Why are there so many losers?
- Thread starter AshanD
- Start date
The question I've been grappling with for years is this: What is a valid stop?
Small account traders trade short intraday timeframes and place tight stops in an effort to "reduce risk". More often than not those stops get taken out by pure noise, and their attempt risk reduction fails because they reduce their rewards more than their risk.
Institutional players trade longer timeframes and have much wider stops. They also tend to make more money than nervous daytraders
But where is the cutoff point? What is a valid stop for a given level of volatility?
Ten bucks for a good answer.
Hello:
A "valid" stop permits you to maintain your position long enough for your edge to kick in.
Please donate your $10 to a local charity.
Lefty
A "valid" stop permits you to maintain your position long enough for your edge to kick in.
Please donate your $10 to a local charity.
Lefty
Why are there so many losers?
Cause otherwise there would be too few winners.
Cause otherwise there would be too few winners.
To answer the question -- I am trading part time. Because I have to make money in other endeavors.
I was making insane returns on a 25,000 dollar prop account. Other traders in my office were making even more.
I saved some money over those nicely profitable years and put some into a couple of managed futures accounts.
Took most of the money and put about 40% down on a house. so my trading acounts put together were down to about 100g total. And then I sucked some money out of them to live.
I saw the handwriting on the wall and had to get a job.
When my edge went away. There was no way I could expect to generate six figures off the money I was willing to risk.
My edge went away because it was published, it was arbed away because of the minis, the specialists changed how they did business and the ranges contracted dramatically.
I am not too upset. I have done fairly well in other areas before and after trading. Although I love trading and would be very happy to make six figures doing it full time.
I was making insane returns on a 25,000 dollar prop account. Other traders in my office were making even more.
I saved some money over those nicely profitable years and put some into a couple of managed futures accounts.
Took most of the money and put about 40% down on a house. so my trading acounts put together were down to about 100g total. And then I sucked some money out of them to live.
I saw the handwriting on the wall and had to get a job.
When my edge went away. There was no way I could expect to generate six figures off the money I was willing to risk.
My edge went away because it was published, it was arbed away because of the minis, the specialists changed how they did business and the ranges contracted dramatically.
I am not too upset. I have done fairly well in other areas before and after trading. Although I love trading and would be very happy to make six figures doing it full time.
My take:
Most people lose before they even start. The main reasons: totally undercapitalized, totally naive about market and absolutely no business plan.
Look through a franchise magazine sometime and see how much CASH capital is required to be awarded a franchise. They then require you to go through a fairly extensive training program and they monitor you with financial software to assure your success.
The failure rate of established franchises is quite low.
IMHO, the basic requirements: $25,000 trading capital, Direct Access Screen, US resident, stocks only!!! And read some basic books, such as Bill O'Neill's, even if you don't follow his methods, he does explain how and why certain stocks move up or down. Basic technical understanding but keep it simple.
I always believe that a proper stop loss should be a function of the amount of your cash account. 2% of a $50,000 account is $1000. That is the maximum I would want to lose on any one trade. Or use 1% if you are going for small moves.
SteveD
Most people lose before they even start. The main reasons: totally undercapitalized, totally naive about market and absolutely no business plan.
Look through a franchise magazine sometime and see how much CASH capital is required to be awarded a franchise. They then require you to go through a fairly extensive training program and they monitor you with financial software to assure your success.
The failure rate of established franchises is quite low.
IMHO, the basic requirements: $25,000 trading capital, Direct Access Screen, US resident, stocks only!!! And read some basic books, such as Bill O'Neill's, even if you don't follow his methods, he does explain how and why certain stocks move up or down. Basic technical understanding but keep it simple.
I always believe that a proper stop loss should be a function of the amount of your cash account. 2% of a $50,000 account is $1000. That is the maximum I would want to lose on any one trade. Or use 1% if you are going for small moves.
SteveD
Reading your posts made me think of Jack Schwager's interview with Ari Kiev in Stock Market Wizards and Ari's work with Steven Cohen's traders to increase their profitability. He talks about a few things here in an excerpt from the book. Don't recall the exact situation, and don't have the book with me, but remember he got one guy to increase his profitability up to $1 million annually by just setting his goals higher and going for it. Of course this guy has more capital to trade with being one of the SAC guys.
http://www.amazon.com/exec/obidos/tg/detail/-/0066620597/102-2200628-9280115?v=glance
Look at the bottom of the page where there's a link to:
The Psychology of Risk: Mastering Market Uncertainty by Ari Kiev on page 289
BTW if anyone's interested in buying this book, buy it from the EliteTrader bookstore