[A 3-minute read-and-learn realistic investment course | Lecture 1: Stop chasing methods that guarantee you win]
Today's conclusion
There is no method that can guarantee a win.
I think trading only begins once you admit this.
The word "Holy Grail"
After trading FX for a while, you’ll start hearing the word “Holy Grail.” It means a method that guarantees always winning.
Win rate 90%, monthly return 30%, no losses. Such numbers flood social media and ads almost daily.
To tell you in advance, there is no such thing.
The market moves as a result of buyers and sellers around the world. There is no guarantee that what worked well yesterday will move the same way tomorrow. If there really were a method that always wins, everyone would do the same and it would stop working then.
Win rate can be manufactured to any level
One more thing you should know: win rate is a number that can be made if you set your mind to it.
If you don’t cut losses and stay waiting for the loss to recover, you can push win rate to 90% or 95%. However, one instance where it doesn’t recover wipes out all previous profits.
If the performance sheet only shows win rate, first doubt that.
Even if you lose half, money can still increase
So, if there is no Holy Grail, what should you rely on? The answer is surprisingly simple: “minimize losses, maximize gains.”
For example, suppose you trade 10 times with 5 wins and 5 losses. Losses are 10,000 yen per loss, wins are 20,000 yen per win.
| Total losses | 10,000 yen × 5 = 50,000 yen |
| Total gains | 20,000 yen × 5 = 100,000 yen |
| Net | Plus 50,000 yen |
*Costs such as spreads are not considered; this is a simple calculation.
Even though you’re half losing, you end up with a profit.
The figure obtained by dividing total gains by total losses is called the “Profit Factor (PF).” In this example, PF is 2.0. We will delve into PF in a later section.
About this course
In this course, we’ll write about these straightforward, non-flashy topics in portions that can be read in 3 minutes daily. A total of 360 lessons, taking about a year.
The first month will be numbers: win rate, PF, expected value, and drawdown. Once you can read these, you’ll be less susceptible to glossy promotional copy.
Today’s check
Please recall at least one advertisement that says “Guaranteed,” “Absolutely,” or “No losses.”
Did it include rules on stop-loss and the maximum drawdown (the biggest drop in capital)?
Next episode
Next time we’ll cover “Do not choose a method by win rate.” We’ll verify what happens when you choose a method by win rate with numbers.
By the way, TSUBAKURO is not a Holy Grail either
The TradingView strategy I sell, “TSUBAKURO,” also loses sometimes. We built it to assume losses, set stop-loss and take-profit (risk-reward 1:2) from the start, and target only pullbacks to breakouts. The backtest results, including poor-performing crude oil, are listed on the product page under each condition.
※This article is intended to provide information for investment decision-making and does not recommend buying or selling any specific financial product. The numbers in the article are examples for explanation and do not guarantee future results. In FX, CFDs, and other margin trading, you may incur losses exceeding your initial capital. Please make investment decisions at your own risk.