Actually, that's all it is.
Why do more than 90% of traders lose?
- Thread starter emg
- Start date
How do you manage risk ?
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To manage first you have to take.
You flip coins to choose the risk you take ?
To answer, What, When, Where ?
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To focus on R:R only is bullshit.
Everyone wants an infinite ratio.
But it doesn't fit your underlyings.
Plus an infinite one with P(G)=0 ...
So if you want to max it out (Ratio)
You've got to understand your underlying.
At least you need some clue to choose among options.
You want to build a "system" that tells you where to invest.
A system that will give your strategy the appropriate conditions.
Max Ratio in a shoppy market and it's Gonna be a bloody carnage.
Risk management only is muscles without brain.
Stay blind if it works for you. I liked your post.
But I am one step further. I am a free man.
Free to choose so I honor the best I can.
Don't need to be a genius to choose.
But I want to invest where the probability is higher.
Among the probabilities of size and occurance of a move.
This is false. Provably false.
Here's what you say in your main thread:
"In order to be successful in trading, it doesn't matter whether you are right or wrong when placing a trade. What does matter is that when you are wrong, you lose a little bit and when you are right, you maximize your gains."
Here's the proof that the above paragraph is incorrect :
If you are wrong on every trade entry, it doesn't matter how much you cut your losses. You will be a loser overall.
On the other hand, if you are right on every trade entry, you have found a holy grail. So it doesn't matter whether you let your winnings run except for the final profit. Regardless of how much gain, you will be a winner overall.
Clearly how you enter your trades (rightly or wrongly) is a factor in whether you are ultimately successful.
In other words, trading success is not just about risk management (Cutting Losses Short and Letting Winners Run).
Please get over your obsession with risk management. Risk Management is necessary but not sufficient for successful trading.
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Don't most pros (in any profession) start as hobbyist/novices?
"Novices" and "hobbyists" aren't necessarily the same thing. For example, Renaissance Technologies is the most successful hedge fund of the past 30 years, and they hire highly-accomplished PhD researchers who are utter novices when it comes to trading. I'm probably not going out on a limb here by claiming that a Renaissance Technologies novice is probably going to be at a significant advantage over a DIY trading hobbyist/novice.
On the other hand, it's certainly possible to start as a "hobbyist" (or just barely more than a hobbyist) and later earn an exceptionally good living from trading. I don't think it has a high success rate (especially compared with those who start out in "professional" environments such as bulge bracket banks or quality hedge funds), but it certainly does occur.
In any event, a hobbyist or novice certainly shouldn't count on succeeding in trading, and if married, certainly shouldn't promise any level of success in trading to a spouse!
A professional trader at a financial institution all begin as a novice but the word novice is typically not used when talking about a professional trader that's been newly hired by a financial institution. Also, professional traders are never refer to as hobbyist because its a salary position. In contrast, the word hobbyist is associated with someone that already has another job or retired from another job and trading is just something they do on the side for fun, academic (keep the mind fresh) regardless if profitable or not profitable.
A retail trader as are most members at Elitetrader.com are typically not professional traders unless they are working for someone and licensed or they are private traders (phrase used in Europe or Asia) and they use to be a professional trader (e.g. institutional trader or hedge fund manager...all of which are licensed). Paperwork by brokers identify retail traders as "individual trader".
A lot of retail traders loosely use the term "pro trader" for a retail trader that's profitable and has no other source of income or someone that manages their trading in a business like model.
Funny, if you actually meet a professional trader that works for a financial institution...they almost never refer to themselves as a "pro trader" or "professional trader". Instead, they use their actual job title along with mentioning the name of the firm they work at.
Retail traders that view their trading as a "source of income" instead of as a hobby and they file their taxes as someone that's "self employed"...trading for them is a full-time gig and the ones that are profitable and doing such beyond just a few years have most likely managed their trading in a business like model...only a small percentage of retail traders qualifies as such.
I believe when this forum was first started by Baron (owner)...most came here as retail traders that viewed their trading as "self employed". As the years went by and as global economies changed for the worst...most come here already with another job or possibly unemployed and actively looking for a job with aspirations of trading for a living or as a 2nd source of income.
Forum also has retirees and wealthy folks. Yet, the wealthy folks did not earn their wealth from trading and they don't need a job. There's also the university student group of traders here. There posting habits very obvious especially during the summers in comparison to other months of the year. This level of members I now believe is where the growth is at Elitetrader mainly do to the growth of Universities in the world with state of the art trading rooms. In addition, I think there's a growth of members that are retirees considering people are living longer with some money saved up and realizing they don't have enough money for retirement.
Note: Growth here in students and retirees is just speculation on my part but its gotten easier to identify the posting habits of students at this forum (dramatic increase in their summer posting habits).
This place has such a diverse group of traders, its probably why there's so much arguing, debates because everybody's background is different while most are losing. Yet, I believe we have more profitable traders than the statistics suggest but the income level is so small that they certainly are not trading for a living and because of such...they get viewed as hobbyists.
Why do more than 90% of traders lose?
On the surface there are many easy answers like poor trading plan, poor discipline, not having an edge, poor risk management and so on. Yet, I think its much more deeper than that. The human brain makes poor decisions involving money...behavior finance.
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