90% traders don't make it???

[RoseAndGuilFlip]

I temped for a few weeks at a large retail active trading brokerage at the beginning of 2000. I had a chance to look over several hundred accounts, and I COULD NOT FIND A CONSISTENTLY PROFITABLE ACCOUNT. The barrier to entry at this broker was the highest. Traders had to have a certain net worth, take a trading course and opening an account was considerably more than $25k. All of these accounts were trading before March during the parabolic blow off. The traders often had high powered jobs; some were senior personnel at the big investment banks. Others owned their own businesses and claimed net worths of $millions.

Perhaps I only saw accounts that were closed. Perhaps. The active traders at one of the largest discount brokers did not do much better in 1998. Out of maybe 10,000 accounts viewed, the top guy percentage wise was someone that turned $50k into $300k by daytrading CSCO. I don't remember seeing another daytrader up anything significant and this was 1998. Any retail account that generates more than 25%/year in any market environment is out of the norm.

I went to this daytrader group (support group) a few months ago. There was only one person there that was verifiably profitable. Many of these traders- retired engineers, ex- CPA's, etc.- had a remarkably limited understanding of the market. Most of these sheeple thought trading was easy, lost a bundle then lost more money throwing money at self- proclaimed gurus.

There are lots of anecdotes about the success rate of prop traders and other professionals on these boards. Then again, there are not that many free lunches out there. The success rate for completing the broker training program at ML was 1 in 3 in '97. Most businesses fail.

Why go against the odds? Predisposition towards gambling, ego, too many Ayn Rand books, wanting to strike out and do something great, an unique edge... for personal reasons.

More than 99% lose if everyone is included. Most bs. People that make big returns over long stretches are freaks and celebrity investors.

 

[RoseAndGuilFlip]

Anybody have any figures on what percentage of Little League players become Major League stars? My guess is that it is somewhat likelier for a neophyte to eventually make big money off the market than baseball (training, practice and disposition assumed).

 

[nzbryant]

But why oh why do most people lose, if they have low commissions?

Assuming people enter and exit with a random system - why can they not breakeven - get 3% on one stock, lose 3% on another stock etc.

I know people will reply "human psychology is not suited to trading". But even people who have been practising for a few months or years, and should be over that emotional hurdle, often lose. Surely there must be a bigger reason why so many cant breakeven?

Why?

 

[nononsense]

Quote from Businessman:

...
Otherwise overtime the market would be full of winners
as over time the number of winners would increase and out
number all other groups (losers and startups) that are forced
to leave the market.
...

Hi Businessman,

For most, this age-old truth is hard to grasp.
This is what makes it possible for a limited number of winners to operate in the markets.

 

[torontoman]

I think most people don't make it, because they try to trade for a living. If you trade for a living, your returns must be high. If your returns are to be high, your risk must be high.

This board has a lot of experienced investors. If they tried for a very respectable 15% per year, I think they could do it. But their goals are too high requiring a lot of risk.

Any comments?

 

[nitro]

Quote from torontoman:

I think most people don't make it, because they try to trade for a living. If you trade for a living, your returns must be high. If your returns are to be high, your risk must be high.

This board has a lot of experienced investors. If they tried for a very respectable 15% per year, I think they could do it. But their goals are too high requiring a lot of risk.

Any comments?

I can't agree with you more. However, you are talking retail, and retail traders fail for the one reason that kills in the markets, lack of proper capitilization.

Remember, you go to a pro firm with $25k, and if your strategies are conservative, you can easily get 20:1 or even 50:1 leverage. Do the math, now 15% of $1/2M in play is not a bad living.

nitro

 

[Rickshaw Man]

Quote from Businessman:

This business is full of uncertainty, just because you can make
money today does not mean you will make it tommorow.
Very few traders are successfull over long periods of time
(read decades), life is dynamic and bad shit happens,
people change, markets change.
Trading and life in general just aint that easy.

Sounds like a defeated mentality, live in victory, I choose to be happy no matter what.

 

[DHOHHI]

Quote from Ripley:

Nobody in their right mind would do this for a living. How many people that went to college didn't have a right mind.

I do this for a living and have 3 degrees ... BBA and 2 MS ... I got tired of the corporate grind ... I "think" I have a mind ... and I actually enjoy trading for a living ... one of the most challenging things I've ever done ... and the way I trade today in 2005 is a lot different than how I traded in 1996 (when I started full time) ... adapting and modifying ones methods is one of the things that's a big part of surviving longer term

 

[Nutzo]

Quote from Ripley:

OK big shot. We trade because most of us have never been to college. Does your MBA program take people that didn't go to college?

You are a complete moron.....nuff said

 

[ifinitis]

Quote from Moreagr:

do you still trade at fidelity?? i have an account with them but hate the ticket charges of $8

whats your typical size? do you scalp or position trade??

oh BTW do you use their triggers?? i hate them i get them 30 min to late most of the time.

I still use Fidelity. I thought that $8.00 trades regardless of share quantity was on the low end of whats available? Of course there is still much I do not know, please share if you have a suggestion.

My size varies by what I am trading.

If I trade NFLX, for example, I will normally not trade my day trade buying power, using 500 share lots, since the stock has an average day volume of around 1.5 million shares traded, making it hard to get out if I have say 10k shares and it reverses quickly. NFLX also seems to be heavy traded by the Pro's, maybe Hedge Funds. If they start moving it, it will move fast. If I trade AAPL, for example, I normally do trade close to max buying power and trade 1000 and 500 share lots. In both the above instances I would step into a position trade.

I trade break outs/downs, use trend lines, and moving averages.

I guess I technically scalp when I am buying at the bottom of the trend line, selling at the top, shorting at the top, and coving at the bottom. And when I do the same with a stock moving between moving averages.

I position trade when I see a trend and keep the position till it looks like it is breaking.

Recently I have been buying some Tech stocks in the Pre-market and selling them at where I think the high is within the first 10 minutes of the market opening. This has worked well on Tech/Internet stocks who have beat earnings and provided better guidance. Then take another position in them later after 10 am.

I do not use the price triggers in the software yet. I still have alot to learn to take advantage of all the software capabilities in Active Trade Pro and Wealth Lab. I plan to take a week or two off when I get back above break even (4k) to reflect on and refine some of my trading methods. I will also print the manuals out for Wealth Lab to see what it can do when properly used.

I am a babe in the woods at Day Trading, and I know it. I rambled again and have wandered away from the topic of this thread Feel free to suggest things, I do listen.