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Why do 5% of Traders Win?
- Thread starter oldtime
- Start date
what is a decent return? In the old days over a lifetime, for a passive investor we use to tell them 6%. And that was 100% in stoclks if you were young and 50/50 bonds if you were over 50-55 years old.Quote from sanfo:
the ture reason is: Most traders, those 95%, expect much higher return and bear the loss which they can not afford.
Now they tell them 4%
but trading is a business
what kind of return could you expect on your original investment if you opened a business? A restaurant or a store (and that is about all any trader could ever do with the measely amount most of them start with.)
Quote from emg:
Click this link http://www.elitetrader.com/vb/showthread.php?s=&threadid=222458
Day trading es requires sufficient capital. And why, because of the high volatility and leverage. "mathematical failure is a moot point" means variable. Lets take es as an example again, to minimize the "variable," (risk) is to have sufficient capital $500K minimum and $100K per contract to trade the es. that will minimize the variable.
If ones begin trading in es with an account $5000, he increases the variable.
1 + 1 = 2 how did that equal 2? eliminate the variable.
1 +1 =8 how did that equal 8? increases the variable
Here is an interesting research from UNIVERSITY OF CALIFORNIA BERKELEY about day trading:
http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trading and Learning 110217.pdf
So why do investors take up day trading and why do so many persist in the face of
losses? We consider three broadly defined answers to this question.
First, it could be the case that day traders do not have standard risk-averse
preferences; they may be risk-seeking or attracted to investments with highly skewed
20
investments, such as lotteries, that have negative expected returns but a small probability
of a large payoff as suggested by Kumar (2009). Unlike
lottery winners, day traders must succeed on repeated gambles in order to achieve overall
success. Such repeated gambles do not tend to generate highly skewed distributions.
Second, day traders may be overconfident in their prior beliefs about their
abilities and biased in the way they learn. Several papers (e.g., Odean (1998, 1999),
Barber and Odean (2000, 2001)) argue that overconfidence causes investors to trade more
than is in their own best interest. Overconfident day traders may simply be bearing losses
that they did not anticipate.
Third, day traders may trade for non-financial motivations including
entertainment, a taste for gambling, and the desire to impress others (see, e.g. Grinblatt
and Keloharju (2009)). Some investors may enjoy the process of day trading so much that
they are willing to persist in the face of regular losses. Some investors may be attracted to
21
the casino like qualities of day trading with its frequent bets, wins, and losses.*** Some
investors may choose to day trade in hopes of impressing others.â â â
For prospective day traders,
âtrading to learnâ is no more rational or profitable than playing roulette to learn.
http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trading and Learning 110217.pdf
So why do investors take up day trading and why do so many persist in the face of
losses? We consider three broadly defined answers to this question.
First, it could be the case that day traders do not have standard risk-averse
preferences; they may be risk-seeking or attracted to investments with highly skewed
20
investments, such as lotteries, that have negative expected returns but a small probability
of a large payoff as suggested by Kumar (2009). Unlike
lottery winners, day traders must succeed on repeated gambles in order to achieve overall
success. Such repeated gambles do not tend to generate highly skewed distributions.
Second, day traders may be overconfident in their prior beliefs about their
abilities and biased in the way they learn. Several papers (e.g., Odean (1998, 1999),
Barber and Odean (2000, 2001)) argue that overconfidence causes investors to trade more
than is in their own best interest. Overconfident day traders may simply be bearing losses
that they did not anticipate.
Third, day traders may trade for non-financial motivations including
entertainment, a taste for gambling, and the desire to impress others (see, e.g. Grinblatt
and Keloharju (2009)). Some investors may enjoy the process of day trading so much that
they are willing to persist in the face of regular losses. Some investors may be attracted to
21
the casino like qualities of day trading with its frequent bets, wins, and losses.*** Some
investors may choose to day trade in hopes of impressing others.â â â
For prospective day traders,
âtrading to learnâ is no more rational or profitable than playing roulette to learn.
http://mitsloan.mit.edu/finance/stl.php
MIT Sloan School of Management opened a fully equipped, state-of-the-art trading room in 1996, the first ever built on a university campus. The Sloan Trading Lab is identical in every detail to the best trading rooms in financial capitals around the world providing MIT Sloan students with hands-on experience in trading and finance. The room consists of an electronic tickertape which carries price information from multiple markets, covering all 300,000 financial instruments worldwide; two Trans-Lux DataWall panels, which display late-breaking news and other financial information fed from Reuters; and 23 trading stations.
While the Sloan trading room accurately reflects today's financial markets, it is also intended to be a research facility with the potential to play a central role in shaping innovations in the practice of finance. As with other research centers at MIT, cross-disciplinary collaboration is being encouraged. Possible avenues of research, some already under way, include projects to develop novel visualization techniques for representing complex portfolios; studies on the psychology of financial markets and how human behavior influences trading decisions; and computational techniques that incorporate artificial intelligence and neural-network theory in order to evaluate and learn, at a very sophisticated level, from past market experience.
Higher Education!!!!!!!
MIT Sloan School of Management opened a fully equipped, state-of-the-art trading room in 1996, the first ever built on a university campus. The Sloan Trading Lab is identical in every detail to the best trading rooms in financial capitals around the world providing MIT Sloan students with hands-on experience in trading and finance. The room consists of an electronic tickertape which carries price information from multiple markets, covering all 300,000 financial instruments worldwide; two Trans-Lux DataWall panels, which display late-breaking news and other financial information fed from Reuters; and 23 trading stations.
While the Sloan trading room accurately reflects today's financial markets, it is also intended to be a research facility with the potential to play a central role in shaping innovations in the practice of finance. As with other research centers at MIT, cross-disciplinary collaboration is being encouraged. Possible avenues of research, some already under way, include projects to develop novel visualization techniques for representing complex portfolios; studies on the psychology of financial markets and how human behavior influences trading decisions; and computational techniques that incorporate artificial intelligence and neural-network theory in order to evaluate and learn, at a very sophisticated level, from past market experience.
Higher Education!!!!!!!
Quote from emg:
Another thing to keep in mind small traders, those that day trade to impressed others are called vendors! 3rd party educational vendors/signal providers.
99% small traders lose, they just lose!
they need higher, higher, education. go to a school, get a degree, like MBA, from a reputable school, not a state university, for god's sake. go to a private university.
Nodoji didn't go to a private univesity, that's why she blew up!
Don't follow Nodoji, because you will blow up sooner or later, just like her.
But, of course, if you post your result after the fact, we never know if you blow up or not.
The moral of the story is: Avoid a state university like plague, never never never go to a state university, it's a waste of time and money.
Quote from emg:
Higher Education is the key to become a successful traders.
Higher Education!
More than 90% of small traders lose. They just lose!!!
I think the number should be 99%. of course, I am open for debate, if you disagree, let me know.
Next, we need to define "higher." After we know exactly how higher an education should be, we can tell ET newbies and oldies to get a certain level of education.
Personally, I think higher should be at least MBA, from a private university, where you pay for your education, like University of Phoenix. Never a state university, those tax payers supported universities are no good, they are all free party schools.
Quote from beachhouse:
I think the number should be 99%. of course, I am open for debate, if you disagree, let me know.
Next, we need to define "higher." After we know exactly how higher an education should be, we can tell ET newbies and oldies to get a certain level of education.
Personally, I think higher should be at least MBA, from a private university, where you pay for your education, like University of Phoenix. Never a state university, those tax payers supported universities are no good, they are all free party schools.
I agree you need an education to trade. You can educate yourself by simply looking at charts if you trade price action. You can educate yourself by researching particular stocks and currencies,commodities if you are a fundamental trader. By no means whatsoever do you need to go to college and get an MBA to become a successful trader. College does not teach you how to trade.
What you need to become a profitable trader is SPECIALIZED KNOWLEDGE.
Specialized knowledge can be obtained through following the markets day in day out. Finding a system with a basic set of rules to hedge unreasonable losses.
Initiating trades and then analyzing your trades through a personal journal. This lets you know where you stand and if you need to change your trading method. Apart from your balance that only shows the results of your trading endeavors.
Sticking with the game for long enough to succeed. Some may take longer then others. PERSEVERANCE! This is not a get rich quick game. You are competing with the best if you want to be a part of the best you need to put in many many hours studying.The best also have a true passion for trading. If you do not have a passion for trading you probably won't make it.
I have put 4 hardcore years of studying the markets. Since i have always been one to conquer what i get into. My mind is engineered for specialized knowledge. General knowledge can be obtained all over this forum and the web. General knowledge is important when you need it. You will obtain general knowledge as you work on how to beat the market. The market is a puzzle. There are clues all over the place. What you need to do is find them. The clues may not show up right away. If you keep problem solving you will eventually hit on something. The worst thing you can do is enroll in a forum and try to copy other peoples ideas or try to find a mentor. Teach yourself how to fish! If you do not have the capabilities of learning for yourself you will not succeed in this game.