Myths and market FOREX reality

The author of article: Andrey Vedihin, Company Alpari I Quote classics — A.Elder «How to play and win at a stock exchange»:

If your friend who does not have a wide experience in agriculture, tells to you that is going to support itself from a site in an acre quarter, you decide that it should hunger. All of us know, how many it is possible to squeeze out from such plot. But in the field of stockjobbing adult people allow the imaginations to blossom.

As soon as the fan receives some blows and receives the requirement about довнесении money, it instead of energetic becomes shy, and starts to develop any terrible ideas about the market. Losers sell, buy or stand aside, proceeding from the imaginations. They as children who are afraid to pass through a cemetery or to glance at night under a bed because there there can be phantoms. Not structured market environment allows to produce imaginations easily.

Imaginations influence our behaviour even then when we do not give ourselves the report in their existence. The successful player should find out the imaginations and get rid of them.

 

The myth about kitchen, or is a little about technologies of work of the broker companies

The reality is that that exists three technologies of work дилингового the centre.

1) Any client position is not blocked on the external counterpart. In this case дилинговый the centre is interested in loss of the client since its prize дилинговому to the centre should be paid from own pocket. The dilingovyj centre working on such technology, is called "kitchen". Usually in the first years of formation of the company it has not enough clients that from their positions to collect standard for interbank форекса a prize (0.5 million) and to deduce a cumulative client position on the external counterpart. For "the young" companies the risk of is great that one of clients will win the large sum, and the company will not have not enough money resources to pay off with it and other clients. To lower probability of such outcome in activity "young" дилинговых the centres frequently the aspiration is observed to help client to lose that negatively affects reputation of all branch as a whole.

So has gone that the word "kitchen" became abusive in Russia. In the late nineties in Russia was a little дилинговых the centres, and the majority of them had not enough clients for hedging of a cumulative client position on the external counterpart. Therefore in the late nineties was to observe in the nature of things the incorrect relation дилингового the centre to the client: слипадж on closing and other ways of dishonest struggle. But time is not necessary on a place. The companies created in the nineties, have acquired client weight. Bad quoting negatively affects on reputations of the company, therefore the large companies, as a rule, do not work against the client. Neetichesky ways of struggle from clients profess only small, again formed, дилинговые the centres.

When дилинговый the centre «grows from short panties», and the quantity of its clients will exceed some thousand, the company management starts to understand that:

The
• profit дилингового the "kitchen" centre - as a result appears approximately equal to a spread increased by quantity of transactions, which in direct ratio to quantity of clients. The size of client base, in turn, depends on reputation дилингового the centre.
The
• good reputation of the company and long-term profit is more favourable than short-term prizes from work against the client, therefore дилинговый the centre (even remaining kitchen), passes in a maturity, i.e. cease to shift quotations, «to draw stops» etc.
• Business began to cost much, and at founders дилингового the centre is not present desire to lose it in case of a casual prize of several clients.
The
• average size of the deposit has started to increase (positive influence of good reputation), have started to appear big clients who basically win since the size of their deposit allows to observe rules of management of risks (Money Management), and they are, as a rule, more professionally prepared in respect of trading etc.

As a result the management дилингового the centre starts to reflect on hedging of client positions that means transition to the second type of technology.

2) to Deduce a cumulative client position. In this case at excess of a total client position of any in advance certain size (for example, 5 million), it is deduced on interbank FOREX. As a result at the company motives disappear to work against the client. Business becomes steadier since big prizes of clients any more do not put дилинговый the centre on a ruin side.

3) to Deduce each transaction of the client on the interbank market. From the point of view of pluses for the client this technology has no advantages before the second type. Among minuses for the client it is possible to note:) the big initial deposit and the minimum size of the transaction; on the conclusion of transactions not some seconds, and minute leave and it is more.
At the moment of a writing of this article at Company Alpari was more than 7,200 real clients that allowed the company to work on technology № 2.

Myth about impossibility to earn in the market форекс

In books write: 90 % of the people working on маржинальных the financial markets, lose the money. Unfortunately, it is valid so. We will try to understand the reasons of it. If to try to analyse work of these of 90 percent we will see that the lost trader:

• Does not own analysis bases (technical, fundamental or other). On a question «That such МАКД (MACD)», he responds that it is the Moscow ring highway.
• Does not understand trading philosophy. I will explain on a personal example. Being a young technical analyst I has sat down to analyze any фин. The tool. Let there will be a yen. I look at a week — indicators show downwards, on дневку — downwards, on четырехчасовку — downwards., for 5 minutes — downwards. In a fantastic way, there are no contradictions! I rise downwards … Result pitiable. Belief in those. The analysis it is at all undermined. To run behind beer … I think … I Come to a conclusion much, what not that. The analysis is guilty, and I. A week and дневка showed that a global trend bearish. And short schedules showed that trend movement already goes and, probably, has reached the bottom. The ideal moment for sale would be, if: a week and дневка specify in a bearish trend, and four часовка — on the bull trend (there is a recoil), and часовка shows the termination of the bull trend (for example, the bull divergence).
• Does not observe a rule money management:
  • Does not expose stops in general
  • Expose too short stops. The stop warrant on форексе should be not closer, than 40-50 пипсов from entry point. Closer stop warrants are sentenced, since, entering into the market, you, for certain, cannot catch the bottom-pichok. The error usually makes 10-15 пипсов. Plus 5 пипсов a spread. If to consider still market noise (10-15 пипсов) we will receive that the stop warrants exposed on distance less 40-50 пипсов from entry point, practically do not have chances to worry a position, ИМХО.
  • Do not observe a parity profit/loss = 2/1.
  • Try to fix profit in 5 пипсов, but are ready to incur losses in 100 пипсов and more. That at such tactics at least not to lose, it is necessary on 20 profitable transactions (20×5 пипсов = 100 пипсов profits) to do only one unprofitable in 100 пипсов. I.e. the percent of successful transactions should make 95.24 %. Such not under force even to Soros. The professional analyst gives 75-80 % of correct forecasts.
  • Etc.
• At the analysis "the small" periods are used. It seems to me that in the market there is a noise approximately in 10 пипсов (the large order to bank from the client has arrived, and it has pressed through a course on 5, for example, пипсов. In some minutes the course has returned on the previous level. Plus any indicative differs on some пипсов). We take the given position as an axiom (to prove it it is impossible). Then:
  The
  • analysis минуток will allow us to catch movement in 15 пипсов (for example). From them 10 пипсов will be noise. I.e. 66 %.
  The
  • analysis 5-minutok will allow to catch movement in 30 пипсов. Noise of 33 %.
    …
  The
  • analysis часово will allow to catch movement in 100 пипсов. Noise of 10 %.
  • Аналих дневок will allow to catch 500 пипсов. Noise of 2 %.

Figures conditional, here the main thing a principle. Thus, we at the analysis of the small periods try to predict noise, and at the analysis of the big periods — we try to make the market forecast. Имхо, noise is unpredictable. The market is predicted. Therefore it is necessary to analyze the long periods.
If at you it is impossible to earn on форексе, attentively and thoughtfully read the aforesaid and draw corresponding conclusions. Namely: that it is successful and profitable to work in market FOREX, it is necessary to possess certain knowledge, and also it is obligatory to observe certain rules (for example, money management).

Myth about insufficiency of brokers in the broker company or why the transaction at the moment of strong movement of the price is long made

Certainly, the delay can be caused and such factors:

• Program or hardware maintenance does not cope increased in tens times at the moment of strong movement by a stream of demands.
• Shortage of the personnel — brokers.

But, as a rule, the broker companies working already of some years in this market, have no neither personnel, nor technological problems. And delays all the same arise. Why?
The most widespread form of work in the large company will be 2я (see above) — when on the external counterpart the cumulative client position is deduced. When the market quiet, the broker at receipt of inquiry of the client almost instantly fixes the transaction of the client, and only then starts to be puzzled with a problem of a conclusion of a cumulative client position (in a case limit excess) on the external counterpart. There is no place to hurry up, the market quiet. The market will give the chance to the broker to enter on pair пипсов better the client (and then on pair пипсов to leave better).
But on волатильном the market already all in another way. To hedge a position on the external counterpart it is necessary at once, and that the price will leave, and the broker will work to itself at a loss. Therefore processing of client demands is carried out simultaneously with a conclusion of excess of a client position to the external counterpart. Time of processing of the demand of the client, naturally, increases. But it it is necessary to consider that client positions are deduced on the external counterpart as necessary "payment" for reliability of the company, a payment.

Myth about insufficiency of the capital

I quote classics — A.Elder «How to play and win at a stock exchange»:
Many losers think that would achieve success if had the big means. All losers have been thrown out from game by a series of failures or one, but extremely destructive transaction. Often, after the fan has closed all positions which are at present unprofitable, the market turns back and moves in that direction on which he counted. The loser is ready to beat itself or the broker: «If it has held on even a week, he could earn a modest fortune!»
Losers perceive change of directions of the market as acknowledgement of the methods. They earn, occupy or save enough money again to open the modest account. History repeats itself: the loser will sweep away, then the market moves in other direction, "proving" that that was right, but too late, the account is again empty. During this moment the imagination also is born: «If at me was больший the account, I would hold on a bit longer and have won».
Some losers raise money at native and familiar, showing them records. It would Seem, they confirm that, having more means, the loser would receive a big prize. But if they receive more money also them will lose as though the market laughs at them!
The loser suffers not from a capital lack, and from underdeveloped consciousness. It can destroy the large account almost as quickly, as well as small. It changes, and its management system the capital is unsatisfactory. It goes on too big risk at any size of the account. Irrespective of, its system is how much good, the sequence of unsuccessful transactions will by all means throw out it from game.
Players often ask me, how many money it is necessary to have to begin game. They want to have possibility to worry recession, time falling of cost of their actives. They expect that will lose a heap of money before something will earn! They remind the engineer, gathering to construct some bridges, doomed to collapse, and then to erect a masterpiece. Whether the surgeon can expect to kill some patients before it becomes the expert on appendix removal?
The fan equally does not assume that it will have losses, as well as does not prepare for them. Conviction that at it is not enough means, is the dodge, allowing not to notice two unpleasant things: absence of discipline in game and absence of the realistic management plan the finance.
One of advantages of the big account is that cost of the equipment and services is less in comparison with your capital. The one who operates fund in one million dollars and spends 10000 dollars for computers and seminars, should earn only 1 percent to compensate it. The same expenses will make 50 % for the player with the capital in 20000 dollars.

Myth about the autopilot

I quote classics — A.Elder «How to play and win at a stock exchange»:
Imagine that to you the stranger comes to garage and tries to sell automatic system for management of your car. Pay all some hundreds dollars for the computer chip, establish it in the car and cease to spend forces for management, he speaks. You can take a nap in an armchair of the driver while «Dexterous рулила» delivers you to work. Most likely, you will laugh to such seller in the person. But whether you will laugh, if he offers you automatic system for stockjobbing?
The players trusting in a myth about the autopilot, believe that the pursuit of riches can be automated. One try to develop automatic system of game, and others buy it from experts. People, years perfecting the skill of the lawyer, the doctor or the businessman, spread thousand dollars for tinned competence. Over them avidity, laziness and mathematical illiteracy supervises.
Before system wrote down on pieces of paper, and now they usually take the form of the diskettes protected from copying. Some are primitive, and some are very difficult and have built in оптимизаторы and rules of management of the finance. The set of players is in searches of the magic, capable to transform some pages of a computer code in a never-ending stream of money. Those who pays for the automated game systems, remind medieval knights who paid to alchemists for a secret of transformation of simple metals in gold.
Difficult human activity does not allow to automate itself. Computer training programs have not forced out teachers, and accounting systems have not caused unemployment among bookkeepers. The majority of human employment demands experience in decision-making so cars and programs can help, but not replace the person.

If you managed to get working automatic system you could leave to Tahiti and spend the life rest in luxury and luxury, receiving a continuous stream of checks from your broker. But while unique who has earned on the automated systems, there are sellers of the software. They have generated small, but colourful надомную the industry. If their systems worked, what for it them would be to sell? They could leave to Tahiti and collect checks from brokers! However, at each seller the answer is ready. One assert that love programming more than stock market game. Others say that sell system only to receive the capital for stockjobbing.

The market each time changes and changes automatic system. The most rigid yesterday's rules badly work today and, most likely, will not work at all tomorrow. The competent player can correct the methods if he finds out alarm signals. The automatic system not so easily adapts and самоуничтожается.

Having autopilots, airlines pay the high salary to pilots. They arrive so because people are capable to cope with unforeseen situations. When at the liner over Pacific ocean occur case damage or when over fuel reserved in places of Canada comes to an end, only the person can get out of a crisis situation. About such situations wrote newspapers, and in both cases skilled pilots have managed to plant the cars because improvised. No autopilot could repeat it. To trust the money to the automated system is the same what to trust life to the autopilot. The first unforeseen event will destroy your account.

There are good game systems, but behind them it is necessary to look after and correct their each decision. You should watch process, without shifting the responsibility on system.