The "most important thing" not even listed in the textbook when playing FX

Why you lose in trading

There is an absolutely essential point

It is a matter of whether your trading logic fits you

This is not merely about trend following or mean reversion

Mean reversion is not "trading logic"

Trading logic is about the type of how you grow and how you shrink your account

This is the most important thing that isn’t in textbooks

Probably there are only these three types

Think of 100 pips as a percentage

If you reset, 100% per lot

If averaging down, 1% per lot (10% per lot seems low risk but high risk)

If using a stop loss, 10% per lot (0.5% to 1% per trade)

The lot risks for averaging down and stop loss are similar

When you actively use averaging down

Trade aggressively with a risk-reduced lot size

To increase your stop loss you must ultimately trade aggressively

Trading tends to separate by type of trader

There is no advantage of being good or bad with mean-reversion logic—it’s meaningless

Either way you don’t grow; mean-reversion is “not important”

What matters is whether you are able to grow

Whichever you choose, you can grow

Focus on eliminating the losses

So for that

There are three types: averaging-down type, reset type, and stop-loss type

Averaging-down type is one who incurs heavy losses and cuts losses, then can averaging down again after a swing

If market recognition and bias recognition are perfect, this is the suited trading logic

The reset type bets high risk, compounds, and restarts after resetting

A method that relies on zero-cutting (zero-cut)

Stop-loss type is between averaging down and reset

If you trade based on market recognition, this is better

For all types, being proactive is essential

Also, a condition is to select products with no correlation at all

If you pick the same yen currency, it will negatively affect your market sense

If you trade in yen but use a different type in a dollar currency, that also harms you

Trading with completely unrelated products is the condition

Big loss and you can cut losses and swing back

or

Bet high with zero-cut and reset for restart

or

A type that grows the market

Note: always choose highly volatile products

Volatility of a product is something you should get used to because it will come someday

And since you want bigger gains, you should choose that first if you want results

One-shot trading without stop is a reset type

Because eventually you will lose

Eventually you will lose, meaning rely on zero-cut

Zero-cut and stop loss share the same idea

It's not that brokers are deceiving

Zero-cut is a system that exists because it can be compensated

Therefore, these will not disappear

Loss-cutting with zero-cut is essentially the same as stop loss

So even if zero-cut disappeared

the activities would be averaging down with 100% lot

In other words, it would be like averaging down at around 50%

The second entry (averaging down) is located near the center of the first entry’s stop loss

In other words

If the stop loss is 20 pips, you are entering using averaging down at the 10-pip mark

That is the kind of high-risk trade done with zero-cut

Back-calculating, zero-cut type trading would be

A trading method where you can trade with stop losses

With 100% lot, one averaging down is about the limit

If you do reset-type with stop loss

The aggregate P/L is the result of one entry plus one averaging down

That P/L is the restart after reset

The goal is to increase this P/L in the zero-cut type

If you think of zero-cut type as stop-loss type

It is comparable to a reverse Martingale

A combination of reverse Martingale and averaging-down

Averaging down can accept up to two increments; that is based on market recognition and bias recognition

Up to two increments are effective for market rebounds

Only up to two increments work for optimal market rebound

This probably continues forever

What zero-cut type trading does is, metaphorically,

Do reverse Martingale with stop loss at minimal loss

Then manage the loss and perform averaging down in a similar way

Thus, one averaging down is just right

Because it is about the same profit and loss among averaging down; without reaching averaging down, it’s meaningless risk hedge

One averaging down is the perfect balance

The risk of one entry losing plus the hedge of two entries surviving and making profit

That is why one averaging-down type is efficient

Averaging-down types must pursue low risk relentlessly

If you cannot endure, it’s meaningless

You must rise from there, so you will take 1% risk per 100 pips

100 positions to reach 100%

Averaging-down types are often misunderstood, but

They are suited for hedging both sides

However, if you start overusing Martingale, it becomes high risk, so stop

Also, using Martingale makes it "Martingale-centric" and is meaningless

One Martingale can be meaningful, but four or five Martingales are completely meaningless

Averaging-down type

This is a game of "intrinsic risk vs. reward"; without understanding this, you will end up with 10% risk on low lot averaging-down

If you do not understand intrinsic risk

Even with 1% risk, averaging down will just leave you in limbo

To digest intrinsic risk, hedging with both sides is best

To grow forever into the future

Only flexibility and aggressiveness matter

Zero-cut type and stop-loss type are favorable

Averaging-down type can also manage with hedging if used

Aggressive trading and high-velocity turnover logic

This exists in zero-cut type and stop-loss type

Similarly in averaging-down type, but

Intrinsic risk exists

However, even with stop-loss type, if you continue averaging down you will face the same risk

Trend trades also show patterns where intrinsic risk prevents profits

If you can resolve this intrinsic risk, you just need to cut losses if you feel you must

There is bias in the market

By biases when a major trend has not formed

When a major trend forms, the pace of a trend-only market differs

That’s all that affects automated trading

Automated trading that is completely unaffected by the market sits at a distance of ±0

This is the same state as trend trading

If you do not actively trade with a market bias recognition somewhere, you cannot achieve results better than automated trading

The most efficient for trend trading is

MACD

If you input the average trend level numbers per product with plus/minus,

It helps estimate the strength of trends; it becomes easier to see

Then view the market as one frame

After making a profit and taking profit, you trade again in the next frame

The trend is present

And only which trend pattern it is matters

Whether it is a trend line type, staircase type, or support/resistance type—this is all

Besides that, you should give up because it cannot be controlled

When it resurges, it’s easy to spot

By viewing the market with bias recognition

Trend patterns

You can place trades by range patterns

Chase only the trend patterns

Also chase range patterns

For trend trading only

Look with MACD

Trend type, staircase type, and support/resistance type—that’s all

Beyond that, turnover is poor; in other words, two entries is the maximum

Which is better: one-shot or averaging down

Please decide based on the market

Consider markets with volatility

Averaging down

In staircase-type trends or up/down markets, even if you can predict it and make profit,

In fast-moving markets, you cannot make a profit; you incur large losses

Even if you swing back, you can just cut losses as a reality

In principle, it doesn’t change much because it’s market-driven

So, for averaging-down type, don’t rush; rotate gradually

That’s why you trade with small, low-risk lots for averaging down

Unlike a single-shot swing,

Averaging down restarts in line with the market direction

Therefore, swing down averaging is effective

With one-shot swing, you end up repeating until profits are realized

The market requires waiting-type trading to accumulate

Averaging down should be combined with swing-down to fit the market

Also, market recognition

Both one-shot and averaging down use the same thinking

Therefore, you should implement hedged trading resembling averaging-down

In practice, it is a one-sided awareness of market recognition

In other words

Do not think that you can “be saved by averaging down”

This is the point

To trade with market recognition

That’s why you perform swing-down averaging

Why averaging-down is bad

Because you end up with a big loss by averaging down

Box breakout

and

Trends

Because it’s hard to incur big losses

If you swing down averaging

In a zigzag market, that alone leads to big losses

Even if you do not swing, you would incur big losses

So, you end up cutting losses here as well

Until the trend appears and ends

1:10

Trend

1:3

Averaging down

1:10 to 1:3

Why can zero-cut type increase profits

Because it acknowledges losses

So averaging down and continuing to cut losses and take a rest is fine

That’s all

Where to endure = averaging down

Where to be aggressive = swing

Where to rest = cutting losses

If you don’t place a stop loss and you do a one-shot cut,

If it moves suddenly, you cannot control it

But with averaging down, you can consistently make profits

If you cannot place a stop loss, you should be in averaging-down type

The opposing indicator of contrarian averaging-down

Why is it the perpetual favorite

Simply because contrarian averaging-down becomes a perpetual favorite

However, markets drift away

Also contrarian averaging-down can keep profits but drift away

To keep making profits

Trend trading would soon only increase losses if you keep doing it

Therefore you must simply wait with time

Markets consist of this "contrarian averaging-down favorite" and its opposite indicator

Thus, ranges and trends are formed

In short, time-based waiting and simply following the trend

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