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  1. #1
    Senior Member analyst75's Avatar

    I Canít Win Trading Competitions !!!

    ďWeíve seen plenty of traders over the years make huge returns on their accounts, well over 1000 per cent in a relatively short period of time, but as soon as they hit a drawdown period they just as quickly give it all back. This is because they were trading well beyond risk limits in the first place.Ē Ė Charlie Burton

    The currency markets have many benefits that are no longer secrets: the biggest daily turnover, inability of Smart Money to control the markets permanently to their favor, interesting fundamentals, high liquidity, 24-hour availability, low spreads, etc. As a result of the increasing popularity of the markets, many types of programs are coming up in the financial industry; and one of them is trading competitions.

    I once participated in some of the competitions and never won a single one. In spite of my trading knowledge, Iíve never even ended in the top 50, not to mention the second or third position. Why?

    On demo and live accounts, I donít usually risk more than 0.5% or at most 1% per trade. I need to do this consistently so that it becomes my second nature. Trading is a game of survival, but in those kinds of competitions, even if I make 2000 pips in a month, my profits would only be 10% or 20%. Now, someone else could make less than 500 pips in a month and achieve 500% profits. The difference lies in the amount of risk per trade. Can you now see why I canít win a trading contest?

    In most competitions, a contestant who achieves the highest returns within the shortest time duration is usually declared the winner. A trading competition Ė usually a demo accounts competition Ė tends to last for one week or one month only. Every competitor thus strives to achieve hundreds or thousands of percentage of returns during the short period. Iíve seen a competition in which a participant made 3000% returns in less than one week! Iíve seen a trading competition in which a participant made 700% returns in a month. Does this means theyíre the most proficient traders on the planet? The answer is NO.

    When the market is favorable to your trading method, youíll be making money with new orders, no matter what. A winning streak can last for days, weeks or months, before itís alternated by a losing streak (before another winning streak comes again). Itís too common that most people who make money in winning streaks give back more than their profits during losing streaks, as a result of excessively high stakes and lack of risk control methods.

    Most types of trading competitions encourage people to make the highest possible money as quickly as possible. This kind of indoctrination canít favor traders that aspire for a lasting career. Just as speculators who get hundreds of percentage of profits because of excessively big position sizes, but soon theyíre no longer in the markets; one who risks too much per trade is a gambler, but one who takes risk control method serious is a real trader. When a competing gambler is in a winning streak, she/he can make hundreds or thousands of percentage returns when 20%, 30%, 40%, 50% or 60% (or more) of the portfolio is risked per trade. Nevertheless, the higher the stake per trade, the higher the loss or the drawdown when something goes contrary to the trading method. Thatís why some of the so-called expert traders or trading champions later crashed and burned in the markets. Theyíll still tell you trading is great and they can trade very well, but theyíre no longer in the markets because their suicide trading methods backfired at them.

    Would you prefer to get rich quickly and have a temporary career or would you want to make small and constant gains? What matters most to you: the safety of your account or big profits as soon as possible?

    There are also certain trading competitions in which organizers rule that winners must accurately predict the exact price of a particular trading instrument within a specific period. Isnít that hard? Market wizards all agree that future prices canít be predicted, yet we can harness gains from them. How can I predict the exact future prices when Iím not clairvoyant or psychic? If psychics could even do that, I guess theyíd have become billionaire traders. Should you predict an exact future price within a specific period and win, it is by pure chance.

    The Types of Trading Competitions I Can Win
    There are types of trading competitions I can win, but sadly, theyíre not that common in the Forex world.

    I can win a trading competition that rules that winners would be those whose accounts are still intact and positive after making 1000 trades (or at least 500 trades) within some years. How many gamblers can win that type of competition? I can win a competition that gives awards to those who achieve the least amount of drawdowns after several months or years. I can win a trading competition that recognizes contestants who makes most pips, not most profits within several months.

    Yes, if that kind of trading competition allows contestants to compete for 10 months or even years, I can win it. One week or one month is definitely too short to test the reliability of a trading system.

    A good trader is someone who deals with losing streaks successfully and recovers from them, not someone who makes great profits in winning streaks and crashes in losing streaks.

    The most important thing a good trader can do is to keep an account permanently safe in the face of the vagaries of the markets. Making profits is a secondary aim, for there must be an intact capital before profits can be made. If the capital is gone, thereís no means of carrying out additional transactions that could be successful. One best way of keeping our accounts safe is to learn how permanently victorious traders have managed to keep their portfolios safe for decades.

    Conclusion: Most speculators whoíve made billions of dollars from the markets have become extremely rich because their portfolios are huge and they make relatively small, consistent gains. They havenít become billionaires because they achieved 100% gains over and over and over again within very short time periods. They achieve their aims by looking for low risk investment opportunities, and capitalizing on them by giving their winners enough leeway. This is easier said than done, for most traders find it difficult to run their winners Ė itís really difficult. But itís essential for long-term survival.

    This article is ended by the quote below:
    ďPace yourself, take small gains and small losses, trading is not a sprint towards riches, itís a marathon towards financial independency.Ē Ė Alesh Patel

  2. #2
    Veteran Member randy1953's Avatar
    Good article. A lot of truth there but most traders don't like the truth.

    In live trading if you are having fun you are doing it wrong. If it's exciting for you and you just can't wait for the market to open again so you can trade you are doing it wrong.

    If you are really bored and your account is very slowly building you are doing it right
    So exciting and fun you are trading wrong

    Boring and slow you are trading correct.
    For most people it's very difficult to do boring and slow I know I'm one of them.
    However I trade more like this every day. I look for near perfect set ups before I pull the trigger this means there are many trades that I pass on that have turned out to be winners. However when I do get my set up I am almost guarantee it will be a winner.
    This requires a lot of discipline and it's not easy at all it becomes especially hard when I have been waiting 2 hours for my set up and then I missed it because I went for Coffee or something. It's at those times you must be very careful of the revenge syndrome. The mind will tell you screw you I am going to get even now and before you know it you are taking trades that you should not take and then you lose.

    Also add the fact that I am trading other people money also and it's another pressure to deal with.
    However I find that boring and slow works at the end of the day and to me this is what really matters.
    ďNever tell the truth to people who are not worthy of it.Ē
    Mark Twain

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