I hate when people say most traders fail because they are undercapitalized
- Thread starter WhiteOut56
- Start date
Quote from bootize:
Yes...
I think it boils down to semantics about the word "bet." My original premise that trading and gambling are very similar concepts, but different in my mind primarily rests on the notion that one has a skill correlating to a studied and acquired statistical advantage, and the other relies strictly on luck.
A good illustration could be used with poker. On the occasion when I play poker, I know that compared to the friends I compete with, I don't know what the hell I'm doing. The longer I play, the more I loose. I know I'm just gambling for fun with friends. They know I'm the sucka!But I place my bets the best I can. However, for professional poker players, they place bets as well, but have acquired a skill where they know their likelihood of winning cumulatively increases the more they play.
When I went to Vegas, I set aside some dollars to gamble with. I expected to loose it all, but was in it for the experience for fun. However, at the blackjack table, I got lucky with my first few bets. I immediately stopped. I had won enough to cover my flight expenses and knew the longer I played, the higher the probability I would give it back to the casino. So I bowed out and watched my other friends go higher than me, but eventually loose all. In the end, I was the only one who ended positive dollars that night out of the group, yet played the shortest.
When I was a newbie, my naivety prohibited me from realizing I was just gambling in the markets. I quite quickly got my ass kicked! I had grossly underestimated just how long and difficult it was going to be to develop a system that I felt had a positive expectancy over time.
Years later, I still place "bets" in the market, however, now I don't consider it gambling. I consider it a statistically viable placement of money for return over time.
So getting back to the original poster, I believe undercaptalization in and of itself is not the reason most traders fail. I was still undercaptalized when I finally started "getting it." The key was making sure I was confident I had past the threshold from gambling, to making bets as a statistically viable placement of money for return over time.
If one is starting with a humble account size, but passes the above stated threshold through long research and practice, success can be achieved.
I do concede many many people who start undercaptalized loose, but it's not just because they are undercaptalized.
So anyone want to play me in poker!?
Wait... never mind... let me grab my wallet and just give you the money right now
That is true about gambling, but I am an expert poker player so I will just let you grab your wallet and give me the money.
In trading its like poker you have to find the evidence that gives the clues that confirm the market is to trade a certain direction. CL
Most fail to recognise or understand the magnitude of what they are undertaking.
Its easy to open an account and place an order.
To become a professional day trader takes a lot of practice - the right kind of practice.
Its easy to open an account and place an order.
To become a professional day trader takes a lot of practice - the right kind of practice.
Thanks for the accolade, surf. I must however disagree with one thing you said:
"Anything that can work in the market can be programmed."
I'm not convinced of this. I believe discretionary trading can work, and probably does work for some traders. Sorry if I gave the impression that I thought otherwise.
But it is an art, and most people will never be successful, not to mention profitable, artists of any kind. I learned early on that my abilities in the classical arts were miniscule or nonexistent, so it would be extremely foolish for me to assume at this stage of my life that the one exception to my artistic ineptitude would be discretionary trading. I must approach trading as a science or forgo trading altogether. Such is my lot and I accept it without complaint.
Quote from kut2k2:
Thanks for the accolade, surf. I must however disagree with one thing you said:
"Anything that can work in the market can be programmed."
I'm not convinced of this. I believe discretionary trading can work, and probably does work for some traders. Sorry if I gave the impression that I thought otherwise.
But it is an art, and most people will never be successful, not to mention profitable, artists of any kind. I learned early on that my abilities in the classical arts were miniscule or nonexistent, so it would be extremely foolish for me to assume at this stage of my life that the one exception to my artistic ineptitude would be discretionary trading. I must approach trading as a science or forgo trading altogether. Such is my lot and I accept it without complaint.
Yes, correct. Thanks for catching the mistake of mine. It should have read "any OBJECTIVE method that works in the market can be programmed" not ANY method.
With this said, maybe there are successful chart reading savants out there, I don't know for certain, but I do know I have never seen evidence outside of claims and wild proclamations of success. surf
I don't believe successful chart traders 'read' charts, like reading tea-leaves. All markets have an inherent volatility/momentum, this is apparent on a chart, and on a DOM for that matter.
A chart is somewhat random, but the successful chart trader will break it down into components and apply the appropriate trade metrics.
A simple process that can be automated.
The undercapitalization is not the only reason. But I partially agree with the statement. Lower capital means higher risk% per trade. Or it means basing y our stops on what you can afford to risk.
Your stops should be based on the system that you use. And the size of the position should be based on the stops.
You should have a max risk % per day you will lose and a max amount per trade. This percent per trade is what helps you properly determine size.
The hard thing is often, we have all been guilty of it, want ot make money so bad so fast we just risk way to much. Whereas making a little bit everyday adds up. Whereas trying to make a lot every day winds up in losing it very fast also.
Risk % per Day
Risk % per trade = trades per day
If you hit it you stop trading - goal here is surival long enough to figure it out and keeping it once you do
Also not overtrading once you hit that Risk % in profit - don't give it back - ie if goal is 3% - and your up 5% as you caught a runner - either stop or if you want to go for it you can risk 2% to keep going but dont give back the 3%
Also withdrawal money - we often forget that is the point of trading its not to build a balance but to make withdrawals
Your stops should be based on the system that you use. And the size of the position should be based on the stops.
You should have a max risk % per day you will lose and a max amount per trade. This percent per trade is what helps you properly determine size.
The hard thing is often, we have all been guilty of it, want ot make money so bad so fast we just risk way to much. Whereas making a little bit everyday adds up. Whereas trying to make a lot every day winds up in losing it very fast also.
Risk % per Day
Risk % per trade = trades per day
If you hit it you stop trading - goal here is surival long enough to figure it out and keeping it once you do
Also not overtrading once you hit that Risk % in profit - don't give it back - ie if goal is 3% - and your up 5% as you caught a runner - either stop or if you want to go for it you can risk 2% to keep going but dont give back the 3%
Also withdrawal money - we often forget that is the point of trading its not to build a balance but to make withdrawals