Frequent transactions, this is a commonplace problem. This time we use another perspective to look at frequent transactions, that is, transaction costs.
Taking gold as an example, the spread of each platform is about 3-5 points on average, right? floating.
Then a standard lot is about 30 to 50 dollars in cost, and the cost is 40 dollars if you take the middle value (that is, you will lose 40 dollars when you enter the market).
Europe and the United States are probably floating around two points, there are also 1.5 points or 1 point, and there are even fewer. On the whole, the cost of 1 standard lot of 15 US dollars is not high, and of course it is not low.
Every time a position is opened, it is 1 standard lot. According to normal fund management, the account must have at least 10,000 US dollars.
Assuming that the trader does gold and Europe and the United States, add up to 1 standard lot. The average cost of each transaction is 30 US dollars, which is higher for gold and lower for Europe and the United States.
The trading frequency is slightly higher, and it is not too much to do 50 lots a month. Then after one month, 50×30, the cost of 1500 US dollars, 15% of the original amount of the account. If you do it for 6-7 months, how much will the transaction cost be? It will be the same as the principal, which means that the transaction cost will reach 10,000 US dollars.
During these 6-7 months:
① 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%.
②The account earns 20% , how much money is it actually earned? 120%. But the cost of 10,000 US dollars was paid, and the remaining 2,000 US dollars became profit.
③Congratulations , why should I congratulate you? Because in fact your transaction is a tie, no profit or loss, but six or seven months of transaction costs directly blow up your trading account.
So do it 50 times a month, and each time you do one hand, this is the case. In fact, it has the same meaning to scale up or scale down, and it is calculated as a proportion.
Therefore, there are many trading opportunities and opportunities to make money, but the transaction costs have also increased, and more money needs to be made to make up for the losses on transaction costs. What's more, whether you can make money after placing an order is another matter, but the transaction costs are actually there. I guess many people haven't really calculated how scary this account is.
Then, you just feel that there are more trading opportunities and more opportunities to make money, but at the same time, there are also more opportunities to lose money. Some people may say that I have earned all the points that should be earned. Does the transaction have more profit possibilities?
Then do the math again. Is there a direct relationship between the profit of the transaction and the number of points earned? Of course, there must be an indirect relationship, but in fact there is no direct relationship. Why?
For example, assuming that I and another trader A have similar trading abilities and are exactly the same in all aspects (uniform variable, easy to calculate), I make 5 transactions a month, and I calculated in two years, the maximum drawdown That is 3 times the single risk retracement. Little A makes 50 transactions a month, and the maximum drawdown is 30 times the single risk drawdown.
I can afford a retracement of 3,000 US dollars, and I can use 1,000 US dollars in a single transaction; Xiao A can also bear a retracement of 3,000 US dollars, but because he has a single risk retracement of 30 times, so he can get at most one transaction. Offer $100.
The total profit-loss ratio of our accounts is the same, taking a risk of 3,000 US dollars can earn 9,000 US dollars a year.
In the end, as long as our trading ability is the same, Xiao A and I will actually earn the same amount of money in the end, both of which are 9,000 US dollars. It's just that he does more and I do less. I do less, but I have a high single risk, and he does a lot, and the single risk is low.
See, making money from trading has nothing to do with how many points you grab. We are not analysts, we are traders.
The analyst said, look, I predicted a market, and I made 100 points from one range to another, 80 points next time, and 60 points next time. This is usually called to the teacher Shan or the analyst to count the points in this way.
But as a trader, what we should think about is a purely mathematical problem. What are these factors related to our money making?
The first one is single risk. Is your single risk high or low?
The second is profitability efficiency. What is profitability efficiency? It is the account profit divided by the number of transactions. The contribution value of each transaction to one's own account is called profit efficiency. Are you high or low?
As I said just now, the efficiency between me and little A is the same, so I scale up proportionally. If my efficiency is high, his efficiency is low; One side might be stronger.
The third is the total profit and loss ratio of the account. For example, if you withdraw 30%, you can earn 90% in two years, and you can earn 45% in one year. This is the total profit and loss ratio of an account.
The fourth is transaction costs. This was explained at the beginning.
Among all the factors related to whether the transaction makes money or not, there are no points. You earn 1,000 points and others earn 100 points. It is very possible that the person who earns 100 points earns more than you, or has a higher profit rate than you.
That's why I said there is no direct relationship. Note that there is no direct relationship, not no relationship.
When many people do transactions, they do a lot of fun, but in the end they don't make money, or even lose money. Because the focus direction is wrong, where is the focus point? Account Analysis.
First, analyze the single risk of the account, the maximum drawdown, the profit efficiency, and the total profit-loss ratio of the account. How much is the transaction cost calculated by your own transaction frequency, and then fund management.
There must be stable trading behavior before fund management, otherwise, fund management will not be possible. Only by slowly putting the focus on these places can there be an essential improvement at the transaction level.
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