Why are more than 95% losers in transactions?

Thank you Wilderness for the invitation. In fact, this value is very normal, which is the nature of the trading market.

An important definition in the Pareto principle is that in an environment with limited resources, those who are not good at using resources will eventually flow to those who are good at using them. This is the famous 28th law. This resource can be money, power, contacts, or anything real or virtual.

If there is no additional transaction cost in this market, the final distribution of transaction funds in the market should tend to be 28%, that is, 80% of people's funds will be lost to those 20% of people. In fact, due to the cost required for transactions, this ratio will be even more cruel. Here, platform operators and regulators will extract fees from traders’ transaction funds. I call these fees collectively. Don’t underestimate this fee. In the face of the daily trading volume of several trillion in the world, this handling fee is very huge, at least 10% of the total trading funds of all traders must be withdrawn. What are the consequences? That is, among the 20% of the people who can make money, some of them have slightly lower profitability, and they will eventually enter the ranks of losses, so the final distribution of funds is about 80% of the people themselves lose money, and 100% More than a dozen of them lose money even if they cannot cover transaction costs due to their weak profitability. Only the remaining less than 10% of those with strong profitability can make money. This is the fundamental reason why only 95% of people in foreign exchange trading make money as the subject said.

Of course, it is useless to just know how to lose money. We come to this market hoping to make money and become one of those few people. How to become such a person, I will divide it into software part and hardware part.

For the software part, lower your expectations. The trading psychology of lowering expectations is an important factor for survival in the trading market. Many people come to the trading market with very high expectations. They think that if the trading in the market cannot double every year, what is the difference from moving bricks, so they will exert great efforts in this market. The main manifestation is Heavy positions and high transaction frequency. But we have to understand a truth, on an incorrect path, the harder you exert your strength, the greater the harm you will suffer. It may be because you have made a lot of money by exerting your strength a few times, but as long as you don't leave the market and you don't give up this bad habit, you will definitely return it to the market. So what should we do? To reduce the consistent execution of expectations, the market is uncertain, so you may not be able to exert your power and you may hurt yourself, so don’t hold such high expectations and let yourself survive , as long as I can earn more than I lose, relying on time is equally powerful, and this is the effect of lowering expectations.

Hardware parts. A trading system with positive expected returns. In fact, I mentioned this to some extent when I talked about the software part just now. If lowering your expectations just now makes you stronger, then this trading system is a sharp sword in your hand. A trader who can make money and survive for a long time must have his own trading system. I have said a lot about the trading system before, and the turtle trading rule is what I personally admire the most. But what I want to explain here is that even if a good trading system is in front of you, it cannot be achieved overnight. Say, I sometimes don’t know myself, but I know my trading system very well, and I have a deep understanding of its advantages and disadvantages. When it can’t bring me profits for a long time, I understand very well, it’s not Its problem is that the market is not suitable for my trading system during this period of time. I can reduce the position and shrink it. Someone asked me, if it is not suitable, why not stop it first, and continue to activate the system when it is suitable. This involves an important cognition, because whether it is suitable or not is the market, and I only know when the trend is over. As for whether it is suitable for the next moment, I don’t know. It is very likely that the suitable time period will start tomorrow, so I can What I do is to ensure survival when the account funds shrink. Since the trading system is expecting positive returns, I should do it when the wind comes. There is nothing else. Embrace the losses that come with bad periods.

The epee has no front, and it is a great skill. Lower your expectations on the premise of having a positive expectation trading system, relying on time, the market will definitely reward you generously.

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