97% Of Traders Are Failures?

brerwallabi said:

There would be a structure of success in the 3%, I still doubt the figure, so has everyone in the 3% read or a written a book,is that what makes the structure - more knowledge, so what happens when we all became expert traders will the 3% change.

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hi brer,
Assuming the figure is right, it's just a percentage and can stay about the same in the long run, only a small fraction of people will come across this money/risk mgmt info. ASF and Reefcap, for example, only have a few thousand members, and a few hundred (or less who read/post regularly, of those an even smaller number will care much for the types of things Nick mentions).

There's a sucker born every minute so they will continually join the market and help keep that figure intact (or close to it by losing money). Remember how important the psychological part of it is, humans have behaved like this for centuries. For example, as a beginner, I'm not profitable yet, even though I now know of these things now, but that's because I'm only just learning this stuff and I intend to persevere, there are others who'll just go back to their bad old ways of merely punting on the ASX or who'll dismiss the maths because they don't like math- market corrections and downturns will sort them out.

Just for the record I'm sure there are many fundamental investors who don't use the type of mm/risk mgmt that Nick talks about but they'll be doing well (ie profitable), again I don't know of many.

Probably many of the people who are longterm successful maintain a very low profile.
I know a couple and for starters they wouldn't know what a stockmarket chat site was.

ice

ice said:

Probably many of the people who are longterm successful maintain a very low profile.
I know a couple and for starters they wouldn't know what a stockmarket chat site was.

ice

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Hi ice,
Yes, that makes sense, maybe they are also older investors who don't use the internet much to interact with other traders/investors.

'Investor' was someone who said he was doing really well out of his long term fundamental strategy (I'm afraid he doesn't post here anymore, to our great loss). I'm sure there are lots of highly profitable short term traders too who stay quiet.

How can one not be successful in the market? It's like taking candy from a baby. :twak:

websman said:

How can one not be successful in the market? It's like taking candy from a baby

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Depends on whether you're the taker or the baby...

GP

Hi everyone

I remember reading in a charting book once that anecdotal evidence suggested that less than 10% of traders are profitable in the long run.

And when you sit down and think about it, less than 10% is probably right because if it was as easy to make a living out of trading as some rampers would have you believe then everybody would be doing it and our unemployment rate would be much higher than the ~5% it is now because everyone would be sitting at home all day infront of their pc's punching in buy and sell orders all day

Those that are successful will have had a trading/investing plan (that worked) which takes time and effort to get right for one's particular circumstances and stuck to it. The vast majority of mug punters who continually post alleged profits are most probably struggling to make a quid imo.

From what I saw over at commsec and some other sites, there are many rampers/spruikers in chat rooms who imo try to create illusions of success by 'advertising' their supposed profits in the hope that the gullible and less experienced will follow their next ramps when the rampers are in reality trying to recover losses. Obviously some claims of profits will be true but since I can't tell which are and which aren't I disbelieve all of them...but that's just me being cautious.

You'll notice that many rampers also get very defensive and aggressive/abusive towards others when their claims or views are challenged. Imo, these types of chatters with their aggressive and abusive tactics are most likely struggling to be profitable and so take out their frustrations on others when they don't agree with their view/claim. For me, if someone was successful at trading/investing or whatever, why should it matter to them at all if someone else didn't believe their claims of profits unless of course they had another agenda behind their profit claims in that they have a need to be believed so that the gullible will follow their next ramps......bottom line for newbies, and even not so newbies, beware of claims of alleged profits as imo the vast majority will not be true.

I'm only new to this forum and so far have found it a very pleasant forum

Merry Christmas everyone and I'm off to bake some cookies for santa to have a snack when he stops by tonight.

bullmarket

bullmarket said:

And when you sit down and think about it, less than 10% is probably right because if it was as easy to make a living out of trading as some rampers would have you believe then everybody would be doing it and our unemployment rate would be much higher than the ~5% it is now because everyone would be sitting at home all day infront of their pc's punching in buy and sell orders all day

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Unemployments should actually be lower if you think about it

Can someone define what a "trader" is? Are traders people who arbitrage for profit?

Here's the ATO's definition of a person carrying on a business as a trader:

http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htm&pc=001/003/007/001/006&mnu=9447&mfp=001/003&st=&cy=1

captain black said:

Here's the ATO's definition of a person carrying on a business as a trader:

http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htm&pc=001/003/007/001/006&mnu=9447&mfp=001/003&st=&cy=1

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I've just had a look at the above links and it's interesting to note that some of the criteria which determine a "trader" are the same as those set down as mandatory for those who have self managed super funds!!

Seems that if one adheres rigorously to the rules of record keeping, including regularly revising the "Investment Strategy" for a SMSF, one can be considered a share trader!

Julia

GreatPig said:

Depends on whether you're the taker or the baby...

GP

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That comment did make me laugh ! .

Cheers Bob.

bullmarket said:

bullmarket

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You raise some interesting points. Some of which I have spend a lot of time researching - particularly the ones you raised about rampers and people exagerating profits. Another interesting point you raised was "why doesn't everyone make money on the stock market," and obviously this is a valid question.

As I have time contraints at the moment I will answer only that point in the most timely manner. 80% of traders fail because they do not have a plan, they let their emotions take over - they chase losses and seek risk when losses are involved and they are risk evasive when gains are involved. Certainly this juxtaposes what any profitable trader partakes in! It is our instynct to follow our emotions but often, instyncts are wrong!

Regards for now,

powwww

Yep Powwww you do have a point, I've being using mental stops for so long that stuffing up has become part of my trading.

But recently I now pay the small price to make it happen.( Paid Stop )
The best thing I ever did !!.

Take note new traders.
Bob.

hi powwww,

yes, totally agree with you re why most traders fail in the long run and that is why I mentioned in my original post that successful traders will very likely have had a trading/investment plan that took time and effort to develop and fine tune and most importantly they will have stuck to it.

cheers

bullmarket

At work there are around 3 or 4 other people who trade shares. They ALL lost money this year. I think the vast majority of the 90% that fail are like these guys. If they have a spare $20k and see a stock they like they buy $20k of it.

I think that being on a forum like this, where words like risk management/position sizing are discussed will increase the probability of success a lot more.

MIT

Hi all, this is a very interesting post and I had a great time reading through it.

I guess I find day-trading and gambling very similar in nature is because both are betting/trading with things that are UNPREDICTABLE. Benjamin Graham once said,'In the short run, the market is a voting machine, but in the long run it is a weighing machine'. As history has consistently shown, the daily market is driven by individuals sentiment, their greed and fear.

The market/individual stock will go up/down the next couple of days is anyone's guess, but traders are put in a huge disadvantage due fees/brokerage. TheREAL winners are the brokers and ASX.

In the longer run however, as long as the economic and productivity of the country improves, the share market will follow.

Last couple of years would have been easy for daytrading as Oz stock market is doing a great bull run... Its rather difficult to be losing money other than trading shorts/pull options all day long. However, as the volatility of the market increases, especially if there is a bust of the commodity boom, greed and fear will overwhelm most ppl and I guess theres when only 3% of day traders will be still in the black.

its just my two . :

matti_pacman said:

Hi all, this is a very interesting post and I had a great time reading through it.

I guess I find day-trading and gambling very similar in nature is because both are betting/trading with things that are UNPREDICTABLE. Benjamin Graham once said,'In the short run, the market is a voting machine, but in the long run it is a weighing machine'. As history has consistently shown, the daily market is driven by individuals sentiment, their greed and fear.

The market/individual stock will go up/down the next couple of days is anyone's guess, but traders are put in a huge disadvantage due fees/brokerage. TheREAL winners are the brokers and ASX.

In the longer run however, as long as the economic and productivity of the country improves, the share market will follow.

Last couple of years would have been easy for daytrading as Oz stock market is doing a great bull run... Its rather difficult to be losing money other than trading shorts/pull options all day long. However, as the volatility of the market increases, especially if there is a bust of the commodity boom, greed and fear will overwhelm most ppl and I guess theres when only 3% of day traders will be still in the black.

its just my two . :

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Another Graham/Buffett wannabe thinks that they know what trading is about because Benjamin Graham said so.
It's funny how alot of 'value' investors think trading would've been easy during the past few years, yet rarely come out and make similar comments about other investors. The performance of the 'value' investor has absolutely nothing to do with bullish conditions. It's all about picking the right stock, isn't it?

professor_frink said:

The performance of the 'value' investor has absolutely nothing to do with bullish conditions. It's all about picking the right stock, isn't it?

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You are right in some sense professor, it has been an easy ride for most traders/investors last couple of yrs, its almost like randomly picking a number of stock (blue chips), you would have got yourself at least 10%p.a return.. Picking the right stock helps, but as the old saying goes- when there is a flood, it floats all boats! :

The problem comes when there is a sudden downturn... which is unpredictable, and often catch ppl off guide. Those company that are fundamentally strong can make changes/ride through the storm, and those that are speculative in nature will disappear into the dark.

Let us all pray that the day will never come and everyone keep benefiting from the raising market!

matti_pacman said:

Let us all pray that the day will never come and everyone keep benefiting from the raising market!

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Hhhmmm, I'd like to convey the same wishful sentiment, but I'm going to say that a lot of punters are going to lose their shirts down the track. Economic cyles are inevitable, supply will catch up with demand, and people will jump on a bandwagon just as it rolls over a cliff.

I'm hoping the supercyle keeps on getting more super and Chindiapanaiwanporeland keeps growing around 10% for the next 20 years using our valuable dirt and rocks to do so, but, with the US tettering on the edge of a knife, econimc disaster is just a housing crash away. Don parachutes punters.

Make hay, but have some gold stashed under the mattress too.

matti_pacman said:

You are right in some sense professor, it has been an easy ride for most traders/investors last couple of yrs, its almost like randomly picking a number of stock (blue chips), you would have got yourself at least 10%p.a return.. Picking the right stock helps, but as the old saying goes- when there is a flood, it floats all boats! :

The problem comes when there is a sudden downturn... which is unpredictable, and often catch ppl off guide. Those company that are fundamentally strong can make changes/ride through the storm, and those that are speculative in nature will disappear into the dark.

Let us all pray that the day will never come and everyone keep benefiting from the raising market!

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Another incorrect assumption(but don't worry, you are far from alone in this view, there are lots on the forum who think that way). I think you are confusing traders and small cap "punters" a little bit.
My returns are more closely linked to volatility, not direction.
So far this year, my most profitable month has been May, with daylight a very distant 2nd.
The closest thing to a storm for me will be a low volatility environment like 2004, but I have longer term(position trading, not investing "long term" ) methods that I can implement.
The storm you speak of, is simply business as usual for others.

matti_pacman said:

Hi all, this is a very interesting post and I had a great time reading through it.

I guess I find day-trading and gambling very similar in nature is because both are betting/trading with things that are UNPREDICTABLE. Benjamin Graham once said,'In the short run, the market is a voting machine, but in the long run it is a weighing machine'. As history has consistently shown, the daily market is driven by individuals sentiment, their greed and fear.

The market/individual stock will go up/down the next couple of days is anyone's guess, but traders are put in a huge disadvantage due fees/brokerage. TheREAL winners are the brokers and ASX.

In the longer run however, as long as the economic and productivity of the country improves, the share market will follow.

Last couple of years would have been easy for daytrading as Oz stock market is doing a great bull run... Its rather difficult to be losing money other than trading shorts/pull options all day long. However, as the volatility of the market increases, especially if there is a bust of the commodity boom, greed and fear will overwhelm most ppl and I guess theres when only 3% of day traders will be still in the black.

its just my two . :

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A common misconception by those who cannot trade the most difficult of timeframes. Not necessarily day trading but very short term.

All to often traders think that to be profitable you have to pick the right stock more often than not (right being profitable).
When the fact is that you need to have a higher Reward to Risk Ratio over time in your favour.
Not understanding the concept and indeed the application of this principal is the downfall of the majority of traders.

Even in Bear Markets there are stocks which out perform.

Even if you get 2 out of 8 you can be extremely profitable.
If you cant workout how then your in the 90%.