TheRumpledOne wrote:http://www.forex.nawigator.biz/dyskusje/viewtopic.php?t=8192

Gracze intraday to frajerzy? Załączam wyliczenia matematyczne z książki po angielsku, że lepiej grać raz na dzień - swing trading.

EVENING THE ODDS

Trading can be difficult, and in an effort to make it easier, some traders

resort to taking very quick exits. "It's hard to earn 100 pips," goes the

rationale, "I'll just try to make 10 pips on each trade." It seems to make

sense; surely, it is easier to earn 10 pips than it is to earn 50 or 100 pips.

The trader seeks to win by playing it safe, which would seem to be a commendable

trait in the trading world.

TAKE CONTROL OF YOUR TRADING DESTINY

What if I told you that instead of making things easier, this trader is in

fact making his life more difficult? In order to understand why, we need to

delve a little deeper into game theory.

THE HOUSE HAS THE EDGE

Imagine a roulette wheel in a casino. You walk up to the table and place a

bet on either red or black. What are your chances of success?

If you've never played roulette, you might think the odds are 50?50.

After all, half of the numbered pockets are red, and the other half are black,

right?

Wrong. In addition to the red and black pockets, there is at least one

pocket that is neither red nor black. This "zero" pocket tilts the odds

slightly against our player.

In European roulette there is only one zero pocket, giving the house a

slight advantage. On this table, the odds are about 53:47 against our player.

American roulette wheels have two 0s, zero and double zero, and this increases

the house advantage to about 5.3 percent. This further stacks the

odds against our player, reducing his chances for success.

In the world of forex trading, the zero pockets represent the spread.

The odds are always going to be at least slightly in favor of the "house,"

which in this case is the market maker. The wider the spread, the more

"zero pockets" the trader must overcome. Just as each additional zero

pocket lowers the roulette player's chances of success, every additional

pip in the spread lessens the trader's chances of success.

MAKE THE PLAYING FIELD BIGGER

In the forex market, the house determines the spread, which is the equivalent

of the "zero pockets" in roulette. We have no control over the

spread?it is determined by the market maker alone, just as the casino

determines the number of zero pockets on a roulette wheel.

Ah, but what if we could control the number of red pockets and black

pockets? Suppose we were to greatly increase the number of red and black

pockets on the roulette wheel, and at the same time keep the number of

zero pockets steady.

What effect would this have on the odds? The odds of winning at

roulette would improve, because the zero pockets wouldmake up a smaller

percentage of the potential outcomes.

As long as there are zero pockets on the wheel, the odds will never be

in our favor. But by adding additional red and black pockets to the wheel,

The Forex Playing Field

we would lessen the casino's advantage and push the odds closer to 50?50.

The more red and black pockets we add, the better our chances become. In

a sense, we would be making the wheel?which is in this case the "playing

field"?bigger.

Of course, we can't add pockets to a roulette wheel. Casinos are too

smart to allow us to dilute their edge. While that edge is not overwhelming,

it is enough to guarantee that the casino will win more often than they will

lose, over a large enough sample of spins.

But in the world of forex trading, we can increase the size of the playing

field, and thereby improve our chances of trading success. And unlike

in a casino, we will not be forcefully removed from the premises for doing

so!

How is this done? We make the playing field larger by using wider exits

and stops, by using longer time frames, and by trying for larger gains.

You've seen the techniques outlined in this book, so let me ask you this:

Am I ever shooting for a 10-pip gain?

BUT THE OTHER TRADING INSTRUCTOR

SAID. . .

No, but I know that many traders are seeking exactly that. In fact, some

prominent trading instructors are teaching their students to seek only a

small 10- or 15-pip gain before exiting the trade. What is their motivation

for teaching people to trade this way?

Well, perhaps your "trading coach" has asked you to open an account

at a particular broker or market maker. If so, you may have signed an "introducing

broker" waiver that allows said trading coach to collect a small

cash payment every time you place a trade. This is his reward for introducing

you to the market maker.

If you place just a few trades, your trading coach collects just a little

money, but if you place many trades, the instructor will be handsomely

rewarded. So, it's in the trading coach's best interest (and the market

maker's best interest) to have you placing many trades, even though it may

not be in your best interest. Think about that the next time a so-called

trading instructor tries to convince you to shoot for 10 or 15 pips per trade.

LET'S DO THE MATH

What are the odds of success on a trade with a small target? The following

example should give the short-term trader an idea of exactly what it is he

or she is up against.

TAKE CONTROL OF YOUR TRADING DESTINY

Let's assume for the purpose of this example that we are trading a currency

pair that has a 3-pip spread, since a spread of that size is very common

in the forex market.

Our trader just wants to gain 10 pips. That should be easy, right? It's

understood that the trader will lose the spread (3 pips) upon entering the

trade. So, in order to turn a profit of 10 pips, the trader actually needs the

exchange rate to move 13 pips in his or her favor:

10 + 3 = 13

Now that we know what is required to create a winning trade, let's see

what would have to happen to create an equivalent loss. This is how we

will determine the odds of success or failure.

In order to generate a loss of 10 pips, the trader would only need an

adverse move of 7 pips. This is because a loss of 3 pips is incurred immediately

upon entering the trade, again due to the 3-pip spread.

10 − 3 = 7

We've determined that our trader needs a positive move of 13 pips to

gain 10 pips, but an adverse move of just 7 pips will result in an equivalent

loss of 10 pips. The "raw odds" of 10-pip win versus a 10-pip loss for this

trade can be expressed as:

13/7 = 1.857 : 1

The odds of success in this case are 1.857:1, or nearly 2:1 against. That's

a real eye-opener, isn't it? Now you know why it's so difficult to make

money trading for small gains?the playing field is too small! This is the

equivalent of betting "red" on the roulette wheel, when nearly two-thirds of

the pockets are either black or zero pockets.

We can certainly improve the odds of any trade by using good strategies

and solid risk management, but it's hard to see how an individual can

overcome these initial "raw" odds on a consistent basis. If you've tried to

trade this way and failed, now you know why. You're making the market

maker rich, and you might be making an introducing broker rich, but

chances are you are one of the many forex traders who lose money.

CHANGING THE EQUATION

How can we rearrange the odds so that we can have a better chance to win

at forex trading? How can we level the playing field? By making the playing

field larger. You see, if we are aiming for larger gains, the spread becomes

The Forex Playing Field 219

a less significant portion of the trade. It's the same as adding more black

and red pockets to the roulette wheel; unlike roulette, we can choose the

size of the playing field in forex trading.

Let's review the earlier trading situation, only this time we'll make the

playing field larger. Once again, we'll assume a spread of 3 pips, only this

time the trader will be trying to gain 100 pips instead of just 10 pips. In

order to turn a profit of 100 pips, the trader actually needs the exchange

rate to move 103 pips in his or her favor:

100 + 3 = 103

In order to generate a loss of 100 pips, the trader would only need an

adverse move of only 97 pips. This is because a loss of 3 pips is incurred

immediately upon entering the trade.

100 − 3 = 97

We've determined that the trader needs a positive move of 103 pips to

gain 100 pips, but an adverse move of just 97 pips will result in a loss of 100

pips. The "raw odds" of 100-pip win versus a 100-pip loss for this trade can

be expressed as:

103/97 = 1.06 : 1

The odds are now much better, as they are closer to 50?50. As we said

earlier, as long as there is a spread, the odds at the beginning of every trade

will be less than 50?50. However, if we are using good trading techniques

and risk management, or if we are collecting interest on the trade, we can

overcome these slightly negative odds.

Now I'm not saying that you have to shoot for gains of 100 pips or

more on every trade. The point is to understand that when the playing field

is larger in forex trading, the odds of success improve considerably. Also,

traders who are aiming for greater gains tend to hold their trades longer,

and consequently they enter trades (and pay the spread) less frequently.

Your market maker and your introducing broker may love you less,

but your account balance will appreciate it. In the end, you are the only

one who either enjoys the gains or suffers the losses in your account.

WHY DOESN'T EVERYONE DO IT?

So why doesn't everybody trade for larger gains? Why do so many traders

fall into the trap of trading against staggering odds? There are a couple of

220 TAKE CONTROL OF YOUR TRADING DESTINY

possible answers:

1. They don't understand that they are stacking the odds against themselves.

2. They have harmful preconceived notions about the nature of trading

itself.

The problem is that trading isn't always what we believe it to be, or

wish it were. I know exactly what I would like trading to be, and here it

is: I'd wake up in the morning, trade for an hour, make a ton of money,

close my positions, and do whatever I please for the rest of the day. Trading

would be like a video game that we could play anytime we please. Themore

we play the game, the more points we score. We could be rich beyond our

wildest dreams, with minimal effort.

That would be ideal in my opinion, but you may have noticed that these

strategies do not allow for this. That's because strategies need to work

in the real trading world, not in some fantasy world of our dreams. The

problem is that many traders don't know that their misconceptions about

trading are not based on facts. They are trading a market that exists in their

dreams, not in reality.

HUGE GAINS WITH MINIMAL EFFORT!

How do we acquire counterproductive attitudes toward trading? My guess

is the worst culprits are infomercials that tout huge gains in just minutes

a day. You may have seen these long-form commercials, often designed to

appear as legitimate television shows, where wide-eyed investors proudly

proclaim that they made huge gains with minimal effort.

Huge gains with minimal effort.

It sounds good, and that is no coincidence. You are being told exactly

what you want to hear. Instead of telling you what you'd like to hear, I'm

going to tell you the truth?trading is hard work. Short-term traders are

stacking the odds against themselves. There is no such thing as a huge gain

with minimal effort.

When I explained that we need to make the playing field larger, and

thereby hold our trades longer, this was probably not what you wanted to

hear. Why is that? Because we want huge gains with minimal effort.

Why are the airwaves filled with promises of huge gains with minimal

effort? Because salesmen know exactly what you want to hear, and they

know how to get you to write a big check. Whenever someone tells you

The Forex Playing Field 221

exactly what you want to hear, run in the other direction as quickly as

possible.

WHAT WE CAN LEARN FROM THE "SMART

MONEY"

Think about the way so-called "smart money" approaches trading in this

market. Do hedge funds and institutional traders chase after 10- or 15-pip

gains? Of course not?they understand the dynamics that are at work here.

Not only are they not interested in 10-pip gains, they're not chasing after

100-pip gains either. Many of these "big fish" are only satisfied with gains of

thousands of pips?trades that push the odds of success as close to 50?50

as possible.

Not only do the institutional traders understand the value of playing

on a larger field, they set up their trades so that they can collect interest

to boot?thereby increasing their odds to better than 50?50! If this were

a casino, they'd be tossed out immediately. Now you know why they are

called the "smart money"!