Do you really like big profits? Ooh of course, I want too! But we need to be careful because there are many misunderstandings, especially ordinary people in dealing with profit.
Behind the profit there are many details that are not disclosed so that it is susceptible to being misunderstood by most people. In this post I will discuss what are the misperceptions in looking at profit.
1. METHOD OF DETERMINING THE Amount of PROFIT.
I often get a question like this, "if the trading method / strategy, Mr. Sony, can generate profit, what percentage of the month?".
If I answer 5% a month, the method doesn't sound great. Or if I answer 50% a month it seems bombastic, arrogant and illogical and unrealistic.
So it's like this, actually it's not about the method but about Money Management (MM) or setting the lot. This factor is what causes the profit to be large or small.
The misunderstanding or ignorance of ordinary people is that they think different methods mean different results. This is an inaccurate understanding. The truth is that all methods can generate large or small profits, depending on the lot ( MM ).
Like a motorcycle, it can be run fast or slow depending on the gas. All motorcycles can run fast or slow depending on the gas, right?
There are many types of motorbikes. There are racing motorbikes, old motorbikes, ordinary motorbikes, and so on. Different types of motorbikes certainly have different "gassing" abilities. But this time we assume the motor with the same type.
So, don't have a different view, THEN DIFFERENT PROFIT. In general, the profit potential is more influenced by the MM factor, not by the rules of the method.
And vice versa regarding the level of risk and security.
The common misconception and ignorance is that they think there are safe methods and there are unsafe methods. In fact, all methods can bring big or small losses. Again it depends on how to set the lot ( MM ).
A relatively safer method / low risk if using small lots.
A method is relatively more risky / high risk if using large lots.
Regardless of the ability of the user of the method, yes. Of course, the higher the flight hours and the experience of the trader can also reduce the level of risk. But this time we are not discussing the skills of a trader.
Back to main topic.
So, any method can be made high profit or low profit. Any method can be made high risk or low risk. INCLUDING the use of EA / Trading Robot, there is no EA that is low risk or high risk. Everything can be arranged. Again, it's just a matter of MM game.
The method is just a rule, the reason why the entry, when to enter, at what price, what is the profit target, and how much is the risk.
MM is a factor of times to multiply the results of the profit or loss. It's like before, the speed of a motorcycle depends on the gas.
If you currently feel that the method you are using is classified as high risk / risky, please reduce the use of the lot. Then automatically your trading method (relatively) will decrease the level of risk.
Or if you feel your method is too small in profit, please increase the lot. Then your method automatically (relatively) will increase the potential profit.
The important thing is that you must understand that every decision always has an impact and consequence. So the big / small factor of profit is more influenced by the MM, not the method.
2. THINK LINEAR AND STRAIGHT.
When someone says, I profit 5% a week, then don't mean 20% a month.
Or some say 1% a day, also does not mean 20% a month. 1 month has 20 working days. Saturdays and Sundays don't count.
Remember trading is a business, and no business journey is smooth and perfect without obstacles. There will always be fluctuations and ups and downs in market conditions.
Most people's misunderstanding, they think straight and linear.. Especially when making a daily profit simulation that is, then it looks like it will be at the end of the month. And at the end of the year it will be so.
Wow, his mind has flowered and wished he could get that much money. This is just a theory though. Only on paper. In reality, no one can profit smoothly and perfectly.
Linear mindset, fixed, static, straight, looking for certain and safe.. This is employee mindset. The employee mindset needs to be replaced with an entrepreneur mindset. Trader is an entrepreneur.
And entrepreneurs must be trained to deal with changes, uncertainties and dynamic market conditions.
So, don't get your hopes up and be tempted by the fixed income investment offer. Usually ends up disappointing.
3. PROFIT BY PERCENTAGE VULNERABLE TO MANIPULATION.
Suppose we hear someone say"I profit 2%". Usually our assumptions are compared to the total amount of capital invested.
Well here is the problem, trading is a very dynamic and subjective business. Then the calculation of profit as a percentage can be changed, which is compared to the funds at risk.
Capital is the total amount of funds set up for trading.
Balance is part of the funds that are ready to be risked.
For example, the capital is $ 10,000. Then we allocate 10% of it, which is $1,000 as a balance if it is hit by a stop loss or the maximum loss that is ready to be borne.
After trading it turned out to make a profit of $ 200. Now this $200 figure in percentage can be called 2% when viewed from the capital ( $ 10,000 ) or can be called 20% when viewed from the balance ( $ 1,000 ).
This is where the manipulation lies. Many people are incomplete and not detailed in explaining the $200 profit. Of course it would look cooler to say 20% instead of 2%, right? And for ordinary people, it's definitely more interesting to hear about 20% profit than 2%.
Due to this inaccuracy, it is prone to manipulation and over-promotion. Even though it's a different point of view and a different way of calculating it.
So 2% profit is not always worse, or 20% profit is not always better. The point is not to be easily dazzled and influenced by something that looks WOW on the outside but we don't know the inside.
This manipulation does not only occur in the trading world but also in any business. Often I see offers and promotions of a business opportunity by promising a fantastic profit. The name is also an advertisement, so it must be interesting. If it's not interesting, people won't notice it.
Well that's the truth. Humans prefer sweet hopes and promises that are pleasant to hear than a reality that is sometimes unpleasant to hear. Humans only hear what they WANT to hear, not what they HAVE to hear. Let's learn to be more aware and careful again.
So basically there are many ways to calculate profit on a percentage basis, depending on what it used to be. Hopefully through this article, you get new enlightenment.
Okay I conclude once again some misunderstandings in looking at profit,
The size of the profit is not determined by the method, but money management.
Trading is business. As traders, we must use the entrepreneur mindset, not the employee mindset.
Profit percentage is very manipulative and multiple interpretations.
Actually there is nothing wrong with profit. We all certainly hope to make a profit, no matter how much it is still worth being grateful for. What is wrong is our own perspective. We do not know the detailed calculation process or are lazy to study.
Train yourself to always put the risk first and then the profit. We must also be willing to increase knowledge and skills in managing risk. Remember, almost 90% of the causes of failure are our own ignorance. Lack of knowledge and lack of knowledge.
Learn from successful professional traders. Their mindset is very different from the mindset of most people. Professional traders think how to minimize risk, novice traders think how to increase profits.
Do not be too dizzy and fuss about how much profit? But how safe and what are the risks? Let's shift the focus from profit chasers to risk managers. WHEN YOU MANAGE RISK, PROFIT WILL FOLLOW.
CONSISTENT AND OPTIMAL PROFIT GREETINGS.
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