I don't know if we have thought about such a problem. Is it really just a problem of trading technology that the transaction cannot be profitable for a long time? The Federal Reserve and MACD are really easy to come by, but the losses are still as usual. Today I just want to analyze from another angle, the factors that affect the profitability of our account that you ignore.
It is not easy to make stable profits along the way in trading. Most traders spend too much time on probabilistic research. Under what circumstances will the MACD diverge and will not continue to diverge; the situation of the trend line does not need to wait for the third confirmation; when will the Fed discuss Taper and so on. However, it ignores the consideration of relative certainty of the account, such as transaction costs, capital utilization and transaction varieties.
So, from what angles can transaction costs, capital utilization and the selection of trading varieties help us improve our chances of profit?
Transaction costs --- the secret of profit being stolen
As a trader, our transaction cost consists of three components, spread, handling fee (commission) and inventory fee (overnight fee). Our pursuit is that the lower the transaction cost, the better. The best vision is zero cost, and entering the market means the possibility of profit. Of course, such a low-cost platform provider is hard to come by, but if you can choose the cost specification, I don’t think anyone will choose a high-cost trading platform.
It can be said that transaction cost is a problem that most of our traders tend to ignore. They often don't care about the cost of 1-2 points, but they don't know that after a long period of trading, your cost expenditure is enough to swallow up profits.
Taking Europe and the United States as an example, the current transaction costs in Europe and the United States are the lowest among all platform providers. The floating spread in Europe and the United States is roughly around 0-2 points, that is, 0-20 USD/lot, and the average value is 10 USD/lot. The trading frequency is slightly higher, and it is reasonable to do 50 lots a month. Then after one month, the spread cost of 500 US dollars. If account transactions maintain this frequency, your transaction costs will reach $10,000 within 20 months of transaction time. If the account profit is 100%, then it is actually earning 200%, and 100% of the transaction costs are deducted from the 200%, and the final profit is 100%. If the account loses all funds within 20 months, your transaction will actually be a tie, with no profit or loss, but the transaction cost will directly cause your trading account to lose money. Think about it, it's really scary to think carefully!
As can be seen from the above figure, even if the cost difference is only 1 point, the gap in cost will gradually increase as time goes by. This is also the essential reason why we need to pay attention to transaction costs. In terms of costs, we must pay close attention to every penny, because it is actually related to our pocketbooks.
Although our transaction costs include the spread, there are also handling fees (commissions) and inventory fees. But the overall principle is that platform operators who can choose low spreads will never choose high spreads. For example, Forex platform providers, compared to its micro accounts , ultra-low spread accounts and 0 commission accounts will be more suitable for our transactions. Especially during the European and American trading hours, the spread of some mainstream varieties is almost close to 0, which can save our transaction costs to the greatest extent. Therefore, when we choose a platform provider, the choice of transaction costs is really important. It can also be said that if the platform is well selected, the probability of trading profit will be greatly increased.
The picture below shows the spread cost of the Forex platform provider and Zhonghui platform. How would you choose?
Obviously, FXT 's cost advantage in terms of spreads is still very obvious!
Trading leverage --- an excellent tool for capital utilization
We often hear others ask: the greater the leverage, the greater the risk? I don’t know if you agree with this sentence. Is it true that the greater the leverage, the greater the risk?
In my opinion, leverage is directly related to margin (used advance payment), not risk. The greater the trading leverage, the less margin required, and the more margin available in the account. If we trade 2 lots of EURUSD under the premise of 100 times leverage and 1000 times leverage respectively, the margin is different, but the resulting profit and loss are the same. From this level, the greater the leverage, the greater the risk, which is biased rebuttal. Of course, as mentioned above, the greater the leverage, the smaller the margin required to pay, the more money available for trading, and the utilization rate of funds will increase. At this time, traders may increase their positions, and the trading risk will increase. just appeared. This is the direct source of risk.
Therefore, it is problematic to simply think that the greater the leverage, the greater the risk. Leverage only affects our entry threshold, and position is the main factor that determines transaction risk. At the same time, the greater the leverage, the greater the utilization rate of funds in the account. Take Forex, for example, the leverage of ultra-low spread accounts and 0 commission accounts is as high as 2000 times (floating), which greatly improves the utilization rate of funds and raises the threshold for entering the market. For example, the mainstream investment in Europe and America, assuming that the current price of Europe and the United States is 1.19210, under the premise of 100 times leverage, the entry margin for trading a standard lot needs 1192.1 US dollars. If your account only has 1500 US dollars, then your available for loss It is only 307.9 US dollars, which is difficult to withstand the normal fluctuations of the market. And if it is FQT ’s 500 times leverage (maximum 2000 times), then the margin required for European and American transactions is 238.42 US dollars, and more importantly, you will not miss the opportunity because of insufficient funds in the account and cannot enter the market. Therefore, we need to learn to use leverage to make full use of the funds in the account.
So, how does the size of trading leverage help us improve our chances of making a profit? Here we need to pay attention to a data --- the ratio of forced liquidation. The forced liquidation ratio is directly related to leverage and is a risk control method for the platform. So, is the liquidation ratio as large as possible, or is it as small as possible?
Assuming that the liquidation ratio of the platform provider is 100%, then when our available advance payment = 0, the liquidation line of the account will be triggered; when the liquidation ratio is 200%, then when our available advance payment = used Advance payment (margin) will trigger the account forced liquidation line. As shown below:
From this we can draw two conclusions:
① From the perspective of account risk, the larger the forced liquidation ratio, the more funds left in the account after forced liquidation, and the smaller the loss of funds in the account;
② From the perspective of the capital utilization rate of the account, the smaller the forced liquidation ratio, the more the amount available for loss. It is especially suitable for traders who like to carry orders, or traders of Martin EA.
Therefore, as for the ratio of forced liquidation to choose, it should be determined in combination with your own trading habits. If you are a trader of Martin EA, the lower the forced ratio is, the better for you; if you are a trend trader with a large cycle, the frequent layout in the early stage requires a lower forced ratio. However, the liquidation ratio of most platforms is now controlled at 100%, in order to prevent the system from responding untimely during major market conditions. Of course, there will also be platforms with low liquidation ratios. Forex platform providers , ultra-low spread accounts and 0 commission accounts have a liquidation ratio of 50%, which maximizes the utilization of account funds. The best choice for the reader.
Trading variety --- the choice of standing on the wind
Everyone may think that the choice of trading varieties will not affect our trading profits. Is this really the case?
A-shares (Shanghai Composite Index), from the lowest point of 2464 points in March last year to the current 3528 points, has this increase reached our trading expectations? In contrast, the US stock market (Nasdaq index) rose 117% from the lowest 6628 in March last year to the highest 14422 now.
In the same time period, if you choose US stocks or Hong Kong stocks , is your profit margin greater than that of A shares? From this perspective, can choosing a good stock (variety) make our trading more profitable? much easier. To exaggerate, if you choose a stock randomly in the US stock market, the probability of making money is higher than that in the A-share market. "Standing in the air, pigs can fly" is actually true.
Compared with A-shares, the procedures for opening an account for U.S. stocks are very cumbersome. I don’t know why. If we want to buy and sell U.S. stocks, we must have a bank account outside the mainland, which will be very troublesome. What surprises me is that US stocks and Hong Kong stocks can be bought and sold on the Forex platform . It can not only catch the express train of the high valuation of US stocks, but also does not require complicated account opening procedures. It is also a good choice.
summary
After reading this article, do you still think that transaction costs, the choice of varieties, etc. are irrelevant? Don't fall into the quagmire of technical analysis, it's better to try to change the angle, start from the direction that is easy to ignore (the account itself, maybe your transaction will have a qualitative breakthrough, I have used this platform like Fortex for many years, not only The variety is rich, the cost is conscientious, and the transaction is very smooth, I still recommend it very much.
Of course, the choice of platform transaction costs is only the first step. Even if we choose a platform provider with ultra-low spreads like Forex, we still cannot guarantee that we will be profitable. We still need to continue to learn fundamentals and techniques. Can the July non-agricultural data meet expectations? Whether the Federal Reserve’s policy direction will be adjusted, etc., more content can be locked in FQT’s online sharing session, and you can pay more attention to it.
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