousy-Trader B" also risked $500 per-trade; & he also got it wrong & lost it... (SL hit)

On the second trade attempt; the exact same thing happened; both traders got it wrong & lost another $500 once again... (SL hit)

Right now "Lousy-Trader B" still has $9000 left inside his trading account (still looking very strong yeah!)
But "Lousy-Trader A" already has nothing left so he has to go & make deposit once again; he decided to deposit another $1000 again...

Once again both of them risked $500 for another new trade, but they both got it wrong & lost another $500 once again... (SL hit)
They went on to try another different trade, risked $500 for that trade again, but both traders got it wrong & lost $500 yet again... (SL hit)

So "Lousy-Trader A" (as usual) has to go to top-up (another $1000) into his trading account yet again (because there's nothing left in it), but "Lousy-Trader B" is still boasting that he still has alot ($8000 left inside his trading account right now)!

Well, as both traders continued to trade; the same s**t kept on happening & they both still kept on losing $500 (yet again & again per-trade) for every new trade attempts made...

So what happened in the end...? Well it really doesn't matter; whether you have $1000 or (10-times more than that) inside your trading account; because at the end of the day; nothing can really stop a "lousy-trader" from ultimately losing everything at the end of the day anyway; (so no point in talking about having big $50,000 or $100,000 amount inside one's trading account as well; because it will just make "a lousy trader" die much slower actually...; with more reasons to continue losing even more $$$$ in the long run...?)...

Have a good day.
Best regards.
+1 Reply
Unique4xPro ProFX_Strategist
5 months ago
Thank you for taking the time here and I respect your thoughts although they are fundamentally flawed. The essence of this write-up, if it wasn't clear I apologize, was to show how the risk parameters of a given trader should be proportionate to their account valuation; roughly 1-3% per trade. With this in mind the amount that a given trader will risk per trade could not possibly be the same if one has $1,000 in his or her account and the other has $10,000. Say we agreed both would only be willing to risk 1% per trade then trader A with $1,000 should only be risking $10 per trade and thus would have to adjust his or her position size accordingly depending on the size of the stop loss that is required for the trade. On the other hand trade B should only be risking $100 per trade and would too have to adjust his or her position size accordingly depending on the size of the stop loss that is required for the trade. This in effect results in leverage ranging from anywhere between 1:1 to 5:1 but it very rarely ever goes beyond that. Proving our point that most traders are over leverage because to risk more than 5% at the absolute MAX per any given trade is a recipe for disaster.
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ProFX_Strategist Unique4xPro
5 months ago
Thank you, I perfectly understand that you are speaking very strictly in-terms of only risking 1% - 5% of one's trading capital...; but still, nothing can really stop a "lousy-trader" from losing money anyway... The trader with the bigger $10,000 account will be losing $100 per-trade, & the trader with the $1000 small account will be losing $10 per-trade as such... (If both of them keeps on losing, then both traders will still "perish" on the exact same date with depleted account, at the exact same number of trades, if both have been trading the exact same currency pair with the exact same price point position & time...)

Finally, nothing's really gonna stop both traders from risking more (say like $150 per-trade) as well (including the small $1000 account holder; simply because if he loses this round, then he can still go on for a few more rounds; until he needs to top-up his account with more $$$ if he has been losing in the trades)...

I understand the advice to adhere strictly to the 1% - 5% rule though...

But there is always the temptation for the bigger account holder to play bigger/risk more, & end up losing even more (compared to the smaller account holder) as a result... So if a trader is comfortable say in making/losing just $10 per-trade, then he/she doesn't really need to deposit anything bigger than a small $1000 account I reckon (depositing anything bigger would be redundant with more temptation to go out of control I guess)... E.g., some heros with big-fat accounts thinks that they are macho enough to hold losing positions in FX (e.g. letting losses go astray)..., guess what, they ended up losing way much more than smaller accounts that has already been stopped out long ago by margin-calls (basically they just took a much longer period of time to be opted out of the market, at the much greater lost at the end)...

Best regards.
Have a nice day.
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Unique4xPro ProFX_Strategist
5 months ago
If you are at risk of blowing your account in a handful of trades you are over leveraged and you are taking position sizes that are too large. Your risk parameters should allow you to lose at the very least 50-100 trades in a row before going bust and if you are losing that often you clearly don't know how to trade and therefore you should not be trading with real capital. The fact of the matter is that if you learn how to trade and at such time you feel confident to trade with real money it is likely because you have proven to yourself that you have a winning strategy. Thus if you then employ proper use of leverage you should be able to make money over time with consistency because your strategy is a winner and your properly managing your money. I'll conclude in saying that it is absolutely possible to stop a "lousy-trader". If you are a "lousy-trader" it is because you don't know how to trade or your not disciplined or the combination of the two. If you can be taught how to trade, how to be disciplined, how to use leverage, and how to manage your money through write-ups like this one then yes you can stop being a "lousy-trader" and start being a good trader over time that eventually becomes profitable. Your argument is essentially saying that professionals are just born that way... which is entirely false. Any professional in any field became a professional because of hard work and dedication and many failures along the way.
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ProFX_Strategist Unique4xPro
5 months ago
Thank you very much, really appreciate your reply (I concur/agree)...

Anyway, just some observations of mine...; I've witness many traders who are seriously good... (E.g. have you participated in Forex contest/competitions before?) Well, I see those traders starting out with $10,000 (with 1: 50 leverage); & within just a day, they are able to double up that capital more or less...; I've seen it happening countless times (& wondering how did they performed it that rapidly)... I frankly find it impossible to catch up with those guys (on equal-level playing field)...

Additionally there are also "normal traders" who are easily making $100+ in just 2 - 4 trades only (in $1000 account)... (In other words; they didn't need to have a really big $10,000 account in order to be able to accomplish that...)

I also know another guy (he was trading GBPUSD when it was on the downtrend at the beginning of this year); he only had $1000+ inside his trading account...; but guess what, his unrealized floating net profit was at a staggering $5000+...! (Looks like very big lot positions opened & in profit for few hundred pips...)

I've also seen some Gold (XAUUSD) scalpers who made few-hundred-thousands of profit just scalping Gold alone (very tight positions of few pips only)...; they are playing seriously darn big...

There are others...

I am just seeing so much potential in Forex/commodity trading...

Best regards.
All the best.
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Unique4xPro ProFX_Strategist
5 months ago
The reason these traders are able to see such returns is because they are over leveraging their account. The upside potential is great with the amount of leverage that they use to achieve these returns however if they are wrong they will lose 20.. 30... 40... 50% of their account in one trade. One doesn't sustain lengthy trading career trading like that.
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ProFX_Strategist Unique4xPro
5 months ago
Yeah..., I can agree to that...

One strategy I can suggest is to immediately withdraw the new-profits as one makes it. (In other words, it is a better idea not to leave the profits inside the trading account...) The reason is, to prevent one (who could potentially get out of control) & attempt to make bigger trades just because the account-capital is now bigger...

This way, (for example) if a trader is feeling comfortable in making $50 a day trading 0.1 lot sizes (with $1000) account, then he/she really doesn't need anything more than that; (so if he/she has successfully doubled the trading-account at the end of the month to $2000, then he/she can withdraw the profits & just leave the initial $1000 inside the trading-account to continue trading with the same methods & 0.1 lot sizes as before...)

So in the (unforeseen) event if this trader (above) should lose the $1000 inside the trading-account (maybe because of taking a crazy big-risk & failed badly); then at-least he/she would still be having the other $1000 (+ with more common sense to learn & improve & stick to the rules perhaps)...

So it is wise to quickly withdraw the profits (in my opinion)...

P.s.;

Give a "lousy-trader" $100,000 to trade (& he will lose hell lots of $$$$ at the end of the day)...
Give a "expert-trader" $1000 to trade (& he/she will double that at the end of the day)...
If both traders adheres strictly to a 5% rule, then the "lousy-trader" will still be losing (in much bigger amounts), but the "expert-trader" will be profiting consistently (even with $1000)...

Best regards.
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DonaldBradley
5 months ago
This was a very helpful and informative article. Thank you for posting!

Best,
Donald
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Unique4xPro DonaldBradley
5 months ago
Thank you for the words Donald I am glad to see you found it to be insightful!
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TRADINGYOUNG
5 months ago
amazing really helpful!
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Unique4xPro TRADINGYOUNG
5 months ago
Thank you for the words! I'm glad you found it helpful! Make sure your following we will be posting trade ideas and teachings like this. Also check us out on YouTube we do live streams Monday, Wednesday, and Friday at 7 pm est: https://goo.gl/g8sWn3
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Gekko.uk
5 months ago
I have a lot of love for this post- as someone who uses 30:1 leverage himself, I cannot stress enough how important low leverage is
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Unique4xPro Gekko.uk
5 months ago
Thank you for the words man. It is important to find what works for you as an individual trader and it is fine to use leverage once you know what you are doing, but so many traders start off using such high leverage they are bound to fail.
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Tampax
5 months ago
if newbies start with 100€ accounts and only trade 0.01% is pointless, you wont make anything, unless have a +10k capital
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Unique4xPro Tampax
5 months ago
You would never trade .01% you would trade 1%... which yes might seem pointless with $100 equity but Forex is not meant for someone who can only afford to fund their account with $100. You cannot expect to turn $100 into millions... A few percent return each month consistently is enough to build wealth over time.
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karabogerald Unique4xPro
5 months ago
Urg Please, i deposited $25 turned it into, $300, and then into $5000, and then $7000 using Leverage of 1:888. (this was in the course of 1.3 years). / now I let my EA do the work on 0.10 lots, While I do bigger lots Sizes. || (Leverage has nothing to do with Loss, its a competitive tool), Leverage just puts us all on the Same Level (you place a $100 position from your big account, I also place my $100 position from my small account (using Leverage) the market cannot tell a difference / know we on the same Level. .

A Lousy-Trader, is a Lousy-Trader.

Problem with People & Leverage is, they open up to many positions. When your account is Small and your Using Leverage, Trade smart, Hold One Position. (In Forex, They isn't a single position that can Kill your Account, if they is, your doing something really Wrong. (seriously). .

& Also Hedge your position when you fell a loss, (If you went LONG and its Going Against you, go SHORT, to recover and Minimize Your Loss).

Here is my Advise:

If your Account is $5 to $100
- Trade 0.01 lot (Single position at a time). tight SL & TP

then $100 to $200
- Trade 0.02 lot (Single position at a time). tight SL & TP

then $200 to $500
- Trade 0.05 lot (Single position at a time). tight SL & TP

& don't develop trigger fingers of try to trade everyday, trade when the market is in your favor.

& Lastly.... Respect Support & Resistance, all TPs & SLs should be taken there.


[ And FOREX is meant for everybody, Big or Small Accounts, I Know alot of Big Account Traders who blow their accounts, FOREX has no friend, Big or Small Account, Forex Doesn't Really Care, Big Account GOOD FOR YOU, Small Account use Leverage.



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