Part I. Dispelling the Forex Myth / Chapter 2. Profitability Perspective or Profitability Perspective

Surely you didn't decide to engage in Internet trading in the Forex market just out of nowhere. Most likely, there are people in your circle who have told you about their recent profitable trades, which allowed them to renovate their apartment or buy a new car. Fueled by the idea of quick wealth, you rushed to search for information about the Forex market on the Internet and stumbled upon this website. Now it's time to temper your enthusiasm - in this chapter, we will try to dispel another myth of trading financial instruments - the myth of potential profitability.

Someone may tell you that they have made a 100% return on Forex trading in a month. Moreover, they may even give you the investor password to their trading terminal and demonstrate their successful trades. But remember the material from the previous chapter where we talked about events and the probability of their occurrence.

High profitability in the first month of trading does not guarantee high profitability in the second and subsequent months. No one is immune from losses and negative returns. So if your acquaintance trader incurs a 50% loss of the initial deposit in the second month, the result of their trading over two months will be a 25% return per month. If the trader stops trading for the next 10 months, the overall return on their trading will be slightly over 4% annually, which is lower than any savings deposit in a bank. It is worth noting that bank deposits are low-risk investments. Trading Forex is a risky activity that comes with stress, mood swings, and frequent exhaustion. Draw your own conclusions.

The most interesting part is that even if a Forex trader manages to achieve a 30% annual return over three years, they are still not immune to risk. If they end the fourth financial year with a 100% negative return, it can be said that they have worked in vain for four years. High performance in the early years can easily be offset by one unsuccessful trade during a financial crisis. Draw your own conclusions.

So, does it mean that Forex is like the "Colosseum" where participants face either "eternal glory" or "inevitable death"? And which outcome is more likely? Draw your own conclusions.

We are not claiming that making profits in Forex is impossible, we just want to say that it is unlikely in the traditional approach to trading on the market. Just think about it, if everything were as easy as described in books, all traders who read them would become millionaires. Do you have many millionaire traders in your circle? Draw your own conclusions and continue reading the next chapters, where you will find answers to many of your questions.

Part I. Dispelling the myth about Forex / Chapter 3. Systemic view of Forex

In the previous chapter, it was thoroughly explained why trading in Forex cannot be considered a profitable business, even if you manage to make an "astronomical" profit in a certain month. In any business, there is a concept of cash flow. Cash flow can be understood as the net profit of a company after accounting for equipment depreciation, payment of all taxes, employee salaries, and other expenses. Most types of businesses have a consistent cash flow, subject to seasonal fluctuations at most. For a business owner, what matters is not just the profit in a specific time period, but the stability of generating profit. Trading in Forex, in its classical sense, does not align with stability, and therefore cannot be regarded as a serious business.

In the previous paragraph, we deliberately emphasized classical trading, referring to manual trading using widely described trading approaches such as technical or fundamental analysis. Such trading is somewhat utopian, as few have been able to turn it into a structured system for consistent and continuous earnings. If you want to consider Forex as a serious business, you need to create a clear, refined, and time-tested trading system out of such trading. Pay attention that we are now talking not only about a trading strategy but also about a mechanical trading system, an algorithm that generates stable profits. This algorithm doesn't necessarily have to be the "Holy Grail" - it simply needs to provide a stable income on the chosen trading instrument using selected trading signals, with a specific lot size and set stop-loss and take-profit levels.

If you don't have a well-designed and tested mechanical trading system, your trading will resemble a game of roulette regardless of how many books on stock trading you have studied. You are just a private trader, not a commercial or central bank. You are merely a passive participant in the market, which means that in order to get your piece of the pie, you need to approach Forex trading systematically. Of course, unless your goal is simply to enjoy the thrill of gambling.

So what is needed to develop your own mechanical system? What are its components and how are they interconnected? What knowledge in mathematics and programming is necessary for the mechanical trading system to work and generate profits in Forex? You will find answers to all these questions in the next chapter.

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