【RCScalping】"FX is just gambling," they say

It's not that I'm going crazy from losing too much. This is a serious discussion.

...and to avoid any misunderstanding, I'll preface it.

Hello, I'm Ryoma!

This time's theme is

“FX is just gambling.”

Therefore, just as you would seriously try to win at gambling, let's think about how to earn in FX based on probability theory.this discussion.

①“Like gambling, if you trade FX based on probability theory, you’ll see a way to win.”①“Like gambling, if you trade FX based on probability theory, you’ll see a way to win.”

②“Recognize that win rate and risk-reward are in a trade-off relationship.”

③“Based on probability theory, repeatedly win or lose, and shift to a mindset of increasing total capital.”

These three are the conclusions I want to convey in this article.

Considering FX Based on Probability Theory

FX is a choice between buying and selling. If you enter without looking at the chart with a stop loss of 10,000 yen and a take profit of 10,000 yen,

“The risk-reward is 1:1, win rate 50%.”

Even repeatedly doing this, your capital should not increase or decrease in theory.

Betting on red or black is like roulette.

However, in reality, trades happen under unfavorable conditions like spreads and fees.

Therefore, when keeping the risk-reward at 1:1 while accounting for unfavorable conditions, the win rate will drop slightly.

As a result, in reality, capital decreases the more you repeat.

Then, what should we consider?“As you repeat, your capital increases.”How can we achieve that?

Two basic strategies are considered as methods to achieve this.

Strategy 1: Keep risk-reward at 1:1, but raise the win rate to 60%.

Strategy 2: Raise the risk-reward to 1:2, and maintain a win rate around 40%.

One of the means to achieve these is“advantage through technical analysis.”。

Study Dow Theory, chart patterns, and indicators,

“Where is reversal easier here?” “Aldo buy on dips near recent low (Dow Theory)” “From a W top, price tends to fall”—

Identify such tendencies and form trading rules based on this advantage.

…But, after all, technicals aren’t absolute, and they only indicate that a tendency is visible.

Expectations from such uncertain technicals should be limited to, at best, increasing win rate from 50% to 60%, or assuming a likely rebound to try high risk-reward entries—just that level.

Conversely, for the purposes of the aboveStrategy 1,2, the precision required from technicals can be modest enough to be sufficient.

Win rate and risk-reward are fundamentally a trade-off

“Win rate 95%! High-win-rate indicator (signal tool)”

“One-shot 300 pips! Take all the profit!”

“No stop losses for years!”

That sounds very appealing.

It’s so appealing you want to click it instantly.

No, even now I sometimes click (in the hope there’s some groundbreaking strategy I don’t know about).

But I’ve never encountered something that amazing.

There have been excellent ones, but they only guarantee a positive expectancy.

Still, they’re excellent.

But they aren’t the promised “super low risk, super high return.”

The market won’t tell you whether it will go up or down; it’s ultimately unpredictable.

So,

When you widen the stop loss, the win rate increases.

When you widen the take profit, the win rate decreases.

If you aim for high win rate, a single loss becomes larger.

Based on this, consider:

・Win rate 95%—how large is the stop loss width?!

・“Just take 300 pips in one shot” isn’t hard, but… stop loss width and win rate are important!

・“No stop losses”… is that unlimited risk?!

Aren’t you wondering?

Showing only high win rate or high return won’t reveal the strategy.

(Conversely, if explicit numerical risk details were provided, even a high win rate could be trusted?)

“Then, if the expectancy is above 1, is a ‘95% win-rate method’ OK?”

…On this, there is amental issue, so it’s not that simple.

Continuously win and lose to increase total amount

With a 95% win-rate method, if take profit is 10 pips and stop loss is 180 pips, what happens?

In simple math, it should increase with repetition.

But in actual trading, what happens when you hit an 180-pip stop loss?

Moreover, what if you only have one trade opportunity per day…

Can you calmly take 10 pips take profit for 18 days in a row?

If two days in a row you lose 360 pips, can you continue for 36 days?

Most people probably can’t. I certainly can’t.

(Those who can, I think, are talented and wonderful. I envy them.)

Similarly, if the stop loss remains small and you keep aiming for a single large profit, win rate will drop significantly.

In other words,when the balance between risk-reward and win rate becomes extreme, the trading style tends to be mentally taxing.

Isn’t it realistic to aim for a risk-reward of 1:1 with win rate around 60–70, or 1:1.5 with win rate around 50–55?

Of course, which trading style suits you is individual.

“Even with a big stop loss, high win rate is good” or “No worry about consecutive stops, want a big one-shot win”

There are many methods, and you should choose a preferred method.

It’s dangerous to blindly chase “high win rates,” so I’d be grateful if you remember that.

About “no stop losses”… no comment.

Bonus: Strategy with Infinite Averaging Expert Advisor (EA)

Infinite averaging EA has been popular in the past and still is today.

Dreaming of no stop losses is tempting, isn’t it?

But reality is adjacent to total loss…

Then total loss might be acceptable…

• Lot settings to achieve 100% annual return

• With full operation for a year from initial balance, there’s a 30% chance of total loss

These seem more realistic and quite appealing, don’t they?

…If you know of an infinite averaging EA that can achieve this kind of result, please tell me!!

Well then, see you again.

RCScalping – Discretionary scalping on a 1-minute chart –

↓This is the method I use to stay profitable with a rational and correct strategy.https://www.gogojungle.co.jp/tools/indicators/45766