My guess as to why traders fail

[talontrading]

Sorry for the repost, but this needs to be said again. Here is what I posted as the third post in this thread.

too many people think they are going to make it with $5k in an account trading ES futures. In my experience, the total learning curve takes between $150k - $200k and 2 years is more or less average.

I would also add to this list not really understanding the nature of the markets and not understanding probabilities.

Everything except undercapitalization falls under the heading of discipline too... something to think about.

-----------

Many of the posts since then have come under the heading of "not really understanding the nature of the markets". There is some very wrongheaded stuff going on in this thread. Having a plan is good, but it has to be a good plan. Just any old plan will not work!

The answer to the OP's post is simple. People don't have enough money, don't know what they're doing, and don't have the mental fortitude to exercise discipline and avoid emotional mistakes. That's why 1 in 10,000 make it in this business. Simple.

 

[NoDoji]

Quote from trader198:

if you can not determine what will happen, then do not do it.

#1 reason trader's fail: They believe they can determine what will happen.

 

[Rashid_G.]

Quote from shark:

Ever seen a nice trend just completely destroyed by a spike in the opposite direction for seemingly no reason? There's a reason to everything.

Will knowing the reason behind the sudden move cause you to deviate from your plan? As a good trader the answer is no therefore the content of the news is of little value. So Bin Laden is caught.. the news COULD be sold for whatever reason.

 

[failed_trad3r]

You can't trade for a living with either

bad psychology 1%
bad system 9%
bad capital 90%

5k$ wont cut it. Living expenses are 1000 a month. You can't compound money that way that fast. Even 10% a month is hard for a noob.

it doesnt goes like 5k-10k-15k only if ur lucky by using high leverage at the right time
it goes like 5k-5.5k-6k in a capital building mode at best
so u need save up 100k preferably. then use 50k for futures and 50k in savings living. and the chance of blowing up the 50k is pretty high anyway.


psychology is like hypnosis. is psychology is worth something? psychology doesnt give you way to make money, like capital does.

 

[TraderZones]

Quote from JScott:

So finding an edge - ie, a strategy that works - is not one of the reasons?

This is the majority reason. A lasting outperformance Edge are a lot more difiSurprised the previous posters did not grasp this.

Send 100 people into a casino with a bankroll. Let them gamble for just a week. How many people will be ahead?

Send 100 top professional card players into the casino with a bankroll. Let them gamble for a week. Think they will do better than the first group?

Although obviously, very good money management, capitalization and the other things will dramatically affect the utilization of the edge.

 

[Halal Burger]

An ancient Chicago traders proverb:

"If you're losing it, someone's making it. Deal with it"

 

[buylo]

Quote from failed_trad3r:

You can't trade for a living with either

bad psychology 1%
bad system 9%
bad capital 90%

5k$ wont cut it. Living expenses are 1000 a month. You can't compound money that way that fast. Even 10% a month is hard for a noob.

it doesnt goes like 5k-10k-15k only if ur lucky by using high leverage at the right time
it goes like 5k-5.5k-6k in a capital building mode at best
so u need save up 100k preferably. then use 50k for futures and 50k in savings living. and the chance of blowing up the 50k is pretty high anyway.


psychology is like hypnosis. is psychology is worth something? psychology doesnt give you way to make money, like capital does.

In a well capitalized prop shop, I will say that psychology has WAAAAAAAAAAY more than 1% relevancy as far as success. If you can't deal with the mental meat grinding of what's going on, you're toast. I've seen guys with more than enough capital, blow through it just because they have alot of capital. There is an "I can make it back" mentality and they trade bigger and blow the f@ck up. Sounds like psychology to me.

 

[TraderZones]

Quote from neutrino:

Traders fail because the market is perfectly competitive, therefore unpredictable and random, and they are trading noise. It's the same as playing roulette - no amount of discipline, planning, strategy, money management or emotional control can help you make money in the long run.

there are several variants on the efficiency of the market. There is perfectly, strongly and weakly efficient

Based on the recent research I have seen, the market is considered random with a drift (some trend tendency).

 

[billyjoerob]

The "I can make it back real fast" syndrome happens all over. You see it in a basketball game when a player makes a turnover and then makes a foul at the other end, trying to get the ball back with a heroic defensive play. Or in poker when a player goes on "tilt" after a bad play or a bad beat.

 

[duhmentor]

Quote from talontrading:


There is some very wrongheaded stuff going on in this thread. Having a plan is good, but it has to be a good plan. Just any old plan will not work!

The answer to the OP's post is simple. People don't have enough money, don't know what they're doing, and don't have the mental fortitude to exercise discipline and avoid emotional mistakes. That's why 1 in 10,000 make it in this business. Simple.

If you put together a well thought out plan then all the above is accounted for.

A plan isn't "Here is a set up ; trade it" A plan takes into account exactly what it is you want to accomplish and what actions you have to take to accomplish it.

I'd wager that most failed traders didn't take the time to develope a plan. If they did they probably didn't follow it.