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TRADERS RUINEven big guys can lose their shirt… it is irrelevant if it is Forex Tradingstocks, or betting. As we have recently seen in the financial markets, poor choices and risky behavior can bring mighty down banks.How do YOU avoid the bad decisions and bad methods that make account killing errors? Oddly enough it is standing as a”little man” that can be salvation for the non-professional trader. By embracing disciplined Forex trading behavior and realizing how you’re vulnerable can make you a wining trader! More commonly known as”Gambler’s Ruin,” there are a couple of reasons that it is essential that the Forex trader understand this concept.1) Understanding this concept can certainly make the difference between trading career success or failure. Two ) Failure is a statistical, mathematical CERTAINTY in case you don’t know the techniques required to conquer Trader’s Ruin. The Path to RuinIt has been stated that the difference between gambling and speculation (or gambling ) is that in betting the odds are fixed and they’re always in favor of the home and in speculating that the trader uses his wisdom to shift the odds in his favour. So logically, the GAMBLER, even if he wins in the brief term, if he keeps gambling, in the long term he will certainly lose. It then seems plausible, the SPECULATOR (read Forex TRADER), who’s proficient at picking Forex trading strategies where the odds are always in his favor, could acquire or lose in the short term, but over the long haul will emerge ahead.The SAD reality is that this isn’t correct.Even if you had a supply for Forex trading signs which had more winners than losers, the stark reality is that if one aspect of the trading dynamic (the Forex market) has more resources (deeper pockets) compared to other side of the trade (read YOU), over the long term the participant with more funds will statistically always end up with the money. OUCH!For those of you that don’t care about the math an easy example is two dealers playing a game of flipping coins. Each trader takes turns flipping a coin and the other trader calling”heads or tails”. If the calling dealer guesses right, he gets the coin. This is even odds, with every trader having 50% chance of winning any flip. However, should you repeat this process long enough, eventually one trader will have each of the coins – it is a 100% statistical, mathematical certainty.If one dealer starts out with significantly more coins than another, that dealer is the one which will take each of the coins. If you want to see the math it seems like this, where T1 and T2 are Trader One’s and Two’s probability of losing respectively and”n” is the amount of coins held by each trader.T1 = n2 / (n1 + n2)T2 = n1 / (n1 + n2)Should you plug in different numbers you can see how it functions. If Trader 1 and Trader 2 have equal quantities of coins – let us say 100 coins each. Then the probability that Trader 1 will lose all his coins is 100/200 or 0.5 which is 50%. There’s a 50-50 chance that either trader will lose all of his coins into another trader. BUT, if one trader has a far larger quantity of coins than the other watch what happens.If Trader one has 1000 coins and Trader 2 has just 100 the odds of Trader one losing is 100/1100 or even 0.091, this says that the possibility Trader an individual will lose all his coins is only 9.1%, less than one out of ten. Translated in normal terms, this states that if you can find two traders, every dealer’s chance of going broke is equivalent to the ratio of the amount of coins your opponent has to the total amount of coins you have. This implies that with no significant aberration (called a true run of amazing good luck) that the dealer with the smaller bank account will constantly lose.It appears plausible that this is accurate in Las Vegas, where the odds are always against you. Nonetheless, it seems so unfair in Forex market trading. The harsh fact is this applies to the stock markets, investment houses, hedge funds, large private investors and Forex Traders! It’s all about”staying power.” The more cash you have, the longer you can remain in the match, the better your chances of coming out ahead.Little men shed.So do most of us quit? Yes and no. Unless you’ve got a Forex trading strategy that safeguards your assets, you will inevitably lose. Losses and penalties will suck your life from your account. To conquer the Forex markets you must discipline your trading behavior to raise and protect your resources.Beating The Market And Its Minions In Their GameIn Vegas, the only way to win is not to play the sport. However, to accumulate true wealth, playing the markets is among the only practical methods available to the ordinary trader. The financial sector knows this and what it does, from asset allocation models, advertising, commission and fees structure is biased to help keep you IN the markets ON THEIR TERMS. If you quit enjoying their game, they shed their advantage that’s the root of your trader’s ruin.The savvy investor needs to get off the Financial Industry train and take command of his or her own trading techniques. The statistical example above assumes that the Traders make a very structured”bet,” each trade is the identical size each time and it’s a”winner take all” wager. This can be a way that many traders tend to trade, either intentionally or by holding their transactions too long when they are losing. Escaping this mentality and realizing how discipline will help you”beat the street” may proceed the outcomes of your trading strongly in your favor.The first lesson that must be heard is when the trade doesn’t go to your advantage, you quit playing as soon as possible. This requires iron-willed area on your part. You do not have to be right every transaction to win big in the Forex or any market, in reality you do not even have to be right almost all of the time. Most Forex dealers believe in terms of what percentage of transactions they win. Many Forex trading strategies or Forex robot developers brag of results like”95% winning trades” This is the incorrect way to look at a trading strategy.The core concept a dealer should understand is that a trading system should ensure that you win more money than you lose over time. You may lose a lot more trades than you win, but if you keep your losses small, you can overwhelm them with your winnings. A number of the best investors and traders often only make winning trades 40 percent of the time and build huge fortunes. If the trade goes against the successful dealer, he immediately quits the trade, and just plays the match when he is winning. This is the essence of Positive Expectancy (to be examined in another article) – little losses, large wins. If a transaction turns against you, the sooner you quit the trade, the less you lose. When a trader holds on, hoping or expecting a transaction to reverse or enhance and takes even bigger losses is if he enters the kingdom of trader’s ruin.