Why Do More Than 90% of Traders Lose?

[Tams 20]

What is wrong with having 90% of Traders Lose?

 

I ain't complaining...

[MightyMouse 12]

  Tams said:

What is wrong with having 90% of Traders Lose?

 

I ain't complaining...

 

 

Ha ha ha

 

It is a shame that so many have to lose to make so little.

[Tams 20]

  MightyMouse said:

Ha ha ha

 

It is a shame that so many have to lose to make so little.

 

this is life...

 

no different from the medical school, law school, engineering school... etc.

 

most of the people who wanted to become a doctor, do not make it.

most of the people who made it to be a lawyer, do not make enough money to be proud.

most of the engineers, do not work in the engineering field.

 

the only difference between a trader and the other "professions" is...

 

the barrier to entry is low... any Tom, Dick, and Harry who has a few hundred dollars can open an account and pretend to be a get-rich-quick trader.

 

the hard reality is, most of the wannabees are under funded, under prepared, under psych'ed... and over hyped.

If you ask anyone with their state of preparation to be a doctor/lawyer/engineer, they will fail too.

 

The wannabees failed, not because they are stupid, but because they are naive.

 

There is no medicine for stupidity,

the medicine for naivety is the school of hard knocks.

[HARDMAN_GAZ 10]

  TRADEZILLA said:

John,

I think what you're describing is a realization and not necessarily an edge. An edge has to put the odds in your favor everytime you take a risk. Knowing that price moves the same everyday does not in itself increase your odds of trading in the right direction or not getting stopped out. I don't think price moves the same every day because markets have different types of days, trend/bracket/congestion and etc.. In addition, mixed in there is a lot of random behavior.. It is possible but certainly difficult because the slight edge that is available is almost always very well hidden..

TZ

 

 

I would hazard a guess that your decision is based on chart information only, would i be correct?

 

I can't really go into detail without knowing what your answer is.

[TRADEZILLA 10]

  johnw said:

Hi TZ,

 

Yes, I am describing a realisation and yes it flows directly into an 'edge' that exists each and every day.

You appear to me to be thinking of the overall behaviour of the day when you write 'trend/bracket/congestion and etc..'

 

I have no interest in this behaviour until the day becomes yesterday, in which case it may have some influence on how today trades out....

 

Primarily I am only interested in each Price Wave and that is what I trade.

Some days present more trade-able PWs to me than others, but on days that present fewer PWs, they tend to be longer in duration.

 

TZ, please consider me as a simple person who tries to relax into simplicity each day

by seeing the simplicity in the things I do.

 

This attitude neither makes me right now wrong ... it just keeps me simple.

 

John,

I don't question the edge of your method. I've seen so many different methods work that I know there are many ways to do this. I know this trader that trades off elliot wave only with a line on close chart only and does incredibly well. I can't see what he sees but his results validates his method. I know another guy who reads price only with nothing else and his results validates his method. Here's the clencher, I've even seen a consistently profitable scalper that almost never has a losing day trading. He feels his method is so simple and yet I feel my method is simpler, but he disagrees. I feel a bit uncomfortable placing trades off their methods and they feel a bit uncomfortable placing trades off my method but they all work.. so I don't question anybody's edge.. I was only suggesting that a realization does not translate to edge but obviously you have your method that is wave based where market conditions have less impact..

TZ

[TRADEZILLA 10]

  HARDMAN_GAZ said:

I would hazard a guess that your decision is based on chart information only, would i be correct?

 

I can't really go into detail without knowing what your answer is.

 

Y, mine is chart based only.

[HARDMAN_GAZ 10]

  TRADEZILLA said:

Y, mine is chart based only.

 

 

So let me get this right, all of your opinion is based on charts only, you've never been involved in the markets in any other way?

[TRADEZILLA 10]

  HARDMAN_GAZ said:

So let me get this right, all of your opinion is based on charts only, you've never been involved in the markets in any other way?

 

Y, all my trade decisions are based only on charts.

[johnw 10]

  TRADEZILLA said:

John,

I don't question the edge of your method. I've seen so many different methods work that I know there are many ways to do this. I know this trader that trades off elliot wave only with a line on close chart only and does incredibly well. I can't see what he sees but his results validates his method. I know another guy who reads price only with nothing else and his results validates his method. Here's the clencher, I've even seen a consistently profitable scalper that almost never has a losing day trading. He feels his method is so simple and yet I feel my method is simpler, but he disagrees. I feel a bit uncomfortable placing trades off their methods and they feel a bit uncomfortable placing trades off my method but they all work.. so I don't question anybody's edge.. I was only suggesting that a realization does not translate to edge but obviously you have your method that is wave based where market conditions have less impact..

TZ

 

Interesting response TZ.

Although there are several methods (techniques) of trading say the ES, essentially they amount to the same thing.

....Buy as price is about to rise and sell as price is about to fall....

 

When we accept this premise, then the challenge becomes a philosophical one, not a mathematical one as a heck of a lot of people seem think.

I say this because of the nature of the questions that People ask here on ET many of which end up in spirited debates... very sadly it is like watching the tail wag the donkey.

 

My belief, which I have stated before on ET, is that Retail trading is 80% physiological, 18% market knowledge and 2% mathematics.

 

The first two (physiology and knowledge) should be rolled together and it is from here that we determine our philosophy from which we will trade ..... everything we learn about The Market and about Our-self must be tested for delusion .... either we are correct about Our-self and about the Market or we are wallowing in delusion and we must try again, going back to square one until we succeed.

 

As a result of this exercise, the actual mechanics of how we trade will become self evident and are by and large tailored to The Traders style.

 

But the outcome is the same.

 

Numbers like 90%+ failure rate and 10,000 hours screen time have no meaning since we are one single person and we will develop at our own pace.

Edited December 5, 2011 by johnw

[TimRacette 11]

  TRADEZILLA said:

Any edge that can be found will be slight, but its the trust in this slight edge that will do wonders for your results.

 

Look how many millions and millions of dollars the casinos take in each year.The Blackjack tables in Vegas give the house a 51% Edge, to scale, 1% is massive.

 

On a more personal level, pull up a compounding interest calculator and throw in 8% over 30 years, change it to 9%, 10% etc. see how just 1 percent can make a huge difference. I think most traders lose because they aren't able to capitalize on there edge to scale or with any size.

 

The more $ you manage the smaller % you need to make to keep increasing your bottom line. What % would a new trader have to make to bring in 50k a year on a 10k account, 50k account, or even 100k account. As the years go by in my trading I've come to realize it's simply a #s game, well a mental game of #s

 

Enjoy the day,

Tim

[TRADEZILLA 10]

  TimRacette said:

Look how many millions and millions of dollars the casinos take in each year.The Blackjack tables in Vegas give the house a 51% Edge, to scale, 1% is massive.

 

On a more personal level, pull up a compounding interest calculator and throw in 8% over 30 years, change it to 9%, 10% etc. see how just 1 percent can make a huge difference. I think most traders lose because they aren't able to capitalize on there edge to scale or with any size.

 

The more $ you manage the smaller % you need to make to keep increasing your bottom line. What % would a new trader have to make to bring in 50k a year on a 10k account, 50k account, or even 100k account. As the years go by in my trading I've come to realize it's simply a #s game, well a mental game of #s

 

Enjoy the day,

Tim

 

Its because the edge is so small that discipline is so important and so difficult. Often your edge will be in doubt because its so small. However, if it is real and you trust it, you will be the casino.

[TRADEZILLA 10]

  johnw said:

Interesting response TZ.

Although there are several methods (techniques) of trading say the ES, essentially they amount to the same thing.

....Buy as price is about to rise and sell as price is about to fall....

 

When we accept this premise, then the challenge becomes a philosophical one, not a mathematical one as a heck of a lot of people seem think.

I say this because of the nature of the questions that People ask here on ET many of which end up in spirited debates... very sadly it is like watching the tail wag the donkey.

 

My belief, which I have stated before on ET, is that Retail trading is 80% physiological, 18% market knowledge and 2% mathematics.

 

The first two (physiology and knowledge) should be rolled together and it is from here that we determine our philosophy from which we will trade ..... everything we learn about The Market and about Our-self must be tested for delusion .... either we are correct about Our-self and about the Market or we are wallowing in delusion and we must try again, going back to square one until we succeed.

 

As a result of this exercise, the actual mechanics of how we trade will become self evident and are by and large tailored to The Traders style.

 

But the outcome is the same.

 

Numbers like 90%+ failure rate and 10,000 hours screen time have no meaning since we are one single person and we will develop at our own pace.

 

I believe the physiology/psychology has to be put into context with the way we're supposed to trade with our method. Ultimately, our method needs to have a mathematical edge.

[phantom 16]

  steve46 said:

The answer sir or madam, is that retail (amateur) traders lack education, aptitude, skills, experience and are usually under capitalized....

 

Just because one is a "retail" trader doesn't necessarily make one an "amateur." I will assume that by your statement you worked (at some point) for a firm trading other people's money? Are you trying to say that this makes you a pro?

 

Hardly.

[onesmith 10]

He (steve46) is a vendor that sells 4 of the 5 items he mentioned. It's spam. I have him on ignore.

 

  phantom said:

Just because one is a "retail" trader doesn't necessarily make one an "amateur." I will assume that by your statement you worked (at some point) for a firm trading other people's money? Are you trying to say that this makes you a pro?

 

Hardly.

[khamore1 10]

We are receiving and acting upon the wrong information, from the CME, from our Brokers; from fake gurus they all have different interest than us

[neutral 10]

Thanks for the question!

 

but even if this figure is somewhat exact, i will never know all the reasons.

 

Speaking for myself, these are roughly the area's that I am refining to improve:

a=niche (pertinent monitors)

b=planning and appetite/risk control

c=segment and value eminent market potential

d=position launch timing and pertinent initial protection

e=secure market advances with tactical trails

 

c is the creative part. The challenge is to think of systematic and economic ways to better segment what is good potential and what isnt. I believe c is to be regarded the soul of any of my approaches.

 

Peace

Edited December 28, 2011 by neutral

[TheDude 10]

i think a lot of it has to do with expectations and risk. lets look at the retail trader (80-90% failure rate) vs the 'pro' managing someone elses money (i reckon about 40-50% failure rate, which is one point - less stress, the failing pro just goes back to the middle/back office as a risk manager):

 

the trading done by a 'retail' trader is that we tend to try and make money from calling market direction and hopefully managing the probabilities accordingly. It can be done, but first the focus has to be on managing probabilities rather than 'predicting' direction. to succeed you need to have a professional attitude and incredible flexibility.

 

trading done by 'pros' however is a different kettle of fish. they are mostly market neutral strategies, looking to exploit long or short term price anomalies between 2 component such as cash v futures, futures v otc, synthetic positions, etc. cta's are the exception to this - they are essentially trend followers, but they dont use technical analysis as their mainstay. they will use it as a factor, but mostly use market sentiment (implied vols), economic figures, open interest, CoT reports etc. the typical retail trader cant trade the size or afford the infrastructure needed to trade this way.

 

expectation is another part of the equation. where as a retail trader is looking to earn a good living from a 50k account (eg), the pro will be happy with 25% return on the millions/billions the institutions have invested with him.

 

so to compare a retail trader against a pro isnt really fair as its a totally different business model, and a lot, lot tougher as the returns have to be much, much higher, and the only way to get those comparatively massive returns on capital v the pro requires much, much, much more risk.

 

with so much risk being taken, is it any wonder the retail traders life expectancy is so much lower to the pros? basically, in comparison, were playing russian roulette, or, as the pros like to say ' betting on red or black' for a directional trade.

 

i dont really think there is much that can be done to increase the life expectancy of retail traders, except not putting a dime in the market until you can show yourself several months of consistency in sim. even then the whole game changes when real money is on the line - so feel free to disagree with me. one thing is for sure - if you cant make it in sim, you aint got a cat in hells chance in a live market.

 

it can be done though - but most wont have the determination to make it happen. if youre doing it for the money, not the love, again you havnt got a chance.

Edited December 28, 2011 by TheDude

[johnw 10]

  TRADEZILLA said:

I believe the physiology/psychology has to be put into context with the way we're supposed to trade with our method. Ultimately, our method needs to have a mathematical edge.

 

Hi TZ,

 

Yes, of course a trading method needs a mathematical edge ...that is like saying a car needs gas in the tank before ir will run.

Identifying an 'edge' is not difficult, but applying it consistently is another story entirely.

 

That is why I say that a Trader must free him/herself of all self delusion first, before charging into the market ...that is 'the context' that you are talking about.

 

It is the same in any applied field.

Observe how the Navy trains Seals, the Air Force trains Combat Pilots, Senseis train Martial Artists ... first they remove any sense of Self Delusion and then and only then they apply the training.

 

If you want to see Self Delusion in action and the mess that it creates on a grand scale, just take a look a Politics and the current crop of Politicians.

[zupcon 10]

  johnw said:

Identifying an 'edge' is not difficult.

 

I'd probably argue that most people find it extremely difficult to identify an edge. There's no shortage of people attempting to develop mechanical strategies, and by and large they fail.

 

The other issue of course is that on the very few occassions that someone reveals information that might help them identify an edge, they tend to completely ignore it.

 

At a push I might even go as far as to argue that an experienced trader is able to trade without an edge

[wrbtrader 10]

There are various (numerous) different types of "edges" for a trader and they don't all involve math, formulas, mechanical systems, automation trading, indicators, patterns and so on along that line.

 

Thus, if a trader is profitable without one of the above, that trader obviously has an edge that has nothing to do with the above. For example, if someone is a discretionary trader and is very discipline in following his/her trading plan...resulting in consistent profits. That discipline is an edge although not the only edge in comparison to that same trader trading without discipline that results in consistent losses. Simply, if a trader can prove that he/she is profitable with "something" while not profitable without that same "something"...trading with that "something" is an edge.

 

Therefore, all profitable traders have an edge and such becomes more apparent as each year goes by. Yet, that edge just may not be "something" you're able to recognize or you may not think its not important whereas in contrast its extremely important to the other trader. Simply, most profitable traders have other "edges" (plural) that are independent of their trade method but works well with the trade method.

[MightyMouse 12]

  zupcon said:

I'd probably argue that most people find it extremely difficult to identify an edge. There's no shortage of people attempting to develop mechanical strategies, and by and large they fail.

 

The other issue of course is that on the very few occassions that someone reveals information that might help them identify an edge, they tend to completely ignore it.

 

At a push I might even go as far as to argue that an experienced trader is able to trade without an edge

 

You guys should define what an edge is before you decide if it is easy or hard to find. It could very well be that traders fail because they do not know what they are looking for and end up make donations all day long.

[bobcollett 10]

  zupcon said:

I'd probably argue that most people find it extremely difficult to identify an edge. There's no shortage of people attempting to develop mechanical strategies, and by and large they fail.

 

The other issue of course is that on the very few occassions that someone reveals information that might help them identify an edge, they tend to completely ignore it.

 

At a push I might even go as far as to argue that an experienced trader is able to trade without an edge

 

Hi zupcon

An experinced traders edge is his experience

Kind regards

bobc

[johnw 10]

[quote name=wrbtrader;135031

 

Therefore' date=' all profitable traders have an edge ................................

 

Yes, of course ... that is my point entirely .... if we take care of the important things first, the 'edge' drops into place.

What shape it takes is can only be relevant to the Individual Consistently Profitable Trader and quite frankly I don't imagine he/she really cares since they are beyond that point.

 

The 'edge' however does matter to People who are still struggling ... and I don't say this in an unkindly manner.

[RealDemo 10]

  Quote

"The ads made me think, 'This is easy,'"Dorothy Ouma single mother

 

"Two things are infinite: the universe and human stupidity" Albert Einstein.

 

It seems unfashionable these days to describe someone as stupid for fear of being seen as uncaring, insensitive, or heaven forbid honest.

 

.....but really.... come on..... let's start being more honest with one another.

 

If your blaming adverts you really are a dumbass.

 

[ame=

]http://www.youtube.com/watch?v=8rh6qqsmxNs[/ame] Edited December 29, 2011 by RealDemo

[peterjerome 10]

  zupcon said:

...

At a push I might even go as far as to argue that an experienced trader is able to trade without an edge

 

zupcon,

no edge...like a coin flip...50/50?

need high win-probability, greater than 3-1...

good reward / risk analysis solves that issue...

PnF charts are excellent for R/R analysis...

i guess i agree with you zupcon....(well said)

 

however...i'll still look for those little 'nuances' that give me a leg up.

 

peter.