90% traders don't make it???

Here's the original reference:

Neil Hare, Federal News - Day Trading: NASAA Day Trading Task Force Finds Only 11.5 Percent of Day Traders Profitable, 31(32) Sec. Reg. & L. Rep. (BNA) 1065 (Aug. 13, 1999).

Okay, study is six years old, and probably contains a good sucker quotient. Maybe I can cut the odds a bit by having a long term plan to moderate profitability (1-3 yrs), ample funding, and an understanding (and financially supportive) wife. We'll see if having a Ph.D. in psychology helps or hinders...
 
I have always believed that the main reason for a very high failure rate is the very low barrier to entry.

$5,000 and an internet connection and you are in business and posting 25 times a day on ET, LOL

What if one had to go to school for 5 or 6 years, pass a rigorous test, get a license and then trade??

The Series 7 is tough (I passed) but it does not teach one very much about "trading"

I also have always believed that "trading" is 30% "art", 50% discipline and the rest money management, business plan.

I think that is the reason so many "technical traders" do not make money. They do not have the "art" component. Only the engineered facts or numbers, but not the "feel" for the trading.

I would assume no one on ET needs liquidity for their trades. If you are trading a 500,000 share block then liquidity might be of interest, but getting out of 3K/5K is easy. If you are having trouble you are trading wrong stocks, IMHO.

If you do not have direct access screen, and Level II you are trading at a great disadvantage. Also, trying to trade the indices is pure "gambling" , not trading. You are going up against some real big computers with very deep pockets and very smart people running them, LOL.

Why fight out in the deep water?? Get in the shallow area where the big guys don't focus as much.

Just my two cents on a Sat afternoon

SteveD
 
Quote from SteveD:

I have always believed that the main reason for a very high failure rate is the very low barrier to entry.

$5,000 and an internet connection and you are in business and posting 25 times a day on ET, LOL

What if one had to go to school for 5 or 6 years, pass a rigorous test, get a license and then trade??

The Series 7 is tough (I passed) but it does not teach one very much about "trading"
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Excellent point. Then add the adrenaline component such as flashy colorful computer windows, bragging among your peers, the general perception of finance...


I also have always believed that "trading" is 30% "art", 50% discipline and the rest money management, business plan.

I think that is the reason so many "technical traders" do not make money. They do not have the "art" component. Only the engineered facts or numbers, but not the "feel" for the trading.
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What you describe as art can IMO be quantified through game theory; identifiying the pros and cons of a setup from a probability-theory point of view and choosing the one where the odds are in your favor. Not just, e.g., "support @ MA 200" or "hammer" or "channel support in a higher time frame", but rather all at once :cool:


I would assume no one on ET needs liquidity for their trades. If you are trading a 500,000 share block then liquidity might be of interest, but getting out of 3K/5K is easy. If you are having trouble you are trading wrong stocks, IMHO.

If you do not have direct access screen, and Level II you are trading at a great disadvantage. Also, trying to trade the indices is pure "gambling" , not trading. You are going up against some real big computers with very deep pockets and very smart people running them, LOL.
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What if most of the computers use the same or at least similar formulas? Some call it trend channel, others linear regression, others maybe kalman-filtering......


Why fight out in the deep water?? Get in the shallow area where the big guys don't focus as much.

Just my two cents on a Sat afternoon

SteveD
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Cheers
 
Hello:

For reasons unknown to me, I took the time to read the posts.

I have been talking to an associate about some of the methods used to train people here in my office.

What it comes down to is this;

For new (retail) traders, without training, and without a background that offers some carry over to trading, for every 6 traders we hire, we end up firing 4 and one leaves voluntarily within 2 years. Of the 4 that are fired, 3 get the axe within 6 months.

In general I can say that the biggest hurdles are

1. Lack of discipline
2. Lack of patience
3. Lack of focus
4. Inability to adapt to changing market environment
5. Inability (or unwillingness) to learn to research

The training here is difficult. New traders have to adhere to a rigid protocol for the first year. They have a limited number of setups to look for, and once filled they have to follow a proven rule set for managing a position. We don't allow free-lancing. Over a 10 year period, 75% of the traders who have made it past the probation period have had continued success, even if they leave this office.

Take from that what you will. To my eye, it means that good professional training is an indicator of success in this business, even when a person does not have great natural skill or instincts. Also as with most things in life, people who are highly motivated (something that I really screen for) usually find a way to become successful. Unfortunately these characteristics are not often part of the repertoire of the retail trader. That I think is why most do not make it in this business.

Good luck on Monday
Steve

Edit:

I don't want to be impolite, but every time I offer a comment like this I get a boatload of folks asking if I will train them or if I am hiring traders. Answers are "no" and "no".
 
Quote from 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?
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Most traders don't necessarily enter and exit with a random system. Most traders, especially new traders, tend to bargain hunt.

Bargain Hunting - seeking the best possible price on entries leads to top and bottom picking which usually spells disaster for most traders over a period of time.

Trading market turns can be quite profitable however, a trader that can consistently do so is using a very strict discipline\and set of rules on such trades.
 
A Series 7 is not necessary for trading. It is necessary for a lot of other positions within the securities industry.

You probably passed with a perfect score. But it does give one a fair amount of background knowledge of how the actual markets work on a day to day basis. How an IPO is priced, for instance.

The "art" part of trading to me are items like: no follow through on breakouts, no movement on "news" that should get movement, no buying on dips, etc etc.

These are just things that cannot be labeled but one gets the sense of what to do or not to do as the mood ebbs and flows in the market.

SteveD
 
Quote from union1411:

But 90% of doctors don't fail.
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That's because people have low expectations of their doctors. Most visits to a doctor from people I talk to result in a "I don't know" or "we can't do anything about that", and they still get paid for this. When they do something to try and cure your problem and it doesn't help, they also still get paid for it. Totally ridiculous as far as I see it. How can you fail when you get paid for your failures? Think about it.
 
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