My guess as to why traders fail

[duhmentor]

Quote from sprinter:


Sounds like you read too many trading books

I did read the one you recommended,"Winner take all"

Had to buy it as I couldn't find one in a library.

What i got from it was that TA is a viable strategy if you have the discipline to follow it. The COUNTER system the author devises shows a profit. He then goes on to say that the system probably won't work because its boring, you don't have to work for your money, and most won't have the discipline to withstand the drawdowns.

Gallacher prefers to use fundamentals and admits that one must be smarter that the crowd at reading these. I read luckier.

He then comes up with a system. Do your homework with the same information that eveyone else has and pick a market direction based on that info.

Place a 20% target and a 5% stop.

If your target is hit move the stop to 5% below that number and increase the target to 20% above the first target.

If your stop is hit be prepared to re-enter at the original price.

Want to increase your profits. Pyramid at each level when you hit your target and change stops and targets.

What did impress me about the book is his insistance on having a plan. Regardless of what method you use you have to have a plan and the discipline to follow it.

Just having a system means you have to have some sort of plan and not following the plan will probably lead to failure. Read the chapter to system failure.

All in all a worthwhile read.

 

[Bernard111]

Quote from duhmentor:

I did read the one you recommended,"Winner take all"


[...]
Place a 20% target and a 5% stop.

If your target is hit move the stop to 5% below that number and increase the target to 20% above the first target.

[...]

Do you mean that if the original 20% target is hit don't exit as planned but set the trailing stop at 15% and the new target now at 40%?

 

[duhmentor]

Quote from sprinter:

Discipline is a bullcrap excuse designed to sell mentors and psychobabble trading books

edge is what you don't have.

When was the last time you saw an undisciplined computer?


With discipline lose your money in 10 trades us pay commission each time

without discipline lose your money in 1 trade and save on commision

seriously WAKE UP!

That is the whole point.

To have an edge you must have a plan that you follow.

Without the discipline to follow the plan you lose your edge.

 

[duhmentor]

Quote from Bernard111:

Do you mean that if the original 20% target is hit don't exit as planned but set the trailing stop at 15% and the new target now at 40%?

The way I read the system was that if the entry was 100 the target would be 120 and the stop 95.

When price hit 120 the target would be 120 plus 20% = 144 and the stop would now be 120 minus 5% =114

 

[duhmentor]

Quote from sprinter:

sorry. This is wrong. An edge is not a plan. A plan could be the antithesis of an edge ad edges change and plans do not. Don't feel bad 99% of traders would agree with you

I don't feel bad at all.

I actually feel that part of my edge is having a plan and the discipline to follow it. But then everyones "edge" has to be their own.

I can define my edge and dermine when it has stopped working. When I go into a drawdown I'm able to tell if the reason is the edge/plan or if it's cause by myself not following the plan.

Plans like edges can be changed. I haven't had to change it for a few years. Every time I've gotten into trouble it's been my fault.

 

[Bernard111]

Quote from duhmentor:

The way I read the system was that if the entry was 100 the target would be 120 and the stop 95.

When price hit 120 the target would be 120 plus 20% = 144 and the stop would now be 120 minus 5% =114

Ok, thanks for your interpretation duhmentor; I did not catch that meaning.

Another point:
>>Want to increase your profits. Pyramid at each level when you hit your target and change stops and targets.>>

Clearly you want to be larger when your're right but at the same time, not to have stop so near to the average load.

So what about an example about your previous comment, please?

B.

 

[duhmentor]

Quote from Bernard111:


So what about an example about your previous comment, please?

B.

This is a method suggested by Gallacher in his book “Winner Takes All”

Enter position with 2 units for this example @ $100

Target is set at $120 with a stop @ $95.

If price were to hit the target then

Add to position 1 unit.

Set target at $144 (120+20%)
Set stop @ $114 (120 –5%)

Repeat if next target is hit, add 1 unit New target would be $172.80

 

[Bernard111]

That's clear, thanks. Let's talk about trailing stops, if any.

Now let's suppose the price goes up -yes - but until 119 level: at this price there is no add a and no new +20% target.

The issue is a retracement begins back to.... 95. stop is hit.

Does it make sense to close the position with a -5% stoploss when we were ahead of 19% (MFE) ?

 

[duhmentor]

Quote from Bernard111:

That's clear, thanks. Let's talk about trailing stops, if any.

Now let's suppose the price goes up -yes - but until 119 level: at this price there is no add a and no new +20% target.

The issue is a retracement begins back to.... 95. stop is hit.

Does it make sense to close the position with a -5% stoploss when we were ahead of 19% (MFE) ?

That would be my preference. At minimum I would move stop to breakeven.

The book doesn't mention trailing stops.

The Author set out to prove that TA doesn't work and in a round about way proved that it does. The problem lies in the trader not having the discipline to withstand the drawdowns.

His systems were set up to trade the commodity markets and he did have some severe drawdowns.

The system I used as an example was his optimized system and he just showed one example which was trading gold in 1979.

According to the author every staregy should have
1: A stop -loss point
2: A re-entry Mechanism
3: A withdrawal mechanism.

For demonstration purposes he kept the system simple. I assume the thinking was the fewer rules the system had the less chance the trader would have of letting emotion play a part in his execution.

 

[maxpi]

Traders have to have a plan they can follow. It's like Martial Arts... people don't do what they are taught when they get in a real fight.. the secret to overcoming that is to have a plan so simple that you can do it from the moment a fight breaks out and you can do it over and over until the opponent is too screwed up to mess with you for a good while... it has to be intuitive enough so that you can practice it not a whole lot but then it will happen when you need it... if it's too complex, too many choices, wrong type of thinking, it won't happen when you need it. You have to think in terms of "towards the inside" or "towards the outside", not "left" or "right" for one example of something that has to be "phrased" better... "Up" or "Down" has to be replaced with "with trend" and "counter trend". If you can't get the trend from the geometrics on the chart then you have to look at volume patterns and try to intuit it.

In fighting if you extend your arm to strike you also make your arm vulnerable to lots of things... it's always about risk and reward... if I can block to the inside and get a shot at an opponents neck immediately after, that's a low risk and high reward move, I'm going to be doing that every chance I can get. My body type is best suited for that.. I'm going to judge every attack by the simplest possible means, nothing more than force and direction... if it's high force but not going to hit me it's nothing but an opponent presenting me with an opportunity.. if it's low force and going to hit me, ditto... if it's high force and it's going to hit me where it hurts I'm getting out of the way or deflecting it [to the inside, so I can go for the throat and give the guy what he so richly deserves for attacking me].... anything more complex than that will get me beat up.. the market equivalent of me blocking to the outside and leaving myself toe to toe with an opponent whose rhythm is such that the next attack is going to be right at me is for me to take a countertrend signal... the thing poops out and the market runs very vigorously against me and I can only give up or lose... the market equivalent of me blocking to the inside and not going for the neck is for me to see a signal that trend is resuming and to not take it... miss a few of those opportunities and you might as well not trade, better to take a beach walk or something...

If I don't stay in shape I can't stay in a fight long enough to prevail. I have to stay healthy... if I run away from every fight I'll just have to fight tireder... with the market you can't run away, it's bigger than you are, it's stronger than you are but it's not smarter than you are if you study it enough. Can the biggest badass mobster beat you out of $ forever if he walks home the same way every night? Believe me, the markets walk home the same way all day every day, you just have to be there waiting to take some money...