97% Of Traders Are Failures?

[tech/a]

Thanks Prof and T/A,

I'm not putting on any new positions until i can get a my trading capital back up to above 30k. Might be a couple of months.

Hell I started a margin account with no1 son with the Min (at the time) $15,000. So dont have to have large capital base (Now 6 x that).

During this time i'll go over all my records and try to see where i went wrong. I suspect already that i've over traded, having 20 losing trades out of 25 since May 30th.

Could be part of the problem.
Why not start a trading blog here (wether you trade it or not with real $$s) and walk us through the trades with ideas from us.Log up the results and learn from the experience.

I haven't actually got to MaxDD yet, but i've had enough to know somethings wrong.

See a problem already.
Your miss inturpreting MaxDD with Maximum your prepared to lose!!!!
Max DD is a figure calculated from peak to valley drawdowns from within a system over a period of time.Its the maximum your methodology has retraced at anyone time through out the testing period.
A figure you use as a benchmark to see wether your method trades ouside the boundaries tested.
2 VERY different things.

For sometime i've been thinking about putting all my effort into systems work, but its the old 'scared of missing out' that gets me.

Good Idea! Better to miss out than be Taken out of the industry!!

I really appreciate your kinds words and advice.

Cheers,

Hell normally I'm referred to as an egotistical self opinionated GURU! (Not by you).

 

[happytrader]

I only know 2 traders who didn't get knocked about in their first years.

Its very important to have an identity. Are you a trader or an investor? The distinction you make will ultimately affect your actions. As a trader you will not be looking for an attachment or a multitude of reasons to stick around. You're only there for the party and your stoploss is all the only reason you need to take your leave. Traders are indomitable, travel light and don't carry much baggage.

Investors are the exact opposite.

Cheers
Happytrader

 

[CanOz]

Could be part of the problem.
Why not start a trading blog here (wether you trade it or not with real $$s) and walk us through the trades with ideas from us.Log up the results and learn from the experience.

This is a good idea. I could paper trade while i re build up my capital.

See a problem already.
Your miss inturpreting MaxDD with Maximum your prepared to lose!!!!
Max DD is a figure calculated from peak to valley drawdowns from within a system over a period of time.Its the maximum your methodology has retraced at anyone time through out the testing period.
A figure you use as a benchmark to see wether your method trades ouside the boundaries tested.
2 VERY different things.

Yes i know, wrong term, i meant that i have lost as much as i can stomach...which is in itself, a huge learning experience.

You know, as i go through my yearly records, its quite a learning experience too.

I must admit Tech, your full of some good ideas sometimes.

I'll post some humbling stats later once i finish, then we can come up with a trading plan.

Still have testing to do on the system today too.

Cheers,

 

[>Apocalypto<]

The reason 97% of traders may fail is because they give up.

If you work at it hard enough and study study & study evaluate your mistakes and keep plugging you will succeed. Things come faster to different people.

Any one having a hard time, don't despair that's the fun of it keep learning from your mistakes write a plan with rules study and always be confident about what your doing be objective and never be one sided.

Good trading!

 

[>Apocalypto<]

Hell normally I'm referred to as an egotistical self opinionated GURU! (Not by you).

Tech we all love your work in our own special way!

Well at least I know I do!

 

[MattB]

...if 97% of traders fail, I find it really hard to believe that there's even a forum here talking about trading, or that an entire section of the daily newspaper is dedicated to stocks! If that were the case, wouldn't we all just put money in the bank, then 100% of us succeed by making a tiny bit of interest!

Whats the 'fail' criteria here?

 

[Julia]

...if 97% of traders fail, I find it really hard to believe that there's even a forum here talking about trading, or that an entire section of the daily newspaper is dedicated to stocks! If that were the case, wouldn't we all just put money in the bank, then 100% of us succeed by making a tiny bit of interest!

Whats the 'fail' criteria here?

Matt,

I think it's in the interpretation of "trading" as opposed to "investing".
e.g. my preference is for stocks mostly in the top 200 held on a long term basis (or as long as they are performing well), but several members here regard that with scorn and prefer to trade on a very short term basis.
I'm sure some traders will explain further if necessary.

 

[tech/a]

Whats the 'fail' criteria here?

For me its a net profit of all costs related to trading.(May not be others idea).

(1) Software
(2) Hardware
(3) Feeds
(4) Education
(5) My time involved.

(5) Most people ignore.
If you costed your time out at even $20/hr and then related that back to the number of hrs you spend researching and trading,I'm sure you'll find the 97% around the mark.

If I costed out the Hrly rate my company returns me over the 12yrs V the time I have spent on the business of trading then I'm well behind that which the company returns me---thats one of the reasons why I dont wish to trade fulltime,to most my results arent to tardy! ( I dont think they are that bad).

Anyone can turn a profit now and again but over 12 mths or more???

 

[>Apocalypto<]

...if 97% of traders fail, I find it really hard to believe that there's even a forum here talking about trading, or that an entire section of the daily newspaper is dedicated to stocks! If that were the case, wouldn't we all just put money in the bank, then 100% of us succeed by making a tiny bit of interest!

Whats the 'fail' criteria here?

Matt,

you never heard of the term Work in progress

And one replaces the other.

 

[bingk6]

Can,

Irrespective of how good a trading plan you (or for anybody else, for that matter) have, there will always be drawdowns in your trading. This is part and parcel of trading. Sometimes, these drawdowns will occur right at the start where you can least afford to lose and is emotionally challenging. Other times, it may come when you have accuulated a lot of profit, in which case, drawdowns can more easily digested. If your trading plan has been extensively tested and you have confidence that it has positive expectancy then, I believe, the correct action is to persevere with it and allow that positive expectancy to play itself out. Psychologically this can be very difficult, particulaly after recent bad performances, which is a major reason why 97% of traders are failures. It takes more mental strength than you can imagine. Having this "bullet proof" psychology together with the ability to look long term in the face of short term adversity is what separates the "winners" from the "losers". Such confidence can only come from extensive testing of your systems so that you know its characteristics back to front, whereby the results would have given you a lot of ideas as to what to expect from your system.

Tech,

I am curious as to why you and a few other people often mention "overtrading" as possibly a problem. Surely, if your system possesses positive expectancy, you would surely want to trade it "until the cows come home". If after a large number of trades, your system is not performing as you had expected, or indeed making a loss, then your system does not have positive expectancy. A positive expectancy system will always generate a positive return if you pump enough transactions through it. To me, it is not possible to have a system with positive expectancy and still suffer a loss as a result of overtrading, unless we are talking making too many mistakes in carrying out your trading plan as a result of the sheer number of transactions, which is a different issue altogether.

Just my

 

[Spaghetti]

I have no trading plan at all really. If I could plan and record and show discipline I could earn lots working for someone. I trade because I am dysfunctional in paperwork and plans. I hate it. Hate charts, hate spreadsheets, hate balance sheets. I look at all the above though, problems stick out like the proverbial. Can't see any reason to over analyise.

I know I could have made more money if.......... but I cannot believe so many lose money when it has been a period when making money is so easy.

I think a plan will be nesessary when the market is off the boil but at the moment how can one possibly lose?

I do honestly believe if you lose money in this sort of positive climate then perhap a broker would work better.

 

[Spaghetti]

For a total beginner though timing entry is crucial. If you started last week...ouch. If you started yesterday

 

[CanOz]

Can,

Irrespective of how good a trading plan you (or for anybody else, for that matter) have, there will always be drawdowns in your trading. This is part and parcel of trading. Sometimes, these drawdowns will occur right at the start where you can least afford to lose and is emotionally challenging. Other times, it may come when you have accuulated a lot of profit, in which case, drawdowns can more easily digested. If your trading plan has been extensively tested and you have confidence that it has positive expectancy then, I believe, the correct action is to persevere with it and allow that positive expectancy to play itself out. Psychologically this can be very difficult, particulaly after recent bad performances, which is a major reason why 97% of traders are failures. It takes more mental strength than you can imagine. Having this "bullet proof" psychology together with the ability to look long term in the face of short term adversity is what separates the "winners" from the "losers". Such confidence can only come from extensive testing of your systems so that you know its characteristics back to front, whereby the results would have given you a lot of ideas as to what to expect from your system.

Tech,

I am curious as to why you and a few other people often mention "overtrading" as possibly a problem. Surely, if your system possesses positive expectancy, you would surely want to trade it "until the cows come home". If after a large number of trades, your system is not performing as you had expected, or indeed making a loss, then your system does not have positive expectancy. A positive expectancy system will always generate a positive return if you pump enough transactions through it. To me, it is not possible to have a system with positive expectancy and still suffer a loss as a result of overtrading, unless we are talking making too many mistakes in carrying out your trading plan as a result of the sheer number of transactions, which is a different issue altogether.

Just my

Some great points there Bingk6...but aren't you assuming i'm trading a mechanical system? At the moment ii'm trading a descretionary system.

Sorry mate if my incorrect use of the drawdown term confused you.

Cheers,

 

[tech/a]

That was my assumption Canaussieuk.(Discretionary)

For a total beginner though timing entry is crucial. If you started last week...ouch. If you started yesterday

Depends on timeframe.
Entry is one of the LEAST important components.

 

[CanOz]

That was my assumption Canaussieuk.(Discretionary)


Depends on timeframe.
Entry is one of the LEAST important components.

Theres no way i can test my Descret. system ,but its right out of Nick's course. I really do suspect that if i'm more patient, and wait for higher probability opportunities and risk less, then i would do ok through this volitility. But until my coach (Nick, for another 2 months) comes back from AL i'll stand aside, lick my wounds and prepare for the tax man.

Live and learn, i'm very fortunate that i'm single with no dependants, living away from home saving every penny i earn to learn the hard way.

Got a few more years left yet.

Cheers,

 

[Chorlton]

Positive expectancy and R/R ratio's are KNOWNS that are related to the numbers which your trading methodology returns

Hi Tech/A,

Can I ask how one would go about assessing "known" R/R ratios in relation to the trading methodology under consideration?

I assume that the only two options would be either (i) to look back at past trades or (ii) to look at values derived from backtesting.

With option (i), How would this be achieved? For example, on the winning trades, would you look at the price you actually entered and exited together with the original stop level (which obviously hadn't been hit)?

However, with the losing trades, I assume that this could not be calculated as there would be no actual exit (with profit). If this is the case, then assuming that you've had a long run of losing trades, how can the actual average R:R be assessed???

With option (ii), I assume that this would only be possible with a pure mechanical system that you can code. In the case of a discretionary system, IMO this option would not be possible.

Therefore, if you were trading a discretionary system that was currently picking only losing trades, how could this R:R ratio be recorded??


Thanks in advance as this topic has always confused me a little.....

All the best,

Chorlton

 

[happytrader]

That was my assumption Canaussieuk.(Discretionary)


Depends on timeframe.
Entry is one of the LEAST important components.

If you are trading short time frames with leverage or derivatives everything matters. Then if it doesn't work out you have the satisfaction of knowing you did the best you could in the areas within your control. Doing excellent work and aiming to trade well is where the edge is.

Cheers
Happytrader

 

[wayneL]

If you are trading short time frames with leverage or derivatives everything matters. Then if it doesn't work out you have the satisfaction of knowing you did the best you could in the areas within your control. Doing excellent work and aiming to trade well is where the edge is.

Cheers
Happytrader

Exactly.

Entry may not matter on long trends, but in swing trading, it is at least as important as the exit and has a profound effect on the ultimate expectancy figures.

In fact the exit is defined by the entry.

 

[motorway]

In fact the exit is defined by the entry.

And the stop defines the entry

motorway

 

[theasxgorilla]

Theres no way i can test my Descret. system ,but its right out of Nick's course. I really do suspect that if i'm more patient, and wait for higher probability opportunities and risk less, then i would do ok through this volitility. But until my coach (Nick, for another 2 months) comes back from AL i'll stand aside, lick my wounds and prepare for the tax man.

Live and learn, i'm very fortunate that i'm single with no dependants, living away from home saving every penny i earn to learn the hard way.

Got a few more years left yet.

Cheers,

CanAussie;

I like Alexander Elders goal posts for a beginner...snippets quoted:

"The minimum acceptable performance level for a beginner is a loss of 10% of trading capital in a year...many lose 10% in a month, if not a week...if you can survive for a year, learn about trading, and lose less than 10%, your education is cheap and you are way ahead of the crowd".

"The goal of a beginner is to cover trading expenses and generate an annual return on his/her account equal to one and a half times the current rate on T-Bills or a comparable riskless instrument (ie. ING Direct)".