97% Of Traders Are Failures?

[nizar]

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)".

I think Alexander Elder's book is a great one for beginners.
But unfortunately for me i read it after a couple of years out.
Top book though, but i wouldve got alot more out of it if i had read it at the outset. Van Tharp as well, top book, just didnt read it early enough.

 

[moxy]

well said asxgorilla

trading is the ultimate experience...I'm convinced. I've lost 50%. Made it all back plus more. Lost 50% again ( I know..f+++wit)...but...I'm learning. Putting your bucks on the line is the real deal....made 50% back...armed with van tharps expose....god help me!!! wish he had more of Sidney sheltons tone!!...enjoying the ride and learing a hellava lot along the way.!!!:

 

[It's Snake Pliskin]

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.

There must be a small club of us here.

 

[theasxgorilla]

Actually now that i'm reviewing all of my previous positions i'm seeing that my stops were too tight givven the recent volitility. Should i take this into consideration when taking trades in more volitile markets? Go for stops below/above areas of major support, and only where i get really good bang for the buck?

Cheers,

You've already mentioned dropping back to 1% of total equity per trade...perhaps a future enhancement to your plan might instigate that sooner, after x number of consecutive losers for example.

Being more selective will also decrease trade frequency there by steming the rate of loss. As you have mentioned, you can reduce your trading to ONLY the high risk/reward setups. But keep your position sizing conservative...if you're in a losing streak beware of falling into the trap of thinking that because your stop is tighter you can bet bigger and make it all back quick. Reality is you're probaly going to have to grind your way out of the hole.

If the system is discretionary the challenge is that you don't have a blueprint to tell you things like what is the approximate max number of consecutive losers you can expect to see, what was the MaxDD evidenced during backtesting. Without this information its difficult to position size in a way that will allow you to survive through the big drawdowns. And its psychologically tough because you dont know whether its you, the system, the market etc.

Sounds like you might already know what to do!

 

[tech/a]

Hi Tech/A,

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

Unfortunately you need to be able to test it.
You need "significant" numbers ie a large data sample to be able to have confidence.You need to buy and learn the software or hire someone who can test/write it up.To look back and do it manually unfortunately will take years for significant numbers.

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???

Add up every winner
Add up every loser
Add up the capital used in trades
Add up transaction costs.
Add up number of trades.


Then do your averages.
Winners/losers = Winning %
Total profit or loss/into capital used in the trades = $return expectancy.
Losing trades/into winning trades = Expectancy / trade.

There are many more ratio's.

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.

Everything can be coded but agree we are limited to knowledge and software capability (Well I am!).

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

The losing trades and the nett losses would be deducted from the nett wins.

Happy
In your case yes your correct.
However those learning should be involved in trading which is perhaps a little longer in time,where the equation of having to be right isnt as important.
Its easier to trade a weekly methodology than a daily than a short term method than a day trading method.(If trading in a discretionary manner).---well Ive found.

ASXG

you dont know whether its you, the system, the market etc.

The problem with most traders I would expect.

Snake/Wayne and co.

How do you guys work your expectancy (Manually,Test it/Record trades ad hock) and what are an idea of Acceptable numbers for you?

 

[wayneL]

Snake/Wayne and co.

How do you guys work your expectancy (Manually,Test it/Record trades ad hock) and what are an idea of Acceptable numbers for you?

Crude backtesting (i.e. code it up as best as you can) and I keep a total expectancy of all trades, plus moving expectancy of the last x trades to track recent performance.

In round figures over at least the last 3 years
Risk/Reward a touch over 3
Win% a touch under 60%
Expectancy a touch over 1.4

The moving figure moves either side of that of course.

 

[clowboy]

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.

We all have to start somewhere.
I lost money for the first two years of a bull run, and may not have made as much money over the last if I had just held onto a few stocks that never stoped going, however the real test will be to see if I have learnt anything when the bull ends and the bear shakes the snow of his coat.

 

[clowboy]

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)".

they are good quotes asxgorrilla.

Doesnt change the emotional torment of losing money in a bull market though.

 

[happytrader]

When I started I not only failed to plan for every possible outcome but my own reaction to it.

Even though I trade short time frames which is anywhere from half an hour to a week, this does not exempt me from knowing what a stock has been doing in all time frames from yearly, quarterly, monthly, weekly, daily to hourly. These time frames and the price overlaps set the scene for entries in short term trades. For instance with regard to the banking sector,

1. the Santa Claus rally is almost a given.

2. take note of where that banking stock opens at the beginning of the year because this information and the range of the previous year will provide you information you can use now.

3. be aware that there are heads and tails on most pricebars so there is no need to rush into trades.

4. sitting on your hands is a prerequisite.

5. by honouring your entries, profit targets, stoplosses and thorough research you honour yourself.

6. don't take it personally

No need to buy software when you have www.bigcharts.com. and their interactive option. It charts back 20 years. If you confine your backtesting to 10 stocks or less, it does not take much time at all. Keep your expenses low to take the pressure off having to make a return.

Cheers
Happytrader

 

[tech/a]

Happy some good stuff there.

But this??

No need to buy software when you have www.bigcharts.com. and their interactive option. It charts back 20 years. If you confine your backtesting to 10 stocks or less, it does not take much time at all. Keep your expenses low to take the pressure off having to make a return.

Do you mean choose 10 stocks and test them only or use just 10 to design a trading plan/test results etc?
I can see where this is possible with just 10 stocks and a good idea,but if your talking about the whole market based on the above statement---???

 

[happytrader]

Happy some good stuff there.

But this??



Do you mean choose 10 stocks and test them only or use just 10 to design a trading plan/test results etc?
I can see where this is possible with just 10 stocks and a good idea,but if your talking about the whole market based on the above statement---???

Hi Tech

10 bluechips or a lot less such as the big four banks, the big insurance companies, the big miners, the big consumer staples etc. The easier and more predictable to read the better. What may not be obvious on a short time frame will often be abundantly clear on the longer time frames I talk about in my last post. Focus equals productivity.

Cheers
Happytrader

 

[tech/a]

Happy.

Nothing wrong with that!

 

[theasxgorilla]

they are good quotes asxgorrilla.

Doesnt change the emotional torment of losing money in a bull market though.

Yes, and that's not an easy situation to put into perspective. After all, it's only the longest bull market of the last 25 years.

I think a lot of us are all struggling with something. Whilst I've been fortunate (makes me sound lucky, but its been a semi-trailer load of hard work) enough to make returns that exceeded the indexes every year since the bull market began, I suffer with not having evolved confidence in my trading until later on and hence not committing an amount of funds earlier on that could have actually made a real difference (I've also been playing with TechTrader in Amibroker during the last couple of weeks and it makes me sick how much money I would have made if I turned that system on and followed it "with confidence" early during the bull run. That and pulling large amounts of trading capital out of the market during the longest bull run of the last 25 years to go and buy property (on two occasions!).

Missing an opportunity to really prosper in this market sucks...but missing the opportunity to learn and get at least some benefit while its here is even worse. Woulda, coulda, shouldas....we've all got them.

 

[sails]

...
No need to buy software when you have www.bigcharts.com. and their interactive option. It charts back 20 years. If you confine your backtesting to 10 stocks or less, it does not take much time at all. Keep your expenses low to take the pressure off having to make a return....

Happytrader, I think you may have mentioned some time ago that bigcharts give live pricing in the last couple of hours. If so, do you know if this still available?

 

[happytrader]

Happytrader, I think you may have mentioned some time ago that bigcharts give live pricing in the last couple of hours. If so, do you know if this still available?

Hi Sails

Yes its still available for asx stocks at 2.20pm.

Cheers
Happytrader

 

[sails]

Hi Sails

Yes its still available for asx stocks at 2.20pm.

Cheers
Happytrader

Thanks happytrader - I checked it sometime after 2pm today and it was still delayed. Didn't notice the exact time of checking, but could have been before 2.20pm, so will look again on Monday!

 

[Chorlton]

Unfortunately you need to be able to test it.
You need "significant" numbers ie a large data sample to be able to have confidence.You need to buy and learn the software or hire someone who can test/write it up.To look back and do it manually unfortunately will take years for significant numbers.





Add up every winner
Add up every loser
Add up the capital used in trades
Add up transaction costs.
Add up number of trades.


Then do your averages.
Winners/losers = Winning %
Total profit or loss/into capital used in the trades = $return expectancy.
Losing trades/into winning trades = Expectancy / trade.

There are many more ratio's.



Everything can be coded but agree we are limited to knowledge and software capability (Well I am!).



The losing trades and the nett losses would be deducted from the nett wins.

Happy
In your case yes your correct.
However those learning should be involved in trading which is perhaps a little longer in time,where the equation of having to be right isnt as important.
Its easier to trade a weekly methodology than a daily than a short term method than a day trading method.(If trading in a discretionary manner).---well Ive found.

ASXG


The problem with most traders I would expect.

Snake/Wayne and co.

How do you guys work your expectancy (Manually,Test it/Record trades ad hock) and what are an idea of Acceptable numbers for you?

Thanks for the reply Tech/A .... and all the best......

 

[clowboy]

Missing an opportunity to really prosper in this market sucks...but missing the opportunity to learn and get at least some benefit while its here is even worse. Woulda, coulda, shouldas....we've all got them.

AMEN to that

 

[BSD]

From another perspective:

97% of traders can't rebuild a diesel engine
97% of traders can't prepare a risotto
97% of traders can't run 10 metres in 12 seconds
97% of traders can't build an extension on their home

97% of traders have no information, training, dealflow, newsflow, experience, contacts or capital - let alone sufficient interest and time to study economics and finance.

Just as people who trade for a living wouldn't contemplate doing the above duties, maybe 97% of traders need to outsource their 'trading' to professionals - particularly if their lifestyles depend on it.

Many 'traders' in the current market would do just as well plying their trade on sports betting markets.

 

[chrisdedavid]

Well, I guess that means 97% of us wont be here long :

So... forum admins/owners... any stats for us?

Personally, I'd be very critical with myself, I would class "fail" to be where my final profits (before tax) do not cover the normal 5% gain offered by banks (or to be more aggressive use avg % from Managed Funds), and time with hourly pay to do all the trading. If I can't make enough to cover that, then it's not worth the time I spend on it.

Putting money in the bank and getting 5% interest is till "failure" to me. Failure to not invest wisely.
Being a trader and not making 20%+ per year is failure to not just give it to funds to invest for you, wasting your time.
Making 0% and learning in the process, that is a level of success that stats will not see.