Why do 5% of Traders Win?

[SimpleTrades]

Quote from Lucias:

To stress my point..

let's take Neke, I believe he started with a tiny account.. he's made a ton with his withdrawals. Let's say he blows out (hope not). Does that make him a loser? Obviously such an event is undesirable but can't say he'd be a loser because he still netted a lot of money. What if he blows out but then he comes back and makes a million? Is he now a "winner"?

So its worse then what you thought.. not only can we not even answer the question. We can't even ask it!

The usefulness in this exercise is to make one think about what is really important to them.. Obviously, one is most successful when they ause their time and do the things they desire most to do.

Sometimes there is a real value to "blowing out" a small account. Using leverage and the built in margin calls of your brokers system, you can actually take a bigger risk knowing that the most you'll lose is the small amount you've deposited in your trading account.

I pulled that stunt today on a XAU/USD trade. In a period of only a couple of minutes I had tripled my small account. Sure, it could have gone the other way, but so what, you can always reload the small account.

 

[StarDust9182]

Quote from Redneck:

To start – I cannot program

........

A level headed trader, who can execute – will beat a bot – this I know

RN

A true story:

I submitted several months of trades to a fellow who offered to coach me to get better. He analyzed them and did a tremendous job with lots of complex computer analysis. We went over all the measurements carefully. He noted only one specific oddity about the trades.

At the end of his discussion of his report, I asked him for a big picture comment. He said that he was puzzled by the results. He said that my method produced almost double the return of the best system he had ever tested of hundreds. He was on a website board where they test everything they can think of and he is a successful trader himself.

I asked him if he believed the trades I supplied him were honest trades. He said yes, but his hesitation made me wonder if he really refused accept the answer that a good discretionary trader had demonstrated that he could beat the best system this programming fellow had ever found testing everything.

He harped on the oddity since he had never seen it before. I thought about it a lot after I hung up and realized that this was part of my edge. I intuitively had a pretty good idea what had caused it. I decided that he was not the fellow to coach me.

I used to play chess very well. A certain amount of skill was needed to understand the rules and the game at a deep level. The rules were simple but the game was complex and chaotic. A little psychology was needed to understand the opponent and adjust to them.

However in chess, the most powerful opponents were the creative types who adapted the principles and knew where the exceptions lay. One had to play tactical for the tacticians and positional for the positional players. Endless memorization didn't win in the end. Trading is very similar to IGM level chess in my view.

RN - you and I agree.

 

[StarDust9182]

Quote from cornixforex:

Yes, exactly. Many things are subjective enough to be quite simple technically for a human, but extremely hard if ever possible to automate.

Exactly and this was the precise point of the excellent post of NP not equal to P that people couldn't understand. Chess is like that also.

I think that HFT and computers has swung the court in favor of discretionary traders away from system traders. Both can succeed, but one is much tougher now.

 

[SimpleTrades]

Quote from StarDust9182:



However in chess, the most powerful opponents were the creative types who adapted the principles and knew where the exceptions lay. One had to play tactical for the tacticians and positional for the positional players. Endless memorization didn't win in the end. Trading is very similar to IGM level chess in my view.

RN - you and I agree.

Interesting story, and I like the chess explanation. I have never been a master player, but I've always played quite well, and understand what you mean about adjusting to your opponent. I recall how I used to play chess with a friend of mine at university. We used to play 30 games in an evening with both of us starting sober but each becoming progressively more drunk. The style I used to beat him adjusted accordingly. He always beat me until I had one full pint of beer in my system. After that I would beat him until I started pint 5. He'd win every game after that.

Its also a little like playing a musical intrument. In my case its the violin. You can learn all the technical requirements of the instrument, all of the theory. You can even practice for years. However, you will still be a terrible violinist unless you have a musical touch, good ear, sense of beat and phrasing.

My point is similar to yours, but I would add that experience gives person a "feel" for trading that no computer can duplicate. If we extend the musical instrument analogy, theory and practical experience have to occur and develop at the same time. Otherwise, both learning theory and practice is a waste of time and effort.

 

[NoDoji]

Quote from bhardy307:

I really don't think a large amount of starting capital is needed. In fact, to start with a large amount of capital is probably a big mistake. You're actually better off to learn with only small amounts of money and build yourself up over an extended period of time.

I also see big egos on ET who also have the expectation of huge amounts of money very quickly. This too is a trap: the get rich quickly mentality.

I agree totally with this. Trading small forces you to trade smart or blow up quickly. A large trading account in the hands of an inexperienced trader leads to expensive ruin.

You can make a decent living day trading futures with a $10K account, provided you learn how to trade price action, and you can learn how to trade price action with a tiny Forex account.

Quote from Handle123:

I wouldn't even try to teach him cause he wouldn't listen, he had strong thoughts of how the market moves and it was all wrong.

I know a gal who used to be a lot like that. Every now and then, though, a stubborn fool can change

 

[SimpleTrades]

Quote from NoDoji:

You can make a decent living day trading futures with a $10K account, provided you learn how to trade price action, and you can learn how to trade price action with a tiny Forex account.

I'm working on it, with forex, one little account at a time. I have blown out a few small ($100 to $300) accounts.

Remember giving me a hard time back in November when I started that thread about pulling $150 a day out of a $2000 trading account? Ok, I admit it, that was a bad idea. I've learned. However, a little bit at time, I have managed to more than double that account in that period of time. $10,000? Maybe by november 2012?

Trouble is the dear wifey is giving birth in July. Trading may be too risky now given the new responsibillites I have.

 

[Lucias]

This is where we disagree. I know you've claimed to be able to do this. However, I don't think there has ever been someone who has verified to do this over any length of time.

I think its possible to do 100%.... 200%.. 300% returns. This is not a secret. Even so 300% returns is only 30k. That's not a decent living in my mind. Just as a reality check, one proprietary firm told me that even their best traders would not clear more then 40k-50k first year. Of course, and to clear 30k you'd probably need to do 500% returns. It may be possible but I haven't seen anyone do that. Most traders and systems I've tracked at C2 which have attempted such returns have all broken down.

I would say anything beyond 300% is really pushing the credibility boundary. Certainly possible.. but one would have to really swing for fences.. which doesn't exactly go with trading for a living.


NoDoji, you might want to consider enter the World Cup. The entry is free this year and it only takes 10k. This would allow you to document your abilities.

Again hope I'm wrong... but I'm an expert and I have tracked traders in competitions, systems, discretionary traders, etc. I don't believe such return possible in futures trading direction normally and consistently.

If any such return is consistently possible then it is only from scalping where one can reduce the risk per trade. As for scalping futures, this trading style is likewise one of the more dubious. This is the only way though.

Quote from NoDoji:


You can make a decent living day trading futures with a $10K account, provided you learn how to trade price action, and you can learn how to trade price action with a tiny Forex account.

 

[cornix]

Quote from emg:

It's not psychological problem small traders are losing. The reason they are losing are:


1) Under Capitalized
2) Low Educated


For example, this person must be extreme lower educated to trade in the futures market with a starting capital $5000



The minimum capital to trade in the futures market is $500K. If you don't have that kind of money, work in the "House"


More than 90% of small traders lose! They just lose!!

Reload that account until u are dead broke. RELOAD

Trading 1 contract of ES with $5K account and a max stop-loss of 2 handles is no way being under-capitalized IMO. 2% max risk is absolutely reasonable.

I agree with low educated point, though. Most people don't realize what amount of efforts and learning this business requires.

 

[SimpleTrades]

Quote from Lucias:

This is where we disagree. I know you've claimed to be able to do this. However, I don't think there has ever been someone who has verified to do this over any length of time.

I think its possible to do 100%.... 200%.. 300% returns. This is not a secret. Even so 300% returns is only 30k. That's not a decent living in my mind. Just as a reality check, one proprietary firm told me that even their best traders would not clear more then 40k-50k first year. Of course, and to clear 30k you'd probably need to do 500% returns. It may be possible but I haven't seen anyone do that. Most traders and systems I've tracked at C2 which have attempted such returns have all broken down.

I would say anything beyond 300% is really pushing the credibility boundary. Certainly possible.. but one would have to really swing for fences.. which doesn't exactly go with trading for a living.


NoDoji, you might want to consider enter the World Cup. The entry is free this year and it only takes 10k. This would allow you to document your abilities.

Again hope I'm wrong... but I'm an expert and I have tracked traders in competitions, systems, discretionary traders, etc. I don't believe such return possible in futures trading direction normally and consistently.

If any such return is possible.. it is only from scalping where one can reduce the risk per trade...

I don't agree. Earning a living while trading stocks unleveraged with $10,000 is impossible. With forex, because of high leverage, it is completely possible

When I trade XAU/USD, I am only using a $2 deposit to trade a product with an average daily price range of over $25. I can easily pull $15/day trading only one ounce of gold at a time. I regularly pull $15/day with a deposit of only $100 in my forex account. I've been trading for a little less than one year.

So whats a decent living? Depends on the person, but I think pulling $2500/month out of $10,000 of equity is quite doable based on my own current performance. However, you MUST withdraw profits and keep balance of trading account no more than 3 to 5% of your external savings account ( currently balance: a little over $4000)

 

[ExchangeBonds]

Would anyone here honestly want to make a living trading while keeping their account at 10k? That seems extremely stressful and if you have a few bad missteps, you are done. Making 50k a year trading is not a good salary. If you are consistently profitable, you should be doing over 100k easy. That is the nature of the futures business, and it is easily accomplished with the leverage you are given.