Probability theory in Forex.

Almost every person is familiar with the concept of “Probability Theory”, but when you first get acquainted with Forex, the question immediately arises - why does this theory not work?

After all, based on the fact that the trader has only two options for the direction of the transaction, their ratio should be 1:1, that is, in 50% they should bring profit, and in the remaining 50% losses.

But the situation is far from being in favor of profit; rather, on the contrary, novice traders almost instantly lose their deposits, and the ratio of unprofitable trades to profitable ones usually fluctuates 7:3 - 8:2.

The theory of probability in Forex does not work for several reasons:

1 . Untimely entry into the market - you see a rising rate, make a buy deal, but then the price starts to fall and you close the deal. True, after the rate begins to rise again, you really guessed the direction of the trend, but entered the market just at the beginning of the correction .

You need to open a trade immediately after the completion of the previous correction and the start of a new movement.

2 .

Early closing of positions - an open transaction begins to make a profit, but suddenly the profit rapidly decreases and the position turns into a loss-making one, in order to prevent an increase in losses - the transaction is closed. Here, again, everything is connected with trend correction, if you are sure that there are no compelling reasons for a price reversal, you should simply wait out the unpleasant moment, without allowing critical losses.

3 .

Positions closed at the wrong time - often traders try to get as much profit as possible from one transaction, without taking into account the dynamics of the trend; as a result, a reversal occurs and several dozen points already gained are lost. To prevent this from happening, when planning profits, you should always take into account the dynamics of the trend, and to protect the profits already received, use a trailing stop or move the stop loss in time to the area without a loss.

The first three reasons make your profitable positions unprofitable, thereby refuting the theory of probability in Forex trading.

But still, the main reason that pushes a trader to make sudden movements is the mismatch between the transaction volume and the trader’s deposit, due to which even a couple of points turn into a significant loss.
You can make trading more comfortable by reducing this ratio to 1:10 - 1:30.

For example, having $1000 on deposit and opening a deal of 0.1 lot, you will normally react with a rollback of 10 points, because this is only 1% of your deposit, but imagine that you opened a deal of 1 lot, in this case losses would already be 10%.

Using this principle, you can significantly increase the number of profitable transactions and make the theory of probability work in Forex, but you should not forget. that the profit on profitable transactions must be greater than the total loss on unprofitable ones.