Forex Trading Framework – Why you need to take yourself out of the equation

There is something I wanted to ask you in this video. What do you see here? Is it a good result or a bad one? Here you see the system at work, the Forex Trading Framework from October 2017 is automatically trading. It looks we made profit. We are close to 10% profit as the balance shows it. Even the equity is drawing a positive curve on the graph. If you take a look at the history graph, you would probably feel confidence to trade this system. The balance curve is showed by this blue line here. As you see here the balance keeps on moving upwards, however the green line beneath the blue – which shows the equity curve – is at 96,904 Dollars only! Most probably at this point a human trader would stop the auto-trader and close this trade with a loss because this is where it hurts. An automated trading system, just as the Forex Trading Framework does not care, it sticks to the trading rules you have created and continues with the trade. Humans are not so good at sticking with rules. For example: I made up my mind and created a very strict rule never to eat chips again. As long as I don’t buy any I can easily obey my rule. However, when a bag of chips appears in our kitchen for my wife would buy some once in a while, then the damn chips just sitting there staring at me and it is only a question of time when eventually I open it. After opening it, it’s only a short time and no any chips left in the bag. This keeps on happening every time. Now imagine if a simple bag of chips can make me break my own rules, then how about when I see my account balance going down with a few thousands of Dollars, like here? This drawdown here is more than 15,000 Dollars and it looks as it is getting even worse. Now you start to shiver. Oh my God! I am going to lose all my money! And now you quit. But your trading system won’t do that, it will go on to act as if nothing had happened, and it might see several other drawdowns here. This one is even worse! This would be over 40,000 Dollars drawdown. I couldn’t stand that but my system can! Well, all of this is absolutely no problem when you just see a few lines going up and down on a demo account, but once it is real money the meaning of these lines here will completely change your behavior, but it won’t change the code of your trading system. So, if you can get your trading system to trade exactly according to your rules on a demo account the only thing you need to do, is to get yourself out of the way on your real account. In the next video we are going to talk about an easy way how to do this. If I stop the strategy test right here, my results will be very good. I made 41,120 Dollars net profit, but most likely you would kill the system when the equity says you only have left 81,957 Dollars. This is why brokers make so much money and it is also the reason why an automated system is a better trader. If there is one thing that is very predictable, it is the fact that human emotions will cause the biggest losses and most likely you will create these losses yourself -just because you kill your own system right here in the middle of the game and it will never see profits because you stopped it to get rid of your own emotional pain. At this point you really begin to get nerves! Oh my God! I am just losing all my money! Then you quit. But your trading system will continue trading regardless, even when several other drawdowns occur. Wow, the next one here is even worse! This drawdown is more than 40,000 Dollars! I could not suffer this one but my system does! Now when you see this happening only in your demo account that is absolutely no problem. Only a few lines going up and down with virtual money on a demo account, but wait until you see the same with real money! These lines here will completely change your emotions and your actions! But this is not so with the code of your trading system. So, once you managed your trading system to trade accurately by your rules on a demo account, the next thing you need to do, is not to screw up, so get yourself out of the way in your real account as well! In my next video I will be talking about an easy way of how to really do it. Let’s say I stopped the strategy test right here, then the results are pretty good. My net profit is: 41,120 Dollars! But almost sure that you would kill the system when the equity drops to 81,957 Dollars only due to emotions. This is what the brokers are counting on and that is why they make so much money. This is the reason why an automated system is a much better trader! One of the things which is very predictable in trading by fact is that human emotions will create the greatest losses and most likely you are causing these losses, just because you interrupt your own system right in the middle of the game so it can never produce any profits for you have stopped it only to escape your own emotional pain.