A good example is betting on roulette.
If you keep doubling your bet, you will always win.
So bet €1 on black, and black comes up, you win €1.
Bet it again, and if red comes up, you lose €1.
So the next time bet €2 and if black comes up, you win €2, so your total win from this second series is €1.
Then you run into 4 reds in a row but black comes up on the 5th roll.
1) Bet €1 - lose €1
2) Bet €2 - total losses €3
3) Bet €4 - total losses €7
4) Bet €8 - total losses €15
5) Bet €16 , black comes up - cumulative win €1.
So your "system" is working.
But eventually you will hit a run where you lose everything.
Brendan
That is only true if you bet the house each time.
I read a spreadbetting book a decade ago and there was a large section on 'risk management' which boiled down to only ever bet 1-3% of your portfolio on a trade and set strict stop losses (cut your losses).
I don't understand what you mean by that?
That is a different issue altogether? You appear to be referring to the Kelly Criterion which I think assumes a positive EV for each bet.
We don't know the OP's system but it's likely to be a series of small wins at the risk of a catastrophic loss.
Brendan
What leads you to think there would be a difference? It sounds like you understand the need to control risk so your downside should be limited as long as you stick to your strategy.Aside from the roulette strategy that Brendan posted above, I'm still struggling to understand why the results of a strategy in a demo account will be so different from a live account.
I spent 32 years in the financial services industry designing, writing and selling trading, performance and attribution applications. And I can say without hesitation that I don't know a single trader that survived that long. Yes I know lots of people who made a couple of great killings, but eventually lost it all again. This is one place being the picks and shovels vendor is the best strategy. It easier find say 500 people willing to pay you 50 Euros a month to use your software than trying to be very lucky over a 30 year period.I'm a software engineer by day. I was asked to code and backtest a Forex strategy for a friend of a friend two years ago as a nixer. On completing the work, I was at loose end and in lockdown, so I decided to download some books on forex. I just wanted to get a better understanding of what the forex strategy was actually trying to do. From that point on I've spent many an evening and weekend reading up on retail trading. I developed two strategies that use a combination of fundamental and technical analysis, so I decided to open a demo account on MT4 with IG to see how they'd perform in that environment. I've been trading the S&P500, some metals, and also two of the major forex pairs with them for the past twelve months. I've backtested the technical parts of the strategies also. The strategies are far from perfect but they are consistently profitable month-on-month. The win-loss ratio is no match for the strategies I read about online, but they do return a nice profit.
I'd love to see how these strategies would fair in a live account but I keep reading negative comments about retail trading. People keep saying that you are going to lose all your money and that it's a scam etc. I've researched the differences between demo and live accounts, and I know that demo and live accounts are slightly different but I'm can't grasp where the catch is. Why will my strategies that have been working reasonably well in demo accounts flop so badly in a live account?
Some achievement to sell trading applications for 32 years that never worked.I spent 32 years in the financial services industry designing, writing and selling trading, performance and attribution applications. And I can say without hesitation that I don't know a single trader that survived that long. Yes I know lots of people who made a couple of great killings, but eventually lost it all again. This is one place being the picks and shovels vendor is the best strategy. It easier find say 500 people willing to pay you 50 Euros a month to use your software than trying to be very lucky over a 30 year period.
Even better if you can flog your software to a couple of asset management companies.
If , like Brendan, you don't understand the difference between gambling and trading don't waste your money starting.Many thanks for your replies. Some really interesting posts. Every successful trader that I've read about has emphasized how important risk management is in trading, not just retail trading. As noted above, I risk 1%-3% of my portfolio on an individual trade. If my SL is hit then the position is closed. I limit the number of open positions that I have at one time also to two. I cut my losses off at the knees, and I let my winners run to their TPs. My risk reward ratios are 1:2 and 1:3.
Aside from the roulette strategy that Brendan posted above, I'm still struggling to understand why the results of a strategy in a demo account will be so different from a live account.
The competent trader will experience pretty much the opposite. A series of small losses offset by the bigger, profitable trade.We don't know the OP's system but it's likely to be a series of small wins at the risk of a catastrophic loss.
You don't lose money in a demo account so you won't experience the stress. Stress can lead to errors / lack of discipline.Aside from the roulette strategy that Brendan posted above, I'm still struggling to understand why the results of a strategy in a demo account will be so different from a live account.
Oh the applications work as does all the data provided and the training.... it's just that even with all of that you still need to have a lucky streak to run for say 20+ years to win and that is not likely to happen.Some achievement to sell trading applications for 32 years that never worked.
Thirty plus years tells me he won't, there is far too much luck involved to claim that a competent trader exists.The competent trader will experience pretty much the opposite. A series of small losses offset by the bigger, profitable trade.
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