# 95%/5%



## wayneL

Ok I've noticed a few folks starting to preach this 95/5 business here on the forum. So here are a couple of musings/questions:

* Do the people preaching 95/5, presume themselves to be in the 5%? If so, how do they quantify this? By what measure do we separate the 5% "elite" from the 95% of presumably losers?

* I there a fractal at work? Of the 5%, is there a further separation of 95/5? What does that say about the 95% of the 5%? Does this continue up a fractal scale?

* Transversely, is there a 95/5 fractal thing going on with the first 95%, (and so on) or are all the 95% just ####ing plebs?

* Is the 95/5 principle in danger of becoming a cliche'?

* Should we just let go of comparisons as Lao Tzu suggested all those years ago?


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## tech/a

Why would anyone bother answering such cynasism.

Your standing by with a double barrelled shot gun ready to blow heads off.

Your taking an "A" typical plebian view of standing fully cocked armed with the "Us Vs Them" rehetoric.

5% of the 95% no doubt will be plebians.
As will 5% of the 5%.

I guess we both have views on where we both fit then!


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## wayneL

tech/a said:


> Why would anyone bother answering such cynasism.
> 
> Your standing by with a double barrelled shot gun ready to blow heads off.
> 
> Your taking an "A" typical plebian view of standing fully cocked armed with the "Us Vs Them" rehetoric.
> 
> 5% of the 95% no doubt will be plebians.
> As will 5% of the 5%.
> 
> I guess we both have views on where we both fit then!




Cynical? Moi? Surely you jest?

I do however appreciate good spelling, and am amused when folks leap to delusions. 

Us verses them? How do you know whether I consider myself us or them? The attitude of fools. Who is us and who is them? I consider us all us, hence my questions.

A philosophical undertaking.

Cheers

PS - Nice bite


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## 2020hindsight

well for 95% of last year I was doing just fantastic - does that help my rank?

(let's not talk about the other 5% )


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## wayneL

Good reading:




Some folks are offended by Alain's proposition however. _Que sera, sera_.


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## barney

wayneL said:


> Ok I've noticed a few folks starting to preach this 95/5 business here on the forum. So here are a couple of musings/questions:
> 
> * Do the people preaching 95/5, presume themselves to be in the 5%? If so, how do they quantify this? By what measure do we separate the 5% "elite" from the 95% of presumably losers?
> 
> * I there a fractal at work? Of the 5%, is there a further separation of 95/5? What does that say about the 95% of the 5%? Does this continue up a fractal scale?
> 
> * Transversely, is there a 95/5 fractal thing going on with the first 95%, (and so on) or are all the 95% just ####ing plebs?
> 
> * Is the 95/5 principle in danger of becoming a cliche'?
> 
> * Should we just let go of comparisons as Lao Tzu suggested all those years ago?




Hi Wayne, Hope that crook back is a bit better ................. I am definitely one of the 95% plebs :bonk:  ........... and no I'm not happy about ..... but if people like me weren't giving all the 5 percenters someone to take money off, there would be no market  ............. I have no malice towards the 5 percenters, cause in a few years I want to be one :taz:  ................ "Fractally" speaking I think I'd be in the  95%/95% bracket, but I also have a lot more room for improvement than many, so its not all bad news :grinsking  (Gotta love smileys !!)


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## pepperoni

Is this like the 20% of effort yields 80% of results. that one is right.

If its some sort of success/failure ratio id say its 98/2 tops ie 2% have net worth over 2m, 2% have income over 200k etc ... 5% would be a gross overstatement.

The other 98% do nothing, or do ill informed things that distort markets for most, and make profit opportunities for few (very few).


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## wayneL

barney said:


> Hi Wayne, Hope that crook back is a bit better ................. I am definitely one of the 95% plebs :bonk:  ........... and no I'm not happy about ..... but if people like me weren't giving all the 5 percenters someone to take money off, there would be no market  ............. I have no malice towards the 5 percenters, cause in a few years I want to be one :taz:  ................ "Fractally" speaking I think I'd be in the  95%/95% bracket, but I also have a lot more room for improvement than many, so its not all bad news :grinsking  (Gotta love smileys !!)



I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.

An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):

_Thus, that which is seen as beautiful
is beautiful compared with that
which is seen as lacking beauty;
an action considered skilled
is so considered in comparison
with another, which seems unskilled.

That which a person knows he has
is known to him by that which he does not have,
and that which he considers difficult
seems so because of that which he can do with ease.
One thing seems long by comparison with that
which is, comparatively, short.
One thing is high because another thing is low;
only when sound ceases is quietness known,
and that which leads
is seen to lead only by being followed.
In comparison, the sage,
in harmony with the Tao,
needs no comparisons,
and when he makes them, knows
that comparisons are judgements,
and just as relative to he who makes them,
and to the situation,
as they are to that on which
the judgement has been made.

Through his experience,
the sage becomes aware that all things change,
and that he who seems to lead,
might also, in another situation, follow.
So he does nothing; he neither leads nor follows.
That which he does is neither big nor small;
without intent, it is neither difficult,
nor easy. His task completed, he then lets go of it;
seeking no credit, he cannot be discredited.
Thus, his teaching lasts for ever,
and he is held in high esteem._


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## prawn_86

Not too sure about the whole 95/5% thing, i would be interested to see some research? Actual empirical evidence.

One thing that is becoming more known and accepted is the fact that the Pareto principle (80/20 rule) is beginning to be shown to not apply in anywhere near the number of cases once thought. 

Figures like this just seem a bit 'gimmicky' for my liking, and while i understand what they are trying to say, it is a bit too much "self-help/The Secret" style for my liking.

Perhaps these sort of theories are good for 95% of people and 5% can see above/through them


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## Timmy

I am just trying to work out what you mean by 'transversely'.  Is that something to do with Dracula?


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## r m

wayneL said:


> Cynical? Moi? Surely you jest?
> 
> I do however appreciate good spelling, and am amused when folks leap to delusions.
> 
> Us *verses* them? How do you know whether I consider myself us or them? The attitude of fools. Who is us and who is them? I consider us all us, hence my questions.
> 
> A philosophical undertaking.
> 
> Cheers
> 
> PS - Nice bite




If you are going to comment on spelling errors it is best to make sure you don't make any of your own.  Verses?  Are you going to sing for us?  Or Versus.

Anyway, what is it with all this philosophy?  Pedantry is where it is at.


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## wayneL

Timmy said:


> I am just trying to work out what you mean by 'transversely'.  Is that something to do with Dracula?



It's a word often used by amateur philosophers. :

It means a concept which lies across the original concept, integral to it but at a different angle. :


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## wayneL

r m said:


> If you are going to comment on spelling errors it is best to make sure you don't make any of your own.  Verses?  Are you going to sing for us?  Or Versus.
> 
> Anyway, what is it with all this philosophy?  *Pedantry is where it is at*.



LOL

Ah yes, a concept dear to my heart. It is true, I fall well short of my ideals... particularly with spelling.


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## r m

wayneL said:


> I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.
> 
> An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):
> 
> ...
> Through his experience,
> the sage becomes aware that all things *change*,
> and that he who seems to lead,
> might also, in another situation, follow.
> So he does nothing; he neither leads nor follows.
> That which he does is neither big nor small;
> without intent, it is neither difficult,
> nor easy. His task completed, he then lets go of it;
> seeking no credit, he cannot be discredited.
> Thus, his teaching lasts for ever,
> and he is held in high esteem.[/I]




Are we back to US politics?  Obama is always banging on about change and leadership.  Is he the sage?  The sage on the stage, ready for a new age.  How will I know?  He appears to be doing neither nothing or something, so he could be.


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## lesm

Below is an article from an anonymous trader that has appeared in a few different fora, where this type of discussion has been held.



> "From Successful Anonymous Trader:
> 
> You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You're lost in the woods, so to speak. I was there for many years. What did I do? This may help a lot of you:
> 
> I threw out 99% of all the crap I learned about oscillators, divergences, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, Fractals, RSI, stochastics, overbought/oversold (this is a good one--the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look at what they did. Needless to say, I don't pay any attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to simple chart patterns, (a simple moving average and trendline now and then for a visual aid.)
> 
> I came up with a low risk money management plan and put it together with trading with the trend and, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a new way to trade. I am sick and tired of that after 7-years.
> 
> I believe at becoming an expert at one stock or market and its behavior and then putting all your skills and energy to work in a concen(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you'll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.
> 
> One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better and more profitable trades.
> 
> My attitude is changing now to one or two good trades, and that is all I need to make my week ( a triple or a home run, so to speak). There are plenty of them during any given week.
> 
> Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One thing that you can hang your hat on will last you a lifetime. Trading is simple. Remember that it's the Execution or Implementation of your trading plan that is the bigger challenge.
> 
> Most people make finding the method a big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the plain piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.
> 
> I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say...they will tell you everything. You need to listen and get to know them. It can be that simple. "


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## barney

wayneL said:


> I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.
> 
> An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):
> 
> _Thus, that which is seen as beautiful
> is beautiful compared with that
> which is seen as lacking beauty;
> an action considered skilled
> is so considered in comparison
> with another, which seems unskilled.
> 
> That which a person knows he has
> is known to him by that which he does not have,
> and that which he considers difficult
> seems so because of that which he can do with ease.
> One thing seems long by comparison with that
> which is, comparatively, short.
> One thing is high because another thing is low;
> only when sound ceases is quietness known,
> and that which leads
> is seen to lead only by being followed.
> In comparison, the sage,
> in harmony with the Tao,
> needs no comparisons,
> and when he makes them, knows
> that comparisons are judgements,
> and just as relative to he who makes them,
> and to the situation,
> as they are to that on which
> the judgement has been made.
> 
> Through his experience,
> the sage becomes aware that all things change,
> and that he who seems to lead,
> might also, in another situation, follow.
> So he does nothing; he neither leads nor follows.
> That which he does is neither big nor small;
> without intent, it is neither difficult,
> nor easy. His task completed, he then lets go of it;
> seeking no credit, he cannot be discredited.
> Thus, his teaching lasts for ever,
> and he is held in high esteem._




Awareness of the equilibrium between the mind and body equals spiritual freedom/enlightenment perhaps ........... the perfect state of existence?? .........  Humility with substance !

You are getting into some deep stuff Wayne …………. You’re not taking those funny painkillers again are you ….


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## wayneL

r m said:


> Are we back to US politics?  Obama is always banging on about change and leadership.  Is he the sage?  The sage on the stage, ready for a new age.  How will I know?  He appears to be doing neither nothing or something, so he could be.



I guess all he needs now is a cloaky thing and a turban... hang on a minute! He's got those already!

:bowdown:

LOL


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## chops_a_must

wayneL said:


> A philosophical undertaking.




I was going to blog this topic... thanks Wayne.  : 

But... by definition and inference, didn't the 5% ride Enron into bankruptcy?

And haven't the 5% been buying these financials right from the top?

How can you make money if the 95% of people aren't going in your direction after you get in? Or is it just the 5% that realise that they need the 95%?

Might be a case of measuring the incalculable...


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## lesm

Another on Day Trading.



> Do Day Traders Make Money? (Part 1)
> by Unknown Author
> 
> There have been a number of studies of day traders at specific firms that have attempted to answer the question of whether day traders make money. However, for several reasons, there is no definitive answer to the question. An initial problem is defining the term "day trader" and determining exactly how many day traders there are. Additionally most day traders do not publicly disclose their results. But we can piece together the various sources of information and come to some general conclusions.
> 
> Day traders were described in the preliminary prospectus for All-Tech (filed in 1998) as those who engage in the buying and selling of securities many times during the course of a day based on short-term price volatility. They typically close out open positions by the end of trading day in order to manage risk when the markets are closed. Positions are sometimes closed within minutes of the initial purchase or sale. Recent estimates of the number of dedicated "day traders" (that operate at day trading firms) are in the 5,000 range. Others estimate that there may be another 250,000 people that use some kind of software or dedicated systems to trade full time from home. These people should be differentiated from the more than 5 million people that have online accounts and that might occasionally place one or more day trades.
> 
> There have been many studies that have concluded that most day traders lose money, but there have also been studies that documented successful trading by day traders. The data currently available seems to imply the following results.
> The majority of new day traders probably do lose money.
> At some firms a very high percentage of day traders lose money.
> However, there is some evidence that a majority of (surviving) day traders at some firms are profitable and many traders generate tremendous returns on their money.
> Industry commentators also suggest that day-traders using software at home are much less successful than those trading at professional day trading firms. (See The Net Effect Of Day Trading from Inter@ctive Week (11/23/98))
> 
> Many investment industry veterans have suggested that day trading is a fad or and/or argue that it is based on faulty numbers. There have also been a number of studies and press articles that have concluded that the vast majority of day traders lose money. But some of these same people might be surprised to learn that there are also some legitimate studies suggesting that day traders do in fact make money buying and selling stocks intra-day.
> 
> Supporters of day trading can refer to a study that was published in the March/April 1998 edition of the respected Journal of Financial Economics. In "The Trading Profits of SOES Bandits" ( Abstract), Jeffrey H. Harris and Paul H. Schultz studied several weeks worth of data from two day trading firms and did indeed find evidence that the traders made money at the expense of market makers.
> 
> SOES bandits was the term used to describe individual investors who use Nasdaq’s Small Order Execution System (SOES) for day trading. 1000 shares was the maximum size allowed in SOES at the time of the study but SOES trading rules have changed since 1996, removing some of the day traders' advantages. Harris and Schultz studied data from two different firms and found that in aggregate, traders at both firms made money after commissions for the several weeks studied.
> 
> Harris and Schultz discussed the fact that SOES bandits were able to trade profitably with market makers even though they have less information. They suggest that because bandits keep the profits and bear the losses from their trades they have greater incentives to trade than the employees of market-making firms. The Bandits typically closed positions by placing limit orders through Instinet or SelectNet (a system that allows bids and offers to be sent electronically to all market makers in a stock). The principal advantage of SelectNet and Instinet to SOES bandits is that they allow trades within the Bid/Ask Spread.
> 
> Its important to note that theoretically, there is a simple reason why it is possible for market makers and traders to make money buying and selling stocks. In fact, many professionals (market makers and professional traders) consistently make money doing just that. See The Bid/Ask Spread and Market Makers for more on this topic.
> 
> The authors found that "SOES bandits make money only if they can close out positions within the spread through SelectNet or Instinet. Bandits who both initiate and close positions through SOES usually lose money." Interestingly, they found that trading profits declined when the holding period exceeded one minute and twenty seconds. Bandits lost money in positions held for more than five minutes.
> 
> This topic is also discussed in Saints or sinners? from CNNfn (9/1/99). According to the article "Finance professors are, in fact, divided about the viability of day trading" and Professor Schultz suggests it's a game best left to young people with good memories because the fast pace of trading.
> 
> On the other hand there have been a number of studies and investigations with less encouraging results. The most frequently cited is a study by Ronald L. Johnson for the NASAA. Johnson concluded in An Analysis of Public Day Trading at a Retail Day Trading Firm - Report of the Day Trading Project Group Findings and Recommendations (8/9/99) that the majority of traders studied lost money and the vast majority of traders ran the risk of losing their entire stakes.
> 
> In an administrative complaint filed last year against a now-defunct day-trading firm, Massachusetts securities regulators alleged that only one of the branch's 68 accounts made money. According to an article in the NYTimes (Do Diligence (RR) (8/1/99)) day trading has exceptionally high "washout rates" and "regulators who have examined the books of day-trading firms say that more than 9 out of 10 traders wind up losing money. Because most of these people disappear quietly when their cash runs out, few who replace them in the trading rooms know about them or their failures."
> 
> Gretchen Morgenson from the NY Times also discusses the topic with Harvey Houtkin in 2 Brokerage Firms Well Known in Frenzied Day-Trading World (RR) (7/30/99). Morgenson spotted the following statement on the All-Tech web site: "Electronic Day Trading attracts people dead-ended or unhappy in their current field of endeavor and people with a desire to make trading their life's work." According to Master of a New Universe from The Washington Post (5/16/99), Mr. Houtkin estimated that one in three people survive to become full-time day traders while one of All-Tech's regional managers estimated the figure to be more like one in ten.


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## Bill M

I don't like this 95%/5% statement much at all because it doesn't represent the true facts.

In 2006 there were only 38% of all Australians *directly *invested in the sharemarket.

That means 62% didn't have a clue nor really cared or invested in the stockmarket.

Back to the 38%, there would probably be 95% long term investors and 5% successful professional traders.

So out of the whole population your are looking at about 1 to 2% who are successful professional traders.

Considering my favourite hero is Warren Buffett, I will stick with my long term investments in the stockmarket. That puts me in the 36% bracket of sharemarket investing.


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## lesm

Second part - too long for a single post



> Do Day Traders Make Money? (Part 2)
> by Unknown Author
> 
> In Day trading is a quick road to financial ruin (5/5/99), Humberto Cruz of the Sun Sentinel cites Laura Walsh, a certified financial planner who said she prepared 40 tax returns the prior year for investors doing online trading, and not one made a profit. According to Walsh none of the traders had any idea about the concept of the spread.
> 
> A study by Houston-based Momentum Securities Management Co. came to mixed conclusions. The study has not been released to the public but was described in several articles including a comprehensive article in the LATimes by Walter Hamilton, one of the most knowledgeable reporters on the topic. See Study Finds Beginning Day Traders Lose Money and Study Shows Many Day Traders Are Landing in the Loss Column (via SOES.com). The study of 107 traders for several months at six of Momentum's Texas offices found that 6 of 10 newcomers and more than one-third of experienced traders lost money. After a three-to-five-month "learning curve," the study found that profitability of traders improved with 65% making money and 35% losing money. Regulators pointed out that the study covers only a narrow group of traders over a brief period and survivorship bias may be an issue with this study. Additionally it apparently was not compiled by an independent source.
> 
> A recent article in the Wall Street Journal (Single-Stock Swappers Trade One Stock and One Stock Only $$ (12/7/99)) about day traders Gary Ratner (who trades CMGI) and Jeff Easton (who trades Yahoo!) suggests that they routinely make more than $2,000 a day. According to the article, Mr. Friedfertig says that through Nov. 30, 67% of Broadway's 400 active traders -- those who trade at least 3,000 shares a day -- were profitable for the year, and 78% of those who've traded for more than a year made money.
> 
> Another interesting question that follows along the same lines is whether it is possible to train individuals to become successful traders. The question was asked several times by Jack Schwager in his interviews with successful traders in the best seller Market Wizards. While hardly scientific, the following observations from the book are certainly interesting.
> Richard Dennis described an experiment where 40 of 1000 applicants where chosen and 23 were eventually trained. According to Dennis "It’s frightening how well it worked." 3 dropped out, but the successful 20 (known by many as the "turtles") averaged 100% profits per year.
> However, others interviewed in the book were apparently less successful in training others and less optimistic about probabilities of success.
> Bruce Kovner discussed trying to train perhaps thirty people, and only four or five turned out to be good traders. The other 25 left the business and according to Dennis "it had nothing to do with intelligence."
> Marty Schwartz discussed hiring four people but nobody lasted.
> According to Brian Gelber five or less out of every 100 people who go to the floor to become traders make at least a million dollars within five years and at least half will end up losing everything they came in with.
> Tom Baldwin responded that less than 20 percent of those who come to trade on the floor are still around after five years and one percent are successful to the point of making and keeping at least a couple of million
> 
> The percentage of profitable day traders is certainly an important number, especially for those considering day-trading as a potential career opportunity, but another relevant question is whether day traders in aggregate make or lose money. After all, in many industries a small percentage of the players make the majority of the profits. For example, let's hypothetically say that only 10% of day traders make money. Just that information certainly isn't encouraging. But what if we now assume that the average loss for each of the 90% that lose money is $100,000, while the 10% of profitable traders go on to earn an average of $2 million. We could then say that the expected return for all day traders in aggregate is greater than 100%. If 9 lose $100,000, but the one in ten successful traders earns millions, we now have a different picture. In fact, based on those numbers day trading is a better proposition than the lottery or casino gambling, where the house always holds the advantage by any measure. So clearly in analyzing the success of day-traders, we must analyze not only the percentage of day traders that make and lose money, but also the amounts that they win and lose individually and in aggregate. Regardless, it should be obvious to everyone that day trading as a career is only for people in the financial position to sustain the probably losses.
> 
> Another important issue for potential day traders to consider is their opportunity costs. For instance, lets say day trader Loren has $125,000 in capital, currently makes $100,000 a year, and quits a job to start day trading. Loren . Loren expects to use $25,000 for living expenses for the next six months and the remaining $100,000 for risk capital. At the end of six moths Loren has lost half the capital and is left with $50,000. How much is Loren out from making the decision to day trade?
> 
> The answer is not $50,000. Loren has day trading losses of $50,000 but that’s not all. Loren also gave up $50,000 in income from the job left behind, which brings us to a $100,000 pre-tax difference. And the final cost is the opportunity cost of not investing the $125,000, since that money could have been invested in stocks or bonds. So in reality a decision to day trade can cost you a lot more than the capital you lose trading. The time and opportunity costs should also be considered in evaluating the profitability of day trading for any individual.


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## theasxgorilla

Yes, it's a fractal until you get to the last 20 people in your 5/95 measure...and then it can't be a fractal any longer


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## wayneL

theasxgorilla said:


> Yes, it's a fractal until you get to the last 20 people in your 5/95 measure...and then it can't be a fractal any longer



Oh frac! I knew there was a flaw somewhere! :


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## RichKid

Timmy said:


> I am just trying to work out what you mean by 'transversely'.  Is that something to do with Dracula?




Now that's interesting isn't it? Wayne used to sleep in a crypt during daylight hours, there's even a picture of him in his favourite cape somewhere here on ASF (lol!), everything is upside down in Australia....but I think he's normal again.

Thanks lesm for that first article by the anonymous trader (the second one was good too)...seems to be a trend follower, he must have created a simple system that's very easy to trade.


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## wayneL

RichKid said:


> Now that's interesting isn't it? Wayne used to sleep in a crypt during daylight hours, there's even a picture of him in his favourite cape somewhere here on ASF (lol!), everything is upside down in Australia....but I think he's normal again.



Yep, I've packed my cape away in a box, normal now... well, nearly.


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## lesm

RichKid said:


> Thanks lesm for that first article by the anonymous trader (the second one was good too)...seems to be a trend follower, he must have created a simple system that's very easy to trade.




Keeping it simple, is the way to go. Too often you see people making trading more complex than it needs to be.

Cheers.


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## theasxgorilla

wayneL said:


> Oh *frac*! I knew there was a flaw somewhere! :




BSG fan???


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## wayneL

theasxgorilla said:


> BSG fan???




No. lol had to google that.

Seeing as we were destroying the fracing fractal hypothesis, it was just a little word play... but I probably did hear somewhere, maybe second hand from a BSG fan.


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## nizar

Thanks lesm for those articles.

I have read a study that was carried out on several thousand accounts by one of the big brokers in the US. The 2 guys that conducted the study did so to try and prove/disprove the 95/5 "Myth" (nobody until this came knew exactly where this stat came from). The figures they came up with weren't far off.

They also examined WHY those that lost money actually did lose by examining their trades. And suprise suprise, it had NOTHING to do with their stock picking "skills", the stocks they bought actually did very well over a period of time, but too often they sold too early. And as for the dogs, well they stayed in them too long.

I don't have a source for this (But i didnt just make it up -- LOL) but if you look on google it can't be too hard to find.

Though I think I got to it from a link from another board.


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## tech/a

Lots of stuff around some here on Trading
http://www.cftitrading.com/download/fail.pdf
Seems the 95/5% rule used a lot in various things.
http://www.google.com.au/search?hl=en&q=95/5%+rule&btnG=Search&meta=


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## agro

i thought it was the 80/20 rule


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## MichaelD

I'll bite.



wayneL said:


> * Do the people preaching 95/5, presume themselves to be in the 5%? If so, how do they quantify this? By what measure do we separate the 5% "elite" from the 95% of presumably losers?



Yes, I believe in the 95/5 rule for active traders. I believe I am currently in the 5%. Reason: I'm trading a backtested positive expectancy plan.


wayneL said:


> * I there a fractal at work? Of the 5%, is there a further separation of 95/5? What does that say about the 95% of the 5%? Does this continue up a fractal scale?



Yes, I believe this is a fractal, and within the 5% who are winning because of money management I believe there are 5% who are the much talked about and mysterious supertraders who seemingly effortlessly extract large sums of money from the markets consistently. You only hear about such traders obliquely as they have no need for fame.

Many aspire to this level. Few achieve, as it requires a true trading edge, something which trend trading does not provide.


----------



## tech/a

agro said:


> i thought it was the 80/20 rule




Yes there is the Perato Principal.
Which basically states that you'll spend 80% of anything returning 20% of the result.
And inversley you'll spend 20% of anything returning 80% result.

Richard Koch's "The 80/20 Principal" ISBN:1-85788-168-0 PB
Covers most aspects of this well known rule.

Having applied it in many aspects of life its damned annoying/pleasing how true it is.


----------



## theasxgorilla

MichaelD said:


> Many aspire to this level. Few achieve, as it requires a true trading edge, something which trend trading does not provide.




I'll bite too.  Can swing trading provide it?

ASX.G


----------



## 2020hindsight

are we saying that 5% of the people have 95% of the skill

(I'm confident some have more than others btw)

but likewise, maybe some might have more than the average share of luck in any given time period.

i.e. are we talking last month's tipping comp - or next month's


----------



## nioka

The discussion on this subject seems to suggest 5% are absolute geniuses and the 95% are absolute buffoons, How about a scale 1 to 100. I'd suggest I'm not in the 5% because I have no desire to be there. However I expect to be ahead of the 50% point and am happy with my results to date and claim to be around the 80 to 90% mark. I'm still showing a good profit so far this year. Does that count?


----------



## MichaelD

theasxgorilla said:


> I'll bite too.  Can swing trading provide it?



No.


----------



## It's Snake Pliskin

MichaelD said:


> No.




Why not?


----------



## IFocus

MichaelD said:


> I'll bite.
> 
> 
> Yes, I believe in the 95/5 rule for active traders. I believe I am currently in the 5%. Reason: I'm trading a backtested positive expectancy plan.
> 
> Yes, I believe this is a fractal, and within the 5% who are winning because of money management I believe there are 5% who are the much talked about and mysterious supertraders who seemingly effortlessly extract large sums of money from the markets consistently. You only hear about such traders obliquely as they have no need for fame.
> 
> Many aspire to this level. Few achieve, as it requires a true trading edge, something which trend trading does not provide.





Hi Micheal good to see you drop in

Super trend traders Richard Dennis, Ed Seykota, Richard Farleigh just to name a few all used methods to catch major trends?

I think few will achieve because of the difficulty psychology wise to apply the methods required not that trend trading cannot achieve large profits.


----------



## MichaelD

Swing trading is just trend trading in a shorter time frame - betting a reversal in a trend is just temporary. Thus, like trend trading, it does not provide a true edge, but relies on risk and money management to be profitable (not that there's anything wrong with that).


----------



## IFocus

nioka said:


> The discussion on this subject seems to suggest 5% are absolute geniuses and the 95% are absolute buffoons, How about a scale 1 to 100. I'd suggest I'm not in the 5% because I have no desire to be there. However I expect to be ahead of the 50% point and am happy with my results to date and claim to be around the 80 to 90% mark. I'm still showing a good profit so far this year. Does that count?




Nioka if you remain profitable during this market then you are easily in that 5% this market now is when traders wash through like a water fall as they get whipsawed in and out of positions.

They will be taking consistence losses with small profits. They will learn bad behaviors as a result and likely take profits early scared of getting whipsawed again missing the moves that moves the account upwards.

In the 5% there will be a section for Old D......... sorry joke just about worn out.


----------



## It's Snake Pliskin

MichaelD said:


> Swing trading is just trend trading in a shorter time frame - betting a reversal in a trend is just temporary. Thus, like trend trading, it does not provide a true edge, but relies on risk and money management to be profitable (not that there's anything wrong with that).




Thanks.


----------



## tech/a

*Top 5% of wealth*---Those that can do what they want when they want,support who they want and what they want to support whenever they wish and choose to work or not and can do for an indefinate period regardless of their current age.

*Top 5% of property investors.*---Those that recieve a passive income from property and are un affected by market swings/recession/depression and hold a portfolio greater than their house---this could be just 1 IP.

*Top 5% of Traders-*--Those that can turn a consistent profit in any market condition over a period long enough to generate both bullish and bearish conditions.(years)

*Top 5% in Business*---Those that have businesses which turn a profit well above a basic wage wether they are working in the business or not for prolonged periods of time (Months) without effecting profit.That are established enough to ride out Recession/Depression/good and bad times.

Regardless of color,creed,education,religion,ability to spell,mathamatical skill,type of car they drive or wives they keep.


----------



## wayneL

Is it important to be in the top 5%?

If so, is it important to know you're in the top 5%?

If so, is it important to tell all and sundry that you're in the top 5%?

Or

Is is important to be 100% of what you can be or what you want to be, wherever you are on the scale, whatever that is, and let people think what they will?

Is comparison a thing of the ego?


----------



## wayneL

MichaelD said:


> Swing trading is just trend trading in a shorter time frame - betting a reversal in a trend is just temporary. Thus, like trend trading, it does not provide a true edge, but relies on risk and money management to be profitable (not that there's anything wrong with that).




What is a true edge?


----------



## tech/a

wayneL said:


> Is it important to be in the top 5%?




To 5%



> If so, is it important to know you're in the top 5%?




If you dont know then your not in the 5%



> If so, is it important to tell all and sundry that you're in the top 5%?




Important no.

Or



> Is is important to be 100% of what you can be or what you want to be, wherever you are on the scale, whatever that is, and let people think what they will?




To some no doubt.



> Is comparison a thing of the ego?




To some no doubt.


----------



## MichaelD

wayneL said:


> Is it important to be in the top 5%?
> 
> If so, is it important to know you're in the top 5%?
> 
> If so, is it important to tell all and sundry that you're in the top 5%?



Referring specifically to trading;

Level 1 of the 95/5 fractal;

1. Yes, it's important to be in the top 5% since they are the only ones actually making money. Since no one on the surface admits to trading for anything other than the reason of making money, you must by definition strive to be in the 5%. Otherwise you might as well go to the casino and at least get enjoyment out of losing your money instead of pain.

2. You'll know you're in the top 5% since you're making money consistently.

3. It will lead to psychological trauma to yourself to tell all and sundry that you are in the top 5% as no one will want to listen to your thoughts on how to get into this 5%.


Level 2 of the fractal;

1. If making extraordinary returns is required, then yes you need to be in the top 5% of the top 5%.

2. You'll know you're in the top 5% of the top 5% since you will view the market totally differently to the other profitable traders.

3. It is anathema to tell all and sundry that you've reached this level - it would be both fatal to your psychology and your edge(s).


----------



## wayneL

tech/a said:


> To 5%
> 
> 
> 
> If you dont know then your not in the 5%
> 
> 
> 
> Important no.
> 
> Or
> 
> 
> 
> To some no doubt.
> 
> 
> 
> To some no doubt.



Tech,

For one who so preaches outside of the box thinking, those answers are remarkably inside the box.

Just my opinion.


----------



## chops_a_must

tech/a said:


> If you dont know then your not in the 5%



Or aren't arrogant enough to assign yourself such a special position.


----------



## MichaelD

wayneL said:


> What is a true edge?



A true edge is a fundamental truth about market participants and their behaviour.


----------



## wayneL

MichaelD said:


> Referring specifically to trading;
> 
> Level 1 of the 95/5 fractal;
> 
> 1. Yes, it's important to be in the top 5% since they are the only ones actually making money. Since no one on the surface admits to trading for anything other than the reason of making money, you must by definition strive to be in the 5%. Otherwise you might as well go to the casino and at least get enjoyment out of losing your money instead of pain.
> 
> 2. You'll know you're in the top 5% since you're making money consistently.
> 
> 3. It will lead to psychological trauma to yourself to tell all and sundry that you are in the top 5% as no one will want to listen to your thoughts on how to get into this 5%.
> 
> 
> Level 2 of the fractal;
> 
> 1. If making extraordinary returns is required, then yes you need to be in the top 5% of the top 5%.
> 
> 2. You'll know you're in the top 5% of the top 5% since you will view the market totally differently to the other profitable traders.
> 
> 3. It is anathema to tell all and sundry that you've reached this level - it would be both fatal to your psychology and your edge(s).




Thanks Michael,

Just exploring thought processes and the impact of the ego. Very interesting answers.


----------



## tech/a

wayneL said:


> Tech,
> 
> For one who so preaches outside of the box thinking, those answers are remarkably inside the box.
> 
> Just my opinion.




Were they meant to be?



> Or aren't arrogant enough to assign yourself such a special position.




If your not in the 5% then yes inferring/pretending you were would be both delusional (Personal) and arrogant (as seen by others who know the truth).


----------



## Bill M

tech/a said:


> *Top 5% of wealth*---Those that can do what they want when they want,support who they want and what they want to support whenever they wish and choose to work or not and can do for an indefinate period regardless of their current age.
> 
> *Top 5% of property investors.*---Those that recieve a passive income from property and are un affected by market swings/recession/depression and hold a portfolio greater than their house---this could be just 1 IP.
> 
> *Top 5% of Traders-*--Those that can turn a consistent profit in any market condition over a period long enough to generate both bullish and bearish conditions.(years)
> 
> *Top 5% in Business*---Those that have businesses which turn a profit well above a basic wage wether they are working in the business or not for prolonged periods of time (Months) without effecting profit.That are established enough to ride out Recession/Depression/good and bad times.
> 
> Regardless of color,creed,education,religion,ability to spell,mathamatical skill,type of car they drive or wives they keep.




What about this for me?

*Top 5% Sharemarket Investors*---Those that receive a passive income from investing in shares and are unaffected by market swings/recession/depression and hold a portfolio greater than their house---this could be just half a dozen blue chip stocks?


----------



## wayneL

More Lao Tsu, FWIW:

_By retaining his humility,
the talented person who is also wise,
reduces rivalry.

The person who possesses many things,
but does not boast of his possessions,
reduces temptation, and reduces stealing.

Those who are jealous of the skills or things
possessed by others,
most easily themselves become possessed by envy.

Satisfied with his possessions,
the sage eliminates the need to steal;
at one with The Way,
he remains free of envy,
and has no need of titles.

By being mentall ysupple, he retains his energy.
He minimizes his desires,
and does not train himself in guile,
nor subtle words of praise.
By not contriving, he retains
the harmony of his inner world,
and so remains at peace within himself.

It is for reasons such as these,
that an administration
which is concerned with the welfare of those it serves,
does not encourage status
and titles to be sought,
nor encourage rivalry.

Ensuring a sufficiency for all,
helps in reducing discontent.

Administrators who are wise
do not seek honours for themselves,
nor act with arrogance towards the ones they serve._


----------



## chops_a_must

tech/a said:


> If your not in the 5% then yes inferring/pretending you were would be both delusional (Personal) and arrogant (as seen by others who know the truth).




It's not just that though.

How on Earth can people say that they are definitively in the top 5% when it comes to trading? It's not like there is a giant ladder with finals every season to decide ranking and seedings.

And does this 5% mean for your age? For your progress and development when it comes to trading? For your type of trading? Does it mean that if you are at 94.9% in the rankings you suddenly become unprofitable, unsuccessful and go broke?

No-one can answer these things. They are incalculable. And to say, "look at me, I'm in the top 5%" is laughable.

I don't think I would be in the top 5% in trading. Definitely not, probably. But for my age? Perhaps. Who knows? Especially when most people my age have not been trading for long enough to even know what they are doing. And does that make me unsuccessful? By going on what has been said in this thread, the answer would have to be yes.

But do people my age have potential to be in that 5%? Yep. Do I? Yep. Will I know if I'm ever in that 5%? Nup. Will I proclaim it to the world if by some measure I get there? Nup. I'll leave it at other people making a judgment on that.

And why this need for validation from other people saying, "yep, you're in the 5%"?

If you are meeting your own goals and always striving to do better, is there anything else that needs to be done?

And FWIW, I would never consider someone trading the same mechanical system, or same system for that matter, year in, year out, never changing it, to be in the top 5%. That's complacency and certainly not a top 5% trait in ANY field.

Cheers.


----------



## 2020hindsight

well If we want to be pedantic....
If the claim is that 5% of people will make money out of trading, and 95% will not. 
Then..

whoever said that will be wrong in a bull market, because many more than 5%will win

and will also be wrong in a (severe and sudden) bear market. 

but sure - 1% of the time they might be right.
Then again that depends which period of time they are talking about.  
- big deal.


----------



## tech/a

chops_a_must said:


> It's not just that though.
> 
> How on Earth can people say that they are definitively in the top 5% when it comes to trading? It's not like there is a giant ladder with finals every season to decide ranking and seedings.




A surgeon knows he is a successful surgeon,so does a baker,so does a mechanic,so does a consistently profitable trader.



> And does this 5% mean for your age? For your progress and development when it comes to trading? For your type of trading? Does it mean that if you are at 94.9% in the rankings you suddenly become unprofitable, unsuccessful and go broke?




Consistently profitable for 1 yr ,5yrs, go broke then your not in the top 5% were but not anymore goes for all areas---in my not so humble opinion.



> No-one can answer these things. They are incalculable. And to say, "look at me, I'm in the top 5%" is laughable.




No they are quantifyable.



> I don't think I would be in the top 5% in trading. Definitely not, probably. But for my age? Perhaps. Who knows? Especially when most people my age have not been trading for long enough to even know what they are doing. And does that make me unsuccessful? By going on what has been said in this thread, the answer would have to be yes.
> 
> But do people my age have potential to be in that 5%? Yep. Do I? Yep. Will I know if I'm ever in that 5%? Nup. Will I proclaim it to the world if by some measure I get there? Nup. I'll leave it at other people making a judgment on that.
> 
> And why this need for validation from other people saying, "yep, you're in the 5%"?




You'll know.
Who's looking for validation?



> If you are meeting your own goals and always striving to do better, is there anything else that needs to be done?




Not if YOU dont think so.



> And FWIW, I would never consider someone trading the same mechanical system, or same system for that matter, year in, year out, never changing it, to be in the top 5%. That's complacency and certainly not a top 5% trait in ANY field.




Hmm wonder if youd like your pilot on your next flight to alter what he's been doing for the last successful 500 flights?

Personally how its done is of no consequence to me in ANY field.



> Top 5% Sharemarket Investors---Those that receive a passive income from investing in shares and are unaffected by market swings/recession/depression and hold a portfolio greater than their house---this could be just half a dozen blue chip stocks?




*Bill* Id have to agree *IF*

Capital value of Bluechips invested doesnt fall below the initial capital purchase. Hardly successful to have $2 million worth of Blue chips on start up generating a passive income then 2 yrs later still generating a passive income from $1.8 million worth of shares if liquidated.

*Hindsite* 
Consistently profitable is a far cry from a win here and a win there.
You could have amazing success in a bull market not trade at all in a Bear market and still be spectacularly profitable and in the 5% in my book after 30 yrs.


----------



## chops_a_must

tech/a said:


> No they are quantifyable.




Tell me to the exact point then if they are "quantifiable".


----------



## prawn_86

Tech,

Could you please explain how it is quantifiable for one to measure themselves to be exactly in the top 5%?

As i said way back on the first page, i would love to see some real evidence of these figures. 95/5 and 80/20 just seem a bit too 'marketable' to me.

I tend to agree with Chops that it is actually impossible to be 100% certain if you are in the top 5% in the world/country. In anything, not just trading. 

You can know your good/profitable/better than the majority, but how do you know exactly whhat % you are better than?

There is always someone out there better than you...


----------



## wayneL

tech/a said:


> A surgeon knows he is a successful surgeon,so does a baker,so does a mechanic,so does a consistently profitable trader.



That's not the same as quantifying themselves in a top _x_%.

The confident have no need to validate themselves by assigning themselves some BS incalculable rank. To do so smacks of insecurity.


----------



## tech/a

chops_a_must said:


> Tell me to the exact point then if they are "quantifiable".




Tax time would be a good start.
If you keep good business records and your trading then you should you'll know instantly if your consistently profitable.
In this example we are talking trading ie 5% are consistently profitable.

In general wether its 5% or 20% its clear---well to me anyway that few reach the level I have suggested in my base reply.
Does it matter if it 9.275%.
There is a level with most things that most never achieve.
Ask a Pilot,Race driver,Pro golfer,plastic surgeon.Billiard player,Physist,programmer,dog breeder,author,painter,in all there is that top 5 or whatever %.
Beyond proficient,striven for by others.Benchmarks to some.


----------



## prawn_86

tech/a said:


> player,Physist,programmer,dog breeder,author,painter,in all there is that top 5 or whatever %.
> Beyond proficient,striven for by others.Benchmarks to some.




That comes back to the original post of this thread.

What are the actual %'s, and why is it that 95/5% is used so often? Beyond the fact that it is a nice number.

Its all well and good to say "im good/very good at what i do" but its a totally different matter to say you are in the top X % without public records/numbers/studies etc


----------



## Trembling Hand

As for day traders, I have posted this study else where but its the only empirical evidence I have ever seen that day trading talent is a lot rarer than even the 95%/5% stat. 



> we provide a comprehensive analysis of the profitability of all day trading in Taiwan over a five year period. During an average six month period, we identify over 130,000 investors who transact at least $NT 1.5 million in day trades and over 9,000 who transact at least $NT 90 million in day trades. To do so, we use a unique and remarkably complete dataset, which contains the entire transaction data, underlying order data, and the identity of each trader on the Taiwan Stock Exchange (TSE) – the World’s twelfth largest financial market. With these data, we provide a comprehensive accounting of the profitability of day traders during the period 1995 through 1999.






> Our main empirical findings can be summarized succinctly. Heavy day traders appear to trade at favorable prices, but only a select few are sufficiently savvy to consistently earn profits net of their trading costs. More than eight out of ten day traders lose money in a typical semiannual period.






> only two out of ten make money; fewer do so consistently.


----------



## chops_a_must

tech/a said:


> Tax time would be a good start.
> If you keep good business records and your trading then you should you'll know instantly if your consistently profitable.
> In this example we are talking trading ie 5% are consistently profitable.



What if they are in the top 5% of skilled tax evaders?

Previously you said: "You'll know." in regards to calculating your % position.

I didn't want this to turn into a pissing contest, but I guess it has to come to that, and I'm probably an interesting case study.

I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.

So that is close to 250% in 18 months. Or something like that.

Do I think I am in the top 5% because of that? Nope. Because I GENUINELY believe there would be more than 5% of people in the markets who have made more than that in that period of time. Is that a correct or incorrect assumption? Whether or not you are in that 5%, apparently, is contingent upon that very assumption.

But do I think I've been successful? Yep, I sure have. Most is down to pure ****, for sure, but I've gone from being someone dabbling and a hack, to someone having enough money to be damn serious about trading.

See, you seem to equate being in the top 5% with being successful. It just doesn't work like that. If you trade long only, and your goal is not to lose any capital in this bear market, and you achieve that, then that is very successful. Stuff it if 5% of people make more than you!

I do not care if I am in the top 5%, if you can even measure your place. What I do care about is not losing money, beating indexes, and maximising my profits. And so long as that is done, the rest is just BS.


----------



## IFocus

chops_a_must said:


> I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year, since.
> 
> So that is close to 250% in 18 months. Or something like that.




Chops end this year with that record and you will be some one special in the game of retail trading a very Rare Chop indeed.


----------



## lesm

TH,

The study you are referencing, although empirical, has produced similar findings to a range of studies related to day traders.

The consistently profitable day trader long-term appears to be a rarity according to any of the published studies to date.

Cheers.


----------



## chops_a_must

IFocus said:


> Chops end this year with that record and you will be some one special in the game of retail trading a very Rare Chop indeed.




Mmm... most of that is due to futures trading of late, and then that reinvested.

The problem is, futures will take just as easily as they give. If I get another draw down like I did in a week in Jan, repeatedly, that figure would drop quite a bit. However, I only trade opens and gaps on them now, so it has been much more consistent.

Cheers.


----------



## brty

Hi,

In a discussion about the 5% compared to the 95%, I would like to ask about the following characters.

1. Jesse Livermore. Died broke. Was he in the 5 or the 95?

2. Victor Niederhoffer. 5 or 95?

Or were they both in the 5 then changed to the 95 when they self destructed?

Or were they back from the 95 to the 5 when they remade fortunes after losing them??

Or are they aberrations that just don't count?? 

bye

brty


----------



## Trembling Hand

lesm said:


> TH,
> 
> The study you are referencing, although empirical, has produced similar findings to a range of studies related to day traders.
> 
> The consistently profitable day trader long-term appears to be a rarity according to any of the published studies to date.
> 
> Cheers.




Just to put some $$AUD to that study. The average income for the very small group of profitable was $70,000 *BUT* the median income $9,000. That's after brokerage but not before other expenses and tax! 

Obviously there was a very very small group cleaning up that lifted the average way above what most profitable were making.


----------



## wayneL

Haha great question.

How about John Elliott, the LCTM mob etc etc.


----------



## MichaelD

wayneL said:


> The confident have no need to validate themselves by assigning themselves some BS incalculable rank. To do so smacks of insecurity.




Whoa there a second, Wayne - you're the one who introduced the arbitrary 95/5 which many respondents, myself included, simply translated into "losing trader/consistently profitable trader".

The precise % is ultimately irrelevant. The question of groups within groups is a far more interesting point of discussion.


chops_a_must said:


> I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.
> 
> So that is close to 250% in 18 months. Or something like that.
> 
> Do I think I am in the top 5% because of that? Nope. Because I GENUINELY believe there would be more than 5% of people in the markets who have made more than that in that period of time. Is that a correct or incorrect assumption?



Your assumption that more than 5% of market participants would have made more than that is almost without a doubt incorrect. (Bit of a tongue twister there).

There are some qualifiers, however;

- what element of this return was due to luck? - eg overleveraging and getting lucky with the run of wins, excess risk taking, picking a bubble stock by luck - versus good management of trades. If you're in the 5% you'll KNOW what was luck and what was not. If it was luck and you don't realise it, you'll give it all back sooner or later. The 5% KNOW what their edge is.

- open equity should not be counted.

(this in no way is meant to disparage your trading results, just to fuel discussion).


----------



## theasxgorilla

wayneL said:


> By retaining his humility,
> the talented person who is also wise,
> reduces rivalry.




Hands up who here can claim to have this on their _charter_?

Thankfully, I'd say most.


----------



## wayneL

MichaelD said:


> Whoa there a second, Wayne - you're the one who introduced the arbitrary 95/5 which many respondents, myself included, simply translated into "losing trader/consistently profitable trader".
> 
> The precise % is ultimately irrelevant. The question of groups within groups is a far more interesting point of discussion.



No I didn't. They were rhetorical questions based on the promulgation of the 95/5 cliche' on other threads. A philosophical analysis of the need for some to continually bring it up.

No insult was intended to anyone, and particularly to you (I know what you were doing and my comments don't apply). 

Cheers


----------



## chops_a_must

MichaelD said:


> Your assumption that more than 5% of market participants would have made more than that is almost without a doubt incorrect. (Bit of a tongue twister there).



What I base that on, is that more than 5% would have lost more than what totalled up to that percent. Therefore, more than 5% would have made that on the opposite side. But I guess if I'm not going to claim to be in the 5%, anyone with less returns wont be claiming that either. So we are stuck.



MichaelD said:


> There are some qualifiers, however;
> 
> - what element of this return was due to luck? - eg overleveraging and getting lucky with the run of wins, excess risk taking, picking a bubble stock by luck - versus good management of trades. If you're in the 5% you'll KNOW what was luck and what was not. If it was luck and you don't realise it, you'll give it all back sooner or later. The 5% KNOW what their edge is.
> 
> - open equity should not be counted.
> 
> (this in no way is meant to disparage your trading results, just to fuel discussion).




A lot of it was to do with luck. As I said, a lot was pure ****. My first four trades from memory were with TLSCA, AED, QGC and MCR. I only remember two losing trades in my first month or two. So I probably couldn't have had a better start.

I didn't use margin to begin with, never used CFD's. I've never traded U stocks, except shorting ERA.

It was only after reading about trading, I realised why I had had the gains. I had been inadvertently trading breakouts. But after proving to myself I could manage positions, I got into margin. I've been gradually reducing my margin position the last few months, and as of yesterday, I have no margin being used. I have a large amount of funds available however.

I only have 3 open positions, and 2 will be closed in the next few days.

But you are right. The longer I've been here, the more conservative I've become, and the less volatile my gains have been, although steadier. A lot of my gains were flukes, but there was a reason for those gains, and I've just incorporated that into my trading with proper management.

Whether or not that makes me in the top 5%? I don't know. Even if I was, I wouldn't claim it. Maybe I'm just not that sort of person? I assume there are others like that as well.


----------



## MichaelD

chops_a_must said:


> A lot of my gains were flukes, but there was a reason for those gains, and I've just incorporated that into my trading with proper management.
> 
> Whether or not that makes me in the top 5%? I don't know. Even if I was, I wouldn't claim it. Maybe I'm just not that sort of person? I assume there are others like that as well.



Pretty much by definition, you've answered your own questions. Your mindset is well and truly in the "5%".

It is said that the $ don't matter to the very best traders - the $ come as a byproduct of the intrinsically interesting process of trading. How do you feel about that statement?


----------



## nizar

brty said:


> Hi,
> 
> In a discussion about the 5% compared to the 95%, I would like to ask about the following characters.
> 
> 1. Jesse Livermore. Died broke. Was he in the 5 or the 95?
> 
> 2. Victor Niederhoffer. 5 or 95?
> 
> Or were they both in the 5 then changed to the 95 when they self destructed?
> 
> Or were they back from the 95 to the 5 when they remade fortunes after losing them??




Very good post.
And interesting questions.

From what I understand about Victor Niederhoffer, he was a gun trader, making excellent money for years. He had a sound understanding of risk and everything like that. But the reason he lost is because for him, who was a competitive squash player, trading was like a game in which he had to win.

But ultimately, he blew up.

So which category is he in?

Does it count if the reason you blew up is due to a black swan?
But -- that said, very conservative traders, eg. those that take 0.5% risk, if unleveraged, can still trade on after a black swan most likely.

Michael, do you have any comments about the above?


----------



## nizar

MichaelD said:


> Your mindset is well and truly in the "5%".




Is being in the 95/5 about mindset and understanding the theory?
Or about practical trading results that are beyond random?
(Obviously you could achieve the former through luck).

How about if you have the mindset and understanding but your (recent) realtime trading results are absolutely sh**house (Like mine! ), what does that mean? LOL.


----------



## Porper

> I didn't want this to turn into a pissing contest, but I guess it has to come to that, and I'm probably an interesting case study.
> 
> I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.
> 
> So that is close to 250% in 18 months. Or something like that.




Unfortunately that's exactly what this thread has become.

Oh, look at me I made this much more than you, blah, blah.

The fact is nobody knows who is in the 5% and who isn't, what we do probably know is that the posters who do nothing but mention their heroic achievements are not in that so called 5%.

If we are treating trading as a business or a proffession, and we should, then it is exactly the same as making money cutting lawns for a living or not as the  case may be, or whether you are a good enough mechanic to work for Mercedes as a technician or whether your limit is fitting spark plugs and doing oil changes at the local garage.

You are either long term profitable or you aren't.I would hazard a guess that most of us on here haven't been trading long enough to know.I only know of 2 or 3 on here that definitely are profitable long term, there are obviously others, but I bet not many.


----------



## MichaelD

Livermore: A great intuitive trader for picking and exploiting edges to their limits (eg trading in the bucket shops), but incapable of realising when the edge evaporated - hence repeated blow-ups. Probably addicted to trading.

Trader Vic: Don't know enough about his style to comment.

Blowing up: You can't blow up if you limit your risk correctly. You can take a black swan or three and it will hurt, but you won't blow up.

Terrible results in current market: Irrelevant if the positive expectancy plan is still within specification.


Being in the 5% is ALL about mindset. With the correct mindset, EVERYTHING else simply logically falls into place;

Stop losses - illogical to trade without them
Written down trading plan - illogical to trade without one
Following the trading plan - illogical to deviate from the plan
Backtesting the trading plan - illogical not to backtest any plan
Paper trading the plan - illogical to engage the market with real money before validating a plan
Predetermining the maximum expected drawdown of a plan/expected runs of losses - illogical to trade without this information


----------



## brty

Hi,

Trader Vic is Victor Sperandeo not Victor Niederhoffer.

MichaelD, Would you say these characters are not in the top 5%??,because they blew up. 

Or were they in the top 5% before??

bye

brty


----------



## MichaelD

brty said:


> Hi,
> 
> Trader Vic is Victor Sperandeo not Victor Niederhoffer.
> 
> MichaelD, Would you say these characters are not in the top 5%??,because they blew up.
> 
> Or were they in the top 5% before??




Oops - not very familiar with either Victor - my error.

They were never in the 5% - they placed themselves in positions where it was possible to blow up (= took excessive risk).


----------



## motorway

> In a discussion about the 5% compared to the 95%, I would like to ask about the following characters.
> 
> 1. Jesse Livermore. Died broke. Was he in the 5 or the 95?




What do you know about Livermore ?

He became a media celebrity... A name used to sell all sorts of things

even back in 1923...



> EDWIN LEFEVRE: Who Couldn’t Separate His Facts from His Fiction.




Does  trading with inside knowledge put you in the 5%...
What about if the knowlege is wrong ?

Why was he so good in the Bucket shops ?



> Livermore came to wall street in 1906 confident and ready to conquer.
> Too cocky for his own good, he lost it all in his first bust. never being one to diversify his risks, the ego maniac also didn't understand how hard it is to build a big position.
> 
> Buying stocks is different from reading the tape. If he saw a stock at 20 in the bucket shops and thought it would go to 24. He could buy at 20, and when it got to 24 he could "sell" for a 20 percent profit.
> 
> But on Wall Street he would take his $50,000 and plan to buy 2,500 shares of the stock. That was a hefty position in a market much smaller and less liquid than today's and the spread between bid and offered prices was often huge. It wasn't abnormal to see a stock quoted at 20 bid, offered at 25 - a 25 percent spread.
> 
> Suppose a stock traded last at 20 but was quoted 19 bid, offered at 21. He started buying at 21, plus commission. But then his own buying would drive the stock up. It might take him until 24 to get his entire portion built. Then, if he thought it would fall and started to sell , it might be quoted at 23 bid, offered at 24. he'd then start selling but never get a better price than 23, less commission, and take a loss on his first sale.
> 
> Then he would drive the stock down and take a loss on the liquidation of his remaining 2,500 shares. It's a lot harder to make money in reality than it is to do on paper - something which few people today, except for institutional money mangers, seem to realize. For instance, investment newsletters "manage" portfolios the same way Livermore traded bucket shops. But actually operating off the newsletters' advice is like Livermore's buying on Wall Street.
> 
> Livermore didn't get that at first. He thought he couldn't read the tape fast enough on wall street. So doing the only thing he knew to do, he headed back to replenishing his capital via bucket shops. En route, the 29-year-old stumbled upon Union pacific Railway - on a lucky hunch.
> 
> As Union Pacific rose, he sold short, anticipating a big swing. Then , just as he was about to be wiped out, his swing came in in the form of the San Francisco earthquake, halting East-West money flow and sending the railroad plummeting! Livermore quickly covered his short, took a bundle, booming a second time..... ( from Ken Fisher 100 minds that made the market


----------



## MichaelD

nizar said:


> How about if you have the mindset and understanding but your (recent) realtime trading results are absolutely sh**house (Like mine! ), what does that mean? LOL.




This is worth exploring. The KEY point here is the value you have assigned to your recent trading results.

Did you trade a plan?
Did you follow the plan?
Were the trading results within the plan's parameters?

If yes to all of the above, then you have traded well.

If you have traded well, why do you wish to assign a perjorative adjective to your results?


----------



## nizar

MichaelD said:


> This is worth exploring. The KEY point here is the value you have assigned to your recent trading results.
> 
> Did you trade a plan?
> Did you follow the plan?
> Were the trading results within the plan's parameters?
> 
> If yes to all of the above, then you have traded well.
> 
> If you have traded well, why do you wish to assign a *perjorative* adjective to your results?




LOL was I wishing to assign one of those???
I dont even know what that word means!

The reason we all trade is to make money. Nobody here can dispute that.


----------



## tech/a

Michael has pretty well covered my way of thinking to most posts.

On mindset.

Its all about mindset.
If you truly dont think you wish to be one of the 5% in ANYTHING then you can just about guarentee you wont be.

Its been mentioned that you may not wish to be in the 5% of anything.
That to is fine---my problem is those who are in that boat shooting cannon balls at those who dont wish to be in their boat.




> The reason we all trade is to make money. Nobody here can dispute that.




I dont know about that statement.
The end thermometer of our ability to master this challenge is to make money.

Firstly you need an interest---very few out there have the same interest in trading that we do.

You definately need passion!

I personally trade because I have the above AND it is a massive challenge----an on going and exciting learning process and something that stimulates and challenges my thinking on a daily basis---it doesnt bore me. Its something I can do into my nineties if I'm lucky enough to get that far. 
When I lost my starting capital of $20k in the first 6 mths of trading it became a challenge.
Techtrader came about accepting that challenge.
So did my results.
I'm still accepting the challenge as the market changes.


Business WAS originally about money but as failure and success combined it became challenge.
So did Property---success failure--challenge.

With acceptance of challenge and the combination of Entrepeneurial thinking,innovation,ambition,commitment and application,money follows behind---in all things money orientated.

The Money DOES come if the above is combined---with good management.

Same happens with sport.
Same happens with interests,like becoming a pilot,learning Art,Restoring a car,collecting antiques.(Only no 1 interests me so I'll likely be in the 95% for all the others.)


----------



## wayneL

tech/a said:


> Its all about mindset.
> If you truly dont think you wish to be one of the 5% in ANYTHING then you can just about guarentee you wont be.



Hah Nonsense!

An individual can wish to be 100% of what he/she can be without thought or concern of where they fit in the overall picture. They could end up in the 5% of the 5% without ever thinking about whether they are in any 5%.

In any case, if a person's 100% only gets them 20% up the ladder, I dips me lid to them. They gave what they could. They're 100%ers.



tech/a said:


> Its been mentioned that you may not wish to be in the 5% of anything.
> That to is fine---my problem is those who are in that boat shooting cannon balls at those who dont wish to be in their boat.



ROTFLMAO You just don't know which boat anyone is in here. Typically, you presume anyone with a different outlook is in a different boat achievement wise. That could be true, but the different boat could be bigger and more luxurious than yours... but they could be in the same boat, you just don't know.  

You believe they are cannon balls because you have an ego than can be dented, but they are just thoughts/concepts and can't hurt anyone. So desperate are you to be known as this mythical 5%er, that any challenge to the concept is like a red rag to a bull, a challenge to the ego that must be defended.

Alas, I guess you must do what you must do.

It reminds me of the allegorical story of the caterpillars and the butterfly....

Conclusion. Be what you can be, whatever that is. But comparing yourself to others an anxiety... status anxiety.


----------



## 2020hindsight

well I'm confident that me (and my bank account) are in the 2/3 of 3/5 category


----------



## tech/a

Ah I see your usual ploy.

Nothing to add so Wayne hides behind Moderator status and resorts to personal attack.

Love it!


----------



## wayneL

tech/a said:


> Ah I see your usual ploy.
> 
> Nothing to add so Wayne hides behind Moderator status and resorts to personal attack.
> 
> Love it!



A genuine observation is not an attack Tech/a. I'm trying to help you with your problem.


----------



## nizar

tech/a said:


> Michael has pretty well covered my way of thinking to most posts.
> 
> On mindset.
> 
> Its all about mindset.
> If you truly dont think you wish to be one of the 5% in ANYTHING then you can just about guarentee you wont be.
> 
> I dont know about that statement.
> The end thermometer of our ability to master this challenge is to make money.
> 
> Firstly you need an interest---very few out there have the same interest in trading that we do.
> 
> You definately need passion!
> 
> I personally trade because I have the above AND it is a massive challenge----an on going and exciting learning process and something that stimulates and challenges my thinking on a daily basis---it doesnt bore me. Its something I can do into my nineties if I'm lucky enough to get that far.




Actually -- Yes I take back my comment.

You are 100% correct.
You need passion. Definitely.

I try all the time to get people interested in trading and lend them books and give them links. Several weeks later I ask them if they had had a look or a read. The usual answer, "Nah, too Busy". Busy with school, work, etc, etc.

Its because they dont have the interest and they don't have the passion. I mean -- Im busy too! Even though I also work and go to school (well not now but for the last 4 years) I was always busy as well, but not busy with work and school, rather Im busy with trading!

You always somehow seem to make time for the things you have a passion for and that are important to you.

For me, well I don't count the time I spent trading and learning about trading. Im almost always doing something related to trading.

My mum says that when I talk about trading she can see the sparkle in my eyes.

*With acceptance of challenge and the combination of Entrepeneurial thinking,innovation,ambition,commitment and application,money follows behind---in all things money orientated.*

I like what you're saying here.


----------



## tech/a

Gee thanks.

I'll bring up your points at my next Ego Anonymous meeting.

Catch you all in the morning.


----------



## wayneL

tech/a said:


> Gee thanks.
> 
> I'll bring up your points at my next Ego Anonymous meeting.
> 
> Catch you all in the morning.




I'm here to serve.


----------



## r m

Assuming that we think we are in the 5% / successful traders (by our own choice of measure).
Don't we need the 95%?  Surely we need the 95% to follow the lead and recognise the stocks that we have picked.  Is their buying, after ours, what causes the share price to rise and creates our profit?


----------



## chops_a_must

chops_a_must said:


> I was going to blog this topic... thanks Wayne.  :
> 
> But... by definition and inference, didn't the 5% ride Enron into bankruptcy?
> 
> And haven't the 5% been buying these financials right from the top?
> 
> How can you make money if the 95% of people aren't going in your direction after you get in? Or is it just the 5% that realise that they need the 95%?
> 
> Might be a case of measuring the incalculable...




Obviously agree whole heartedly.



r m said:


> Assuming that we think we are in the 5% / successful traders (by our own choice of measure).
> Don't we need the 95%?  Surely we need the 95% to follow the lead and recognise the stocks that we have picked.  Is their buying, after ours, what causes the share price to rise and creates our profit?


----------



## dhukka

wayneL said:


> Hah Nonsense!
> 
> An individual can wish to be 100% of what he/she can be without thought or concern of where they fit in the overall picture. They could end up in the 5% of the 5% without ever thinking about whether they are in any 5%.




This come close to it for mine. If there really is a 5%, which I personally doubt, I bet they don't spend their time talking about what makes a 5 percenter, they just get on with it.


----------



## theasxgorilla

dhukka said:


> This come close to it for mine. If there really is a 5%, which I personally doubt, I bet they don't spend their time talking about what makes a 5 percenter, they just get on with it.




Yeah you'll notice I haven't posted much lately  :


----------



## It's Snake Pliskin

wayneL said:


> An individual can wish to be 100% of what he/she can be without thought or concern of where they fit in the overall picture. They could end up in the 5% of the 5% without ever thinking about whether they are in any 5%.




This is a good comment because it touches on the fallacy of assigning a percentage figure to something that cannot be fully tested. In the absense of a trading olympic event, what should the parameters be if they didn't change and the conditions were equal. Impossible to study in reality. Perhaps it's mental masturbation to believe in the figures. Many look the part but are they really? What about Livermore? The ultimate operator. Maybe not. You might enjoy this article:http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm

Back into hibernation...


----------



## tech/a

> This come close to it for mine. If there really is a 5%, which I personally doubt, I bet they don't spend their time talking about what makes a 5 percenter, they just get on with it.




Obviously youve never read a book.
Been to a seminar.
Been coached at anything.



> I bet they don't spend their time talking about what makes a 5 percenter, they just get on with it




I'll bet they dont spend 95% or even 98% of their time talking about their specialty but you can bet that everyone of them would talk freely about what makes a 5%er in their field.



> If there really is a 5%, which I personally doubt,




Yeh Soros is just average so is Trump,Tiger Woods well hes plain average.
Sir Edmund Hilary theres another average achiever.J.K. Rowling Very average writer.
You might wish to run through the Nobel prize winners.http://orange.sims.berkeley.edu/cgi-bin/flamenco.cgi/nobel/Flamenco




> An individual can wish to be 100% of what he/she can be without thought or concern of where they fit in the overall picture. They could end up in the 5% of the 5% without ever thinking about whether they are in any 5%.




They can and do of course.

Some however have to work at it and some will seek out the qualities of these special individuals and get there themselves knowing full well which direction they wish to head and how high their goal to succeed is.



> mental masturbation




Classic.


----------



## tech/a

In reality its not the 95/5% statistic which is obnoxious to some its that some have the audacity to class themselves in it even by implication.

Take Tony Mundene,95% want to see his block knocked off certainly by a quiet achiever like Danny Green.


----------



## dhukka

tech/a said:


> Obviously youve never read a book.
> Been to a seminar.
> Been coached at anything.




Geez that was easy, obviously emotionally you're in the bottom 95% tech along with your trading and chart reading, which you proved conclusively back in January. 



tech/a said:


> I'll bet they dont spend 95% or even 98% of their time talking about their specialty but you can bet that everyone of them would talk freely about what makes a 5%er in their field.




Not on chat forums they don't.



> Yeh Soros is just average so is Trump,Tiger Woods well hes plain average.
> Sir Edmund Hilary theres another average achiever.J.K. Rowling Very average writer.
> You might wish to run through the Nobel prize winners.http://orange.sims.berkeley.edu/cgi-bin/flamenco.cgi/nobel/Flamenco




Of course there are experts that separate themselves from the rest of the field by their performance, my point is that 5% is simply an arbitrary and meaningless number.


----------



## tech/a

dhukka said:


> Geez that was easy, obviously emotionally you're in the bottom 95% tech along with your trading and chart reading, which you proved conclusively back in January.




Another who has little to add,resorting to personal attack.
Keep up the quality posts dhukka 



> Not on chat forums they don't.




I'm sure Radge/Howard Bandy and a few others would be happy to know that.



> Of course there are experts that separate themselves from the rest of the field by their performance, my point is that 5% is simply an arbitrary and meaningless number.




It may well be an arbitary number just as any other number---point remains there are those who at the upper limit of ANY scale.

Looking forward to your next rivveting post.


----------



## dhukka

tech/a said:


> Another who has little to add,resorting to personal attack.
> Keep up the quality posts dhukka
> 
> 
> I'm sure Radge/Howard Bandy and a few others would be happy to know that.
> 
> 
> 
> It may well be an arbitary number just as any other number---point remains there are those who at the upper limit of ANY scale.
> 
> Looking forward to your next rivveting post.




And therein lies the point tech, you have very little to add. There are people at the upper end of any scale, thanks for pointing out the obvious.


----------



## wayneL

tech/a said:


> I'm sure Radge/Howard Bandy and a few others would be happy to know that.



Radge & Bandy are just doing their 100% and not harping on about being in _x_%. I don't see them as having that emotional need.

Just like The Man From Snowy River:

_He hails from Snowy River, up by Kosciusko's side,
Where the hills are twice as steep and twice as rough;
Where a horse's hooves strike firelight from the flintstones every stride,
And the man that holds his own is good enough._


----------



## Trembling Hand

wayneL said:


> And the man that holds his own is good enough.




Wayne that line could get you in a heap of trouble. :casanova:


----------



## wayneL

Trembling Hand said:


> Wayne that line could get you in a heap of trouble. :casanova:




Heheheheh! I suppose their was a lack of women up there in those days...


----------



## rub92me

How about 5% of members of this forum account for 95% of the posts? Would that be true? Then both Wayne and tech/a can be in the 5% and everybody lives happily ever after


----------



## tech/a

Guys.

I'm happy to stop posting.

I only do it (post) as I recieve feed back from people who do gain from my postings.

If however a majority here see that which I post as simply self serving hot air just say so.

Even if a few are helped along in their pursuit of becoming the best that they can be then I'm happy.

I dont have a problem with Wayne---infact I enjoy a good stouch,but as I have said before---your peception of me self serving an ego the size of a house wears thin.
It is a perception that I'm sure a few have accept or move me on.
I'm also sure a few get some benifit from that which I post.

I'm abrupt call a spade a spade---thats me,some get used to it others dont.
If thats seen as egotistical,so be it.
If you think my type of people arent for ASF just let me know.
Dont beat around the bush with constant inuendo.

Yeh yeh I know you'll tell me Im making it about me.
Well if you read the thread it became firmly directed at me.
*Lets fix it once and for all.*


----------



## MichaelD

Food for thought. Absolutely NOT directed at specific poster(s).


The market simply IS. Anything else built around it (the market is "good" today, the market is "bad" today, my trading results are "crap" lately, "I'm a great trader", "I'm smarter than other market participants", "the market hurt me badly", "I'm in the top 5% of traders"), are artificial constructs that we add, usually to our detriment.

Accepting the market for what it is removes this discussion to the realm of detached intellectual amusement - just as the market cannot hurt us, neither too can such discussions.

If one's ego can be damaged by either the market or by words on a computer screen then the problem lies within.


Taking the central premise of this thread:
5% of traders are profitable
95% of traders are not profitable

I'm profitable. I guess that means I'm in the 5%. That's interesting. Next.


----------



## Happy

Tech/a this is not the first time that you feel bemused/offended/disappointed or whatever the feeling is, and I have no answer to how to fix it.

I enjoy your posts; I like when spade is called spade.
So if one supporter is enough for you to post, please post.

I noticed that debates too often change from discussion of certain topic to personal attacks, chest beating, puffing up and whatever.

I think it has something to do with simple way of thinking -
Somebody says his point of view and if you don’t happen to agree you are wrong, stupid, and all the rest of niceties coming your way.

Have no answer and suppose one way to fix it could be to stop participation, but be sure here will be many posters who will miss you.

Could we have Tech/a forum where you could have the eject button?


----------



## tech/a

Michael.

Totally agree with your summation.
And would include the various other topics I write upon,Business in general,Property,various trading methodologies.

With threads often instigated by myself.
It appears this "Expertise" in such a wide range of fields offends.

After 54 yrs and 30 of which spent reaching beyond average in these areas,perhaps I have been wrong in the *"Assumption"* that people would be interested in the way I have approached them.

Wayne may well be right in that only a handfull give a rats.
In which case---as more than a few have pointed out to me Why do it.

Why has always been an *assumption* which may well be flawed.
If so my fault and indeed if flawed then my continuation would be seen as egotistical---even by myself.


----------



## IFocus

tech/a said:


> I'm abrupt call a spade a spade---thats me,




Tech I just put it down to the heat wave in Adelaide everyone there must be getting cranky by now LOL


----------



## r m

IFocus said:


> Tech I just put it down to the heat wave in Adelaide everyone there must be getting cranky by now LOL




It is pretty hot in Adelaide and in Melbourne as well at the moment.  Perhaps he should be calling a shade a shade.  It's much too hot to be thinking about spades.


----------



## nizar

MichaelD said:


> Taking the central premise of this thread:
> 5% of traders are profitable
> 95% of traders are not profitable
> 
> I'm profitable. I guess that means I'm in the 5%. That's interesting. Next.




Probably alot more than 5% of traders have made money over the last 5 years.

In fact, not counting the last 6-9 months, it was probably 95% of traders who were profitable, and 5% that were not.


----------



## barney

nizar said:


> Probably alot more than 5% of traders have made money over the last 5 years.
> 
> In fact, not counting the last 6-9 months, it was probably 95% of traders who were profitable, and 5% that were not.




Great !!  Thanks for that Nizar ........... now I'm in the 5% ............ Arthur or Martha .......... I have no idea !! ..............  I know I'm in the 100% , thats for sure


----------



## BBand

If 5% are taking money from the other 95% who are losing, and the market has an average turnover of $xxxxxx.

Can some genius work out the approx expectancy for me - because I think that I am not getting my fair share of the spoils 

I don't think Mr market has been reading the same books as me - he has a habit of proving some of my "best" trades wrong

Nizar
"It was probably 95% of traders who were profitable, and 5% that were not"
- if that was the case - where did all this magical money come from

Another market mystery?

Peter


----------



## theasxgorilla

BBand said:


> If 5% are taking money from the other 95% who are losing, and the market has an average turnover of $xxxxxx.




Hey Bband,

This statement prompts me to think about the assertion many have, that the markets are a zero sum game. But when it comes to stock markets, are they really?  If they are, I expect it's not as cut and dry as many think ie. "I won therefore someone else must have lost an equivalent amount".

Ponder the thought of capital added to the markets through lending eg. a margin loan.  The arrival of this new capital might tip the supply/demand balance in a given stock toward demand, thereby driving up the stock price.  If the stock is at a new all-time-high by inference all holders are winners, on paper, including that most recent buyer*, who now has to add the margin loan debt to his liability column.  If new debtors arrive on the scene and push prices even higher then each previous buyer moves further away from break even and into the black.

I think it's possible in the stock market, particularly this most recent bull market as Nizar describes, for a proportion much greater than 5% to be winners.  Practically everyone with a super account who just left it alone and didn't try to get too cute is today a 'winner'.

Sorry people, making a profit puts you in the 95%.

* yes I realise that due to liquidity considerations this last buyer probably won't be able to liquidate his/her entire position again at the last trade price, but LVRs are calculated of this value.


----------



## BBand

Hi ASX,
I understand what you are saying (I think)

All I was doing was just going with the theme of the thread

5/95% would probably be about right if the market had a steady turn over of existing money.

But as additional money is put into the kitty, then the 5/95% theory could be a bit lop sided, due to investors just holding their positions in an uptrending market.

It takes additional money to fuel a strong uptrend. (XJO)

My thoughts are probably as simplistic as is my trading - but I am profitable - and thats what counts.

Peter


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## MichaelD

tech/a said:


> If so my fault and indeed if flawed then my continuation would be seen as egotistical---even by myself.




Why do you post to stock trading fora?

Why do I post to stock trading fora?

Why does anyone post to stock trading fora?

Why do people blog their trading?


I won't answer directly, but it ISN'T to educate others (and at the heart of it it isn't to stroke one's ego, either).


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## nizar

Michael in response to your questions.

*Why do you post to stock trading fora?*

To learn from others.
You can see this from the number of threads I have started in the Trading Systems section of this board.

*Why do people blog their trading?*

To try to give back some of what I have learnt to the trading community.
Alot of people that know I trade *think* that they want to learn about trading, so now I just refer them to the blog. 

*I say "think" because most of the guys don't end up going through with it. They are too busy. It all comes down to the passion as mentioned earlier by tech and myself.

*I won't answer directly, but it ISN'T to educate others*

Maybe for you it isn't.
Like I said -- for me blogging is to educate others and posting is to learn from others.


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## MichaelD

nizar said:


> Like I said -- for me blogging is to educate others and posting is to learn from others.



You'll answer differently in a year or two when you realize this isn't true.


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## tech/a

Michael.

*I give in.*
Ive been posting on this and one other forum for 14 yrs and I've believed as Nizar has.
Dont want to wait another 2 yrs.!


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## julius

MichaelD said:


> Why do you post to stock trading fora?
> 
> Why do I post to stock trading fora?
> 
> Why does anyone post to stock trading fora?
> 
> Why do people blog their trading?
> 
> 
> I won't answer directly, but it ISN'T to educate others (and at the heart of it it isn't to stroke one's ego, either).




RECOGNITION


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## sails

MichaelD said:


> Why do you post to stock trading fora?
> 
> Why do I post to stock trading fora?
> 
> Why does anyone post to stock trading fora?
> 
> Why do people blog their trading?
> 
> 
> I won't answer directly, but it ISN'T to educate others (and at the heart of it it isn't to stroke one's ego, either).




Michael, that is your opinion, but my opinion is that we can't be so categorical and lump everyone into the same mindset.  IMHO, different people post for a number of various reasons.

I have been personally helped along the way, not only at ASF, but other US option forums.  My goal is to give back what I have received so freely from others as time allows.


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## tech/a

Well keeping with the topic.

Perhaps then 95% of people do think that people like the 5% of us who really do believe we are giving back something to 5% of people who benifit from our postings really are doing it for recognition.

Speaking for myself here I have to say the over the 14 yrs I've gained enormously from the 99.9% faceless people on these forums.
Tremendous contacts,even software,coding,direction,massive amounts of help which certainly paved the way for profitable trading,different approaches,different thinking,problem solving,confirmation,constructive critisism,feedback--to mention a few.

There may well be 5% of people who post for recognition.
And there will always be 5% of people who will always believe that its not possible for people to have non selfish motives when freely giving information/experience.

Fortunately enough of these people hang around long enough to help the small percentage who take up some of their musings.


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## Trembling Hand

Maybe 95% of people post/blog for entertainment. Beats the **** out of watching the idiot box.


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## RichKid

Companionship with like minded people must be up there as a reason why people post on forums, most people like to be around other people or at least interact with them in some way...not everyone in the office or at home is interested in the types of topics we debate here on ASF.

NB We're getting a bit off topic here in relation to the initial discussion.


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## chops_a_must

RichKid said:


> Companionship with like minded people must be up there as a reason why people post on forums, most people like to be around other people or at least interact with them in some way...not everyone in the office or at home is interested in the types of topics we debate here on ASF.
> 
> NB We're getting a bit off topic here in relation to the initial discussion.




Yep. Otherwise, why would forums exist for music and every other interest you can imagine?

As for blogs, I like to write, and the possibility of having a reader forces you to write and get your thoughts on paper, which might not otherwise occur. I'm sure there are others out there who are of the same mind.


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## 2020hindsight

nizar said:


> Michael in response to your questions.
> 
> Why do you post to stock trading fora?




Why do you post to stock trading fora?
a) lark?
b) dig?
c) bit of fun?

sorry nizar, - or rather thanks - just that I never realized before that the plural of forum could be anything but forums 
PS I'm guessing that 95% of people would say "forums" btw - congratulations - you're one of the 5% obviously. 

http://dictionary.reference.com/browse/forum

Old fashioned dictionary:-


> fo·rum   n.   pl. fo·rums also *fo·ra  *
> 
> The public square or marketplace of an ancient Roman city that was the assembly place for judicial activity and public business.
> A public meeting place for open discussion.
> A medium for open discussion or voicing of ideas, such as a newspaper, a radio or television program, or a website.
> A public meeting or presentation involving a discussion usually among experts and often including audience participation.
> A court of law; a tribunal.




New fashioned dictionary:- (Free On-line Dictionary of Computing )


> forum messaging ...
> (*Plural "fora" or "forums*") Any discussion group accessible through a dial-in BBS (e.g. GEnie, CI$), a mailing list, or a Usenet newsgroup (see network, the). A forum functions much like a bulletin board; users submit postings for all to read and discussion ensues.
> Contrast real-time chat or point-to-point personal e-mail.


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## wayneL

I think a lot of the reasons we think we need to post are secondary.

I.e. To learn, to teach, to inflate one's ego, entertainment, whatever. But maybe there's a deeper need?

Humans biological success is in no small measure been a collaborative process. We form cooperative groups and feed off each others endeavours, sometimes as a whole, sometimes in competition. 

But we like to hang out together, even if for a good old fashioned dust-up... we need to communicate. Clubs, pubs, towns, cities exist for that reason.

Sitting behind a screen is lonely and the first need is communication. The need for ego, love, admiration, sport, whatever comes second.

It's a community.

...and to keep it on topic, the people with a need to feel in the 5%, need the 95% to adore them.


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## Garpal Gumnut

MichaelD said:


> Why do you post to stock trading fora?
> 
> Why do I post to stock trading fora?
> 
> Why does anyone post to stock trading fora?
> 
> Why do people blog their trading?
> 
> 
> I won't answer directly, but it ISN'T to educate others (and at the heart of it it isn't to stroke one's ego, either).




I must correct you on your use of fora.

This is not a site for latin scholars. The plural of forum is forums.

I do enjoy ASF, its posters are by far the best of any stock site one can visit for free. Occasional arguments break out, but the information is priceless even from the argumentative.

As they used say in Rome

*Non illigitamus carborundum*

Don't let the bastards get you down.

gg


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## MichaelD

People blog trading because they aren't confident enough in their trading plan to trade without blogging.

Similarly, people post in forums to validate their own beliefs.

eg

Posting "I use a 6.5ATR trailing stop and always close my positions when the stop is breached" will make me more likely to actually do this in practice.


Along the way, there can be indeed much education of others, but first and foremost we post for selfish reasons (and there is nothing at all wrong with that).

Ed Seykota - "Everyone gets what they want from the market."


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## motorway

People like to talk and share 

about things that excite them...

Excitement and passion
are things that make life worth living

in some sense they are life...

motorway


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## Julia

Garpal Gumnut said:


> I must correct you on your use of fora.
> 
> This is not a site for latin scholars. The plural of forum is forums.
> 
> I do enjoy ASF, its posters are by far the best of any stock site one can visit for free. Occasional arguments break out, but the information is priceless even from the argumentative.
> 
> As they used say in Rome
> 
> *Non illigitamus carborundum*
> 
> Don't let the bastards get you down.
> 
> gg



That's a bit tough, isn't it, GG?  Once upon a time only 'fora' would have been correct, but these days with the acceptance in the English language of popular idiom, 'forums' is probably more widely understood.  That doesn't to my mind make 'fora' wrong.

To stay somewhat off topic, on the question of why people post on an internet forum, I'd agree with the poster who said (Wayne, I think) that we are naturally drawn to a collaborative situation, enjoying communicating with others who have similar interests and capacity to express themselves.

I don't believe at all that people posting do so necessarily to boost their egos.
Perhaps some do, but not most.  I really value the information that's available on ASF on a wide variety of subjects, plus the cyber friends I have made from being a member.


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## Garpal Gumnut

Julia said:


> That's a bit tough, isn't it, GG?  Once upon a time only 'fora' would have been correct, but these days with the acceptance in the English language of popular idiom, 'forums' is probably more widely understood.  That doesn't to my mind make 'fora' wrong.
> 
> To stay somewhat off topic, on the question of why people post on an internet forum, I'd agree with the poster who said (Wayne, I think) that we are naturally drawn to a collaborative situation, enjoying communicating with others who have similar interests and capacity to express themselves.
> 
> I don't believe at all that people posting do so necessarily to boost their egos.
> Perhaps some do, but not most.  I really value the information that's available on ASF on a wide variety of subjects, plus the cyber friends I have made from being a member.




Yes the English language is such an adaptable tool that common usage wins out over correctness, and you have to "go with the Flo" apologies to any Flo's out there.

gg


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## nizar

MichaelD said:


> People blog trading because they aren't confident enough in their trading plan to trade without blogging.




LOL are you serious?

And how exactly would a blog instill that confidence??


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## nizar

Garpal Gumnut said:


> This is not a site for latin scholars. The plural of forum is forums.




Classic 



			
				MichaelD said:
			
		

> First and foremost *we* post for selfish reasons (and there is nothing at all wrong with that).




I cant see how you can generalise this.
Different people may well post for different reasons.
Speak for yourself.


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## Sean K

nizar said:


> LOL are you serious?
> 
> And how exactly would a blog instill that confidence??



Affirmation.


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## qmanthebarbarian

95% of stock forums seem to be for people to ramp their stocks. 

This one is in the 5% where people who actually have an idea go to share their ideas and have them ideas challenged. Even the most successful person recognises that they won't become smarter or better if they are not challenged.

Keep up the great work ASF'ers and mods please don't let the discussion degenerate to the point where people like tech are cajoled into leaving.


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## wayneL

Julia said:


> *I don't believe at all that people posting do so necessarily to boost their egos.*
> Perhaps some do, but not most.  I really value the information that's available on ASF on a wide variety of subjects, plus the cyber friends I have made from being a member.



Yeah agree; to the point that those who do post for ego purposes stick out like the dog's proverbials.

Similarly, I think Michael's hypothesis apples to a minority.


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## Kauri

Why do people post on forums and blogs...
 for myself I guess the usual suspects.....
 to share and learn..
 have more experienced traders point out where you are going wrong and hopefully point you in the right direction..
 to share ideas/news and sometimes "_news to be" _that may help other traders and/or explain why something has happened in the market...
 trading can be a plurry lonely game and at least you have some interaction with more than just a computer...
 and I personally tend to ramble semi-incoherently when I have had a drop or three... 

 Blogging... well I sometimes run one when I am trying/testing a new idea... I find it invaluable in assessing real time whether the idea will be worth following.. 
each to his own I guess...
Cheers
..........Kauri


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## IFocus

MichaelD said:


> People blog trading because they aren't confident enough in their trading plan to trade without blogging.
> 
> Similarly, people post in forums to validate their own beliefs.
> 
> eg
> 
> Posting "I use a 6.5ATR trailing stop and always close my positions when the stop is breached" will make me more likely to actually do this in practice.
> 
> 
> Along the way, there can be indeed much education of others, but first and foremost we post for selfish reasons (and there is nothing at all wrong with that).
> 
> Ed Seykota - "Everyone gets what they want from the market."




Staying off topic, Michael you have touched on a number of reasons why people post on forums and blogs but to lump all or even most posters in the same bag is I believe generalizing an issue that runs much deeper and is not so black and white.

Given that most posters are males (assumption) then sure there are a number of underlying psychology foundations that you could generalize about.

However one thing about this site is the wide spread of ages and as a consequence there will be a wide spread of psychological maturity development each level has a range of different emotional needs.

If you study any large group of men interacting age or more importantly maturity has a huge bearing on how and why they interact. I make the point that old men have not necessarily reached full maturity........

Going back to the 5/95 discussion when I think back to all the trading groups I used to attend on the surface the 5/95 rule seemed pretty close to the mark.


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## Trembling Hand

MichaelD said:


> People blog trading because they aren't confident enough in their trading plan to trade without blogging.
> 
> Similarly, people post in forums to validate their own beliefs.




What a load of rubbish. Another gem from someone who can fit a wide and diverse group into a silly generalization.


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## 2020hindsight

There are 2 types of people - those that make generalisations, 
and those like me who don't 

PS tough call TH, I thought MichaelD was accurate - at least when he said (paraphrasing) that we post our tactics to reinforce them in our own mind. 

Like nailing your colours to the mast I guess.


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## theasxgorilla

2020hindsight said:


> PS tough call TH, I thought MichaelD was accurate - at least when he said (paraphrasing) that we post our tactics to reinforce them in our own mind.




I think MichaelD's comment had a far more negative connotation than the way you put it.  I think people don't blog their trading because they're not confident enough in their own trading decisions and psychology to have them scrutinised by the world.


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## julius

Michael that's a bit far fetched in my opinion... most people don't even like to disclose that kind of information.

I think on some level we all want a bit of recognition for what it is we are doing, be it winning, losing, being in the 5th% or the 95th%...

Especially with trading, it can be a lonely game at the best of times.


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## 2020hindsight

theasxgorilla said:


> I think MichaelD's comment had a far more negative connotation than the way you put it.  I think people don't blog their trading because they're not confident enough in their own trading decisions and psychology to have them scrutinised by the world.




err 
yep!
that'll do it every time lol.

Of course I could blog my trading - and you'd all be rich - just do the reverse.


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## chops_a_must

Regardless of where we think we are percentage wise, I think there is something that can make us all feel better, and inflate our egos.

In that, I'm absolutely certain that everyone here can paint better than CÃ©zanne. 

Says a lot for the top 5% of artists...

Cheers.


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## Bushman

As I am reading about the supersonic transformation of Bear Stearns from financial wizz kid to 2 bob operation, it strikes me that the top 5% of financial market participants have got us all into an awful mess. I mean these firms hired the straight distinction types, paid them a bucket load of cash and watched on with pride as they created a toxic worthless mess that might take us all down with them. 

Silly, silly 'top 5%'.


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