Probability theory in Forex.

Almost everyone is familiar with the concept of "Probability Theory," but when first introduced to Forex, the question immediately arises: why doesn't this theory work?

Given that a trader has only two trade directions to choose from, their ratio should be 1:1, meaning they should generate a profit 50% of the time and a loss the other 50%.

However, the situation is far from favorable; quite the contrary: novice traders lose their deposits almost instantly, with the ratio of losing trades to winning ones typically hovering between 7:3 and 8:2.

Probability theory doesn't work in Forex for several reasons:

1. Untimely market entry - you see a rising price, enter a buy trade, but then the price starts to fall, and you close the trade. However, the price then starts to rise again; you did indeed guess the trend direction, but you entered the market just at the beginning of a correction .

You should open a trade immediately after the previous correction ends and a new movement begins.

2. Early position closure - an open trade begins to generate profit, but suddenly profits rapidly decline, turning the position into a loss. To prevent further losses, the trade is closed.

Here, again, everything is related to trend correction. If you are confident that there are no compelling reasons for the price to reverse, you should simply wait out the unpleasant moment, avoiding critical losses.

3. Untimely position closure - traders often try to get as much profit as possible from a single trade, without taking the trend dynamics into account, which results in a reversal and the loss of several dozen pips already gained.

To prevent this from happening, always consider the trend dynamics when planning your profits, and use a trailing stop or move your stop loss to the breakeven point to protect existing profits.

The first three reasons turn your profitable positions into losses, thereby refuting the theory of probability in Forex trading.

However, the main reason that pushes traders to make sudden moves is the mismatch between the trade volume and the trader's deposit, which can turn even a few pips into a significant loss.
You can make trading more comfortable by reducing this ratio to 1:10 - 1:30.

For example, with a deposit of $1,000 and opening a trade of 0.1 lots, you will react normally to a pullback of 10 pips, since that's only 1% of your deposit. Imagine opening a trade of 1 lot, however, and your losses would be 10%.

Using this principle, you can significantly increase the number of profitable trades and put the theory of probability into practice in Forex, but remember: that the profit from profitable trades should be greater than the total loss from unprofitable ones.