# Losing Traders



## ajoz (16 May 2007)

I came across this on another forum and found it quite good so I thought I'd share it here:

The following is a direct quote from TradeGuider.

During a recent TradeGuider seminar I talked about the reasons that
traders are constantly on the losing side of the market and I
highlighted some of the common traits I find when I talk to these
losing traders. Here I have listed those traits and I have an article
I read from, by a long standing TradeGuider customer Rakesh Kumar, who
I thank for allowing me to use his document. If you would like a copy
email me back and I will send it to you. I hope you enjoy reading it
and I wish you good trading and constant profits.

1. Losing traders do not have a trading plan.

2. Losing traders do different things on different days, and totally inconsistent.

3. Losing traders have no BELIEF in their chosen strategy.

4. Losing traders think and act like gamblers.

5. Losing traders are always searching for the holy grail of trading, but it doesn't exist.

6. Losing traders often use too many systems and too many indicators, so they never know what the chart is really telling them. Tom Williams, inventor of Volume Spread Analysis and a former syndicate trader says "The chart never lies, if you know how to read it correctly".

7. Losing traders are often under capitalized, taking large trades with poor risk/reward ratio and no money management skills.

8. Losing traders do not understand how markets work, often believing that price moves markets, but it dos not. The forces of supply and demand and the trading of "Smart Money" causes prices to move.

9. Losing traders get confused by slick sales and marketing of trading systems that claim to have a high percentage of accuracy, so end up trying many systems that almost always result is losses.

10. Losing traders ALWAYS follow the herd, and get locked in to bad trades.


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## steven1234 (19 May 2007)

If there were no losing traders there would be no sucessful traders!

We need bad traders so that we can buy their shares cheap and sell them our dogs...


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## ideaforlife (23 May 2007)

Steven1234 tells the truth in stock market!


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## BIG BWACULL (23 May 2007)

ideaforlife said:


> Steven1234 tells the truth in stock market!



But sometimes we sell our dogs and as soon as they leave our hands they become winners , so same goes for those that sell us their dogs that we think are cheap when we get them they become winners 
Its a dog eat dog world


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## tech/a (23 May 2007)

steven1234 said:


> If there were no losing traders there would be no sucessful traders!
> 
> We need bad traders so that we can buy their shares cheap and sell them our dogs...




A common misconception.


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## Kauri (23 May 2007)

There are Losing Traders because they insist on Trading Losers. Cut the losers loose early and concentrate on riding the winners all the way to the finishing post......


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## happytrader (24 May 2007)

Hi all, 

If you are ready, maybe you will find this very useful.

At a core or heart level most people actually believe there is something fundamentally wrong with them. These are conditioned beliefs from other flawed models. To reinforce this 'shame' it is all played out in words, actions and whom we associate with.

If I told you there is nothing wrong with you but rather your 'modis operandi,' you would either believe me, see the truth in it, forgive yourself and everybody else and move forward, or do your utmost to prove me wrong. Why? because there is a lot of loyalty involved in supporting who we believe ourselves to be. Not to mention the grief you may feel when you realise you actually believed the lie.

Cheers
Happytrader


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## noirua (24 May 2007)

"Losing Traders": Well I think this trader well and truly lost it.

http://www.youtube.com/watch?v=ALn0GBkM_5c&mode=related&search=


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## BIG BWACULL (24 May 2007)

noirua said:


> "Losing Traders": Well I think this trader well and truly lost it.
> 
> http://www.youtube.com/watch?v=ALn0GBkM_5c&mode=related&search=




LLLLOOOOOLLLLL HA HA HE HE


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## Nifty (24 May 2007)

tech/a said:


> A common misconception.




O.K. Genius, To quote Hanson;Please explain.


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## tech/a (24 May 2007)

Ok Before I do.



> "If there were no losing traders there would be no sucessful traders!"




This is the statement which I believe is a glaring misconception.
So before I do would someone like to expalin WHY this has to be TRUE.


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## Pommiegranite (24 May 2007)

tech/a said:


> Ok Before I do.
> 
> 
> 
> ...




If there were no losing traders, all traders would be successful.

Do I get a prize?


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## nrodman (24 May 2007)

Pommiegranite said:


> If there were no losing traders, all traders would be successful.
> 
> Do I get a prize?



Grammatically correct but missing the point. Stevens meaning although grammatically inccorrect,speaks about the essence of markets.


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## disarray (24 May 2007)

as wealth is created it is accumulated. unless you are at the source of wealth creation (central bank, commodity producer etc.) then you only have access to wealth that is already in circulation. to obtain this public wealth, someone else has to give you theirs, either by bartering for a good / service (an advantageous trade)  or by losing it through bad luck / management / stupidity (a disadvantageous trade).

so in the context of the stockmarket - the market is a finite public pool of wealth owned by entities, be it a corporation or an individual. to increase your share of this wealth someone elses share has to diminish. it can be said that those who increase their wealth are successful traders and those who decrease their wealth are unsuccessful traders. so traders who are successful do so, ultimately, at the expense of the unsuccessful. therefore if no one was losing, no one would be gaining.

over to you tech/a


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## happytrader (24 May 2007)

steven1234 said:


> If there were no losing traders there would be no sucessful traders!
> 
> We need bad traders so that we can buy their shares cheap and sell them our dogs...




I don't think this is true at all. Its good practice and also good for the soul to leave something on the table for someone else. Actually, I don't mind at all when I see someone making a profit out of a stock I've just sold. They've taken the risk and so they're welcome to the profit. Plenty for everyone.


Cheers
Happytrader


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## constable (24 May 2007)

disarray said:


> as wealth is created it is accumulated. unless you are at the source of wealth creation (central bank, commodity producer etc.) then you only have access to wealth that is already in circulation. to obtain this public wealth, someone else has to give you theirs, either by bartering for a good / service (an advantageous trade)  or by losing it through bad luck / management / stupidity (a disadvantageous trade).
> 
> so in the context of the stockmarket - the market is a finite public pool of wealth owned by entities, be it a corporation or an individual. to increase your share of this wealth someone elses share has to diminish. it can be said that those who increase their wealth are successful traders and those who decrease their wealth are unsuccessful traders. so traders who are successful do so, ultimately, at the expense of the unsuccessful. therefore if no one was losing, no one would be gaining.
> 
> over to you tech/a



Not so sure about the last comment eg if i buy a share at 5c and sell it for 9c to a person who then sits on it to 20c before selling again then obviously two people have gained without someone losing!


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## Chorlton (24 May 2007)

tech/a said:


> Ok Before I do.
> 
> 
> 
> ...




Tech/A,

Are you hinting at the principle of the "zero-sum" game??

If so, this may be of interest:

"A situation in which one participant's gains result only from another participant's equivalent losses. The net change in total wealth among participants is zero; the wealth is just shifted from one to another.  

Options and future contracts are examples of zero-sum games (excluding costs). For every person who gains on a contract, there is a counter-party who loses. Gambling is also an example of a zero-sum game. 

A stock market, however, is not a zero-sum game because wealth can be created in a stock market."  

(Above extract from Investopedia)


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## YELNATS (24 May 2007)

constable said:


> Not so sure about the last comment eg if i buy a share at 5c and sell it for 9c to a person who then sits on it to 20c before selling again then obviously two people have gained without someone losing!




It just depends on whether the 4-fold increase in share price accurately reflects an increase in the Real Value of the business concerned or whether it only relects an increase in the Perceived Value or Expected Future Value of the business. 

Any increase in Real Value will be evidenced by a commensurate objective increase in the productivity of the business, according to however productivity is measured in that particular industry.

An increase in share price solely based on an increase in Perceived Value, which is unsupported, within a timeframe recognised and accepted within that industry, by any increase in Real Value will in due course be followed by a commensuarte reduction in Perceived Value and hence, share price.


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## disarray (24 May 2007)

constable said:


> Not so sure about the last comment eg if i buy a share at 5c and sell it for 9c to a person who then sits on it to 20c before selling again then obviously two people have gained without someone losing!




a "loss" can be a less significant win though in this respect. if it takes 5 years to go from 9c to 20c while in that time the market doubled that, that counts as an overall loss because the capital could have been put to better use elsewhere.

accumulating wealth at a slower rate in a constantly expanding pool can still be considered a loss for the purposes of this discussion.


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## Pommiegranite (24 May 2007)

disarray said:


> a "loss" can be a less significant win though in this respect. if it takes 5 years to go from 9c to 20c while in that time the market doubled that, that counts as an overall loss because the capital could have been put to better use elsewhere.
> 
> accumulating wealth at a slower rate in a constantly expanding pool can still be considered a loss for the purposes of this discussion.




I disagree. Underperformance in comparison to a benchmark is not a loss. Instead it would be just classified as Underperformance.

However, in accouning terms, a loss is only realised when the stock is sold at less than purchase price. Your scenario is a appreciation of an asset.

In economic terms there would be an Opportunity Cost of not having put the money to better use.


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## constable (24 May 2007)

disarray said:


> a "loss" can be a less significant win though in this respect. if it takes 5 years to go from 9c to 20c while in that time the market doubled that, that counts as an overall loss because the capital could have been put to better use elsewhere.
> 
> accumulating wealth at a slower rate in a constantly expanding pool can still be considered a loss for the purposes of this discussion.




Yes a valid set of circumstances in regards to lost opp.. Question then Disaray, what is the definition of a "winning trader"? ie, what is the real criteria a "winning trader" has to meet?
Looking at it from this perspective and with a zero sum arguement in mind,  your arguement is in danger of significantly widening the parameters of a "losing trader" to the point where there are too many losing traders and therefore the zero sum game fails!!
Get your head round that!


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## constable (24 May 2007)

YELNATS said:


> It just depends on whether the 4-fold increase in share price accurately reflects an increase in the Real Value of the business concerned or whether it only relects an increase in the Perceived Value or Expected Future Value of the business.
> 
> Any increase in Real Value will be evidenced by a commensurate objective increase in the productivity of the business, according to however productivity is measured in that particular industry.
> 
> An increase in share price solely based on an increase in Perceived Value, which is unsupported, within a timeframe recognised and accepted within that industry, by any increase in Real Value will in due course be followed by a commensuarte reduction in Perceived Value and hence, share price.




 Yellnat great point about what has "actually" been gained in terms of the intrinsic value for the second owner of the share.


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## disarray (24 May 2007)

the point being argued is -

"if there are no losing traders there can be no winners"

capital is finite. you are trying to accumulate more from a limited pool. if the world is worth $100 and 5 people are all trying to get a piece, then we each get $20. if i want $21, someone else has to have $19 (or everyone else have $19.75). 

now the world economy (gdp) is worth about $65 trillion. the world population is 6.5 billion. so everyone in the world can have $10,000. for us to have a per capita GDP of $30,000 means 2 other equal amounts of people have nothing. or a whole bunch more have less than $10,000 spread out amongst them.

the whole point of us being traders is to profit from interactions of the global supply / demand cycle. we skirt the edges of the worlds commerce nibbling bits and pieces out of the pool of humanitys wealth. the whole reason this wealth exists (and has existed since the first people swapped a fish for some beads) is to satisfy needs and desires.

if the resources required to satisfy all these needs and desires are finite, then we must compete to access our share. this is the driving force of nature on this planet. for a species to thrive another competing species must die. to thrive we must acquire more. to acquire more of the finite pool we must deprive another of their share.

so for me to win, someone else must lose (pedantics about definitions of "win" and "lose" aside).

then we can go into evolution (growing as a trader, developing better systems etc.) and devolution (people getting caned on T2 and never entering the market again), conflict (trade wars) and the whole range of stuff that makes us people and is reflected in the market (greed, fear etc.). but thats another essay


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## tech/a (24 May 2007)

> A stock market, however, is not a zero-sum game because wealth can be created in a stock market."




The Misconception is that if there is a winner there must be losers.

If that is the case then the ASX wouldnt look like this.(see Chart)!

Remember the majority of trading is carried out by institutions often retail buyers and sellers sell into institutional buy and sell levels.These buy and sell levels can be when stock is rising (Selling) or Falling (Buying).
Sure there will be losers,but there doesnt have to be a loser for every winner.

Mind you there are more losers than winners and I believe that those who are winners are generally very big winners.
The point being missed is there are outside scources of funds being injected all the time.
Superfunds,and Managed funds etc.


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## yonnie (26 May 2007)

yep tech,  

for every winner there is a loser would only be in a situation where you have a pool of the same traders and then only in the long run.

just like tossing a coin and counting the heads and tails coming up......in the end it will be 50/50


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## biff (27 May 2007)

yonnie said:


> just like tossing a coin and counting the heads and tails coming up......in the end it will be 50/50



not quite correct, very rarely a coin will land perfectly balanced on its edge.
Also a common misconception is that if the odds of either a heads or tails on a single coin toss are 50/50 then statistically in the long run  over a number of coin tosses heads and tails will come up an even amount of times. This is incorrect, try it.


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## yonnie (27 May 2007)

did you try it a million times biff?

never mind, already get tired by the thought of it


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## wayneL (27 May 2007)

biff said:


> not quite correct, very rarely a coin will land perfectly balanced on its edge.
> Also a common misconception is that if the odds of either a heads or tails on a single coin toss are 50/50 then statistically in the long run  over a number of coin tosses heads and tails will come up an even amount of times. This is incorrect, try it.





yonnie said:


> did you try it a million times biff?
> 
> never mind, already get tired by the thought of it



The law of large numbers


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