【Zhe Ming Liu FX】 Transcript version released ⇒ How to decisively take profit without hesitation & the truth behind the win rate: small losses, large gains cannot be won [Q&A Question and Answer Video]
The YouTube video I uploaded the other day
I’ve posted a transcription version of it.
If you’re stronger at reading text, please take a look ♪
Q.
There is hardly any clarity on the timing of profit realization,
even when there had been profit, prices reverse sharply and losses become large
and you suddenly receive a stop-out notification—this is a sadly common pattern.
So far, in binary options with fixed settlement timing, I’ve been able to win relatively well.
How should one decide when to take profits?
A.
The timing of taking profits is difficult, isn’t it?
In fact, it’s said to be harder than stopping losses.
With stop losses,
you can use Dow Theory to say “if price breaks here, stop,” or
you can stop losses when price closes below the 60 MA,
so you can follow your own stop-loss rules and know exactly where to cut.
.
By contrast, in profit-taking there are often no clear points.
Sometimes reversals occur suddenly where there is no support or resistance,
and other times price keeps moving and breaks past expected levels ignoring support/resistance.
If you have your own profit-taking rules, that’s fine, but
if you don’t have any profit-taking rules,
you may miss the moment to take profit as price rises and then reverse,
or you might profit and then see price extend further.
Watching such motions,
you’ll eventually
regret not taking profits,
or regret taking profits too early
whether you regret not taking profits or regretting taking profits, you will inevitably feel one of these regrets.
It is human psychology,
and I think everyone experiences this without exception.
There is only one way to prevent this regret.
Constrain yourself to one side.
The choice is between
“Take profits early and accept missing the further gains”
or,
“Delay taking profits to allow further gains while risking a reversal and stop-out”
either option.
Both carry risk,
so you might dislike either option, but
investment requires you to accept a certain level of risk.
If you cannot accept risk, the returns won’t come back to you.
To gain something, you must lose something.
Wanting everything will end in getting nothing.
When you want to gain something, sometimes you must give something up.
This is the principle of exchange known as “equivalence.”
Therefore, accepting risk is absolutely necessary.
Also, I do not recommend trading with a trading style that changes depending on the situation.
People hesitate when there are choices.
While you’re hesitating, the market keeps changing,
and watching a market that changes makes you not know what to do.
Then you end up closing at a bad point and regretting it.
So, narrow down to one side,
and stick to it as your rule and trading style!
Also, not fixing your method and trading with various methods each time can cause inconsistent profits.
To stabilize profits, it is recommended to minimize the patterns of your trading methods and rules.
Now, I will introduce the profit-taking method recommended by Chimei-ryu Investment Techniques.
We recommend placing a limit order at a 1:1 risk-reward ratio.
A 1:1 risk-reward ratio means making the distance to the stop order equal to the distance to the take-profit order.
( Explained in detail in the video. Around 4:00 )
By the way, I used to
固定リスクリワード1:2,
place a take-profit at twice the distance of the stop loss,
and while profits could be large when hit,
the distance to the take-profit was long,
making it less likely to touch, which reduced win rate.
The market is said to be 50% up or down, but that isn’t true.
In reality, it’s a 1 in 3 chance that could be up, down, or neither.
Moreover, about 80% of markets are ranges.
When the market moves into a range,
there is no directional movement, and up or down becomes random.
Sure, given enough time the range will eventually break out in one direction, but
if your orders cause the price to range within a tight area and move up and down randomly,
which touch is more likely, the near rate or the far rate?
Naturally, the near rate is more likely to be touched.
In other words, in order to have a 50% win rate for up or down, you must first find a market that’s trending.
Even if you find a trending market,
there can be mysterious pullbacks or retracements during the trend,
and there is a possibility of long lower or upper wicks.
If you happen to touch stop-loss at the tip of such a wick, it’s over.
In other words,
if you plan a 1:2 risk-reward trade,
you need twice as much justification that the trend will move in your anticipated direction.
As a result,
you have to find points with stronger justification,
which reduces the number of entry points and
reduces trading frequency.
If you have the ability to discern the market and can wait until all conditions are met, you’ll be fine, but
for those who tend to impulsively enter without justification, it’s tough.
Also, with a 1:2 risk-reward, you effectively win only half the time, so win rate drops.
In my case, my win rate was not improving, which became mentally taxing, so I lowered the risk-reward to 1:1.5 to gradually improve it.
Eventually, I settled on a 1:1 risk-reward.
In the market, it is said that the basic trading principle is to risk little and take big profits, but
to execute such trades requires substantial skill and experience, so
risking a little and aiming for a moderate gain is not so difficult
and can be mentally easier to trade.
Also, besides taking profits at 1:1, there is a profit-taking method using wave theory.
(Explained in the video. Around 8:45)
By the way, in the question,
“Currently, in binary options with fixed settlement timing, I’ve been able to win relatively well.”
it states that,
if you adopt the risk-reward 1:1 trade recommended by Chimei-ryu Investment Techniques,
you can perform trades where the advantage over binary options is overwhelmingly higher.
I would like to explain that as well, but
the video has become long, so
I will save that explanation for the next video.
End
That concludes the content of the video so far.
As for the next video, the content is already decided,
and I will upload it as soon as recording and editing are finished!
So please wait a little longer m(__)m
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