Why Do People Trade when the Failure Rate is So High?

Rich... Poor... the moment you label yourself you have lost the game. The former label implies complacency. The latter label implies acceptance of failure.

People have a strong tendency to live up, or down, to expectations. Don't allow others to label you and you will find yourself much more free from their control.

-Raystonn
 
A large swath of the population may casually play sports at some point, but only a slim margin have a lasting and lucrative career no matter how well supported they are. Half of the population played baseball or football as a kid, and half of the population has stock exposure as an adult. There are only a few thousand people that make millions/ year as a pro player. The dream is enticing.

Joe Public Investor pays outrageous fees to slick salesmen and quacks that can't beat a benchmark rather than park their investment bucks into etf's or index funds. People are wrought with neuroses. These same investors are the first to say that trading is wreckless. There is the illusion of strength in the herd mentality and deferrence to authority.
 
Quote from trader56:

Just who would provide this certification and training?

Governments? Their interest is in power, control, and compliance - this is the Series 7 which teaches absolutely nothing about how to trade successfully.

Academic institutions? Their models such as CAPM and those used by LTCM have certainly shown their worth.

Other traders? Why would they want to teach others to be competitors?

Why should someone else - the government, SEC, your parents, your spouse, god - have to give their permission and blessing?

How far should protecting people from themselves be taken?
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I nominate bali something or other.
 
I think we all are lured to the trading arena for similar reasons: potential for unlimited income, illusion of ease in getting there. That is not any different than most entreprenuerial quests.

In my case, trading financial markets is about the only high-pay (potential) career I am qualified for. The other would be real estate, correct timing and market location dependent. That is probably true for a lot of folks.

For those who take trading seriously (not $2k in an account, read a book and dabble with some symbols) with businesslike approach have (in my estimation) a greater than 10% chance for success.

I believe with everything in me than anyone of reasonable intelligence and emotional control can learn to be a skilled, successful trader. That may come easier for some and much harder for others, but is possible for all.

Thank God for free markets and low barrier of entry... along with big swing sessions like this one blessed us with!

Viva La emini Markets
Austin
 
Quote from Hydroblunt:

To loop it back to the mysterious stockgirl (who I suspect is male)....
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Are you kidding me?!

Didn't you see her question?: <b>"should retail investors be allowed to trade stocks without some type of certification or training?"</b>

Can you come up with a question any more <i>female</i> than that? Women generally think that the proper role of government is to <b>mother us all.</b>

The U.S. government was originally created, not to rule over us, but to provide the people with a bare minimum of legal protections. The U.S. was essentially a free <b>Libertarian nation</b> throughout it's first century and a half of existence. (<i>Essentially</i> Libertarian, as there were admittedly great flaws in the treatment of racial minorities.)

From 1776 until the early 20th century, the government's attitude towards so-called 'victimless crimes' can be summed up with the following key quote:

<i>A prohibition law strikes a blow at the very principles upon which our government was founded. Prohibition goes beyond the bounds of reason in that it attempts to control a man's appetite by legislation, and makes a crime out of things that are not crimes.

~Abraham Lincoln</i>

<b>...and then came Universal Suffrage and fucked it all up.</b>
Almost immediately, the government began its exponential growth into nanny-state territory, with the federal government shoving its slimy hand into all our lives. Suddenly, the freedom of consensual adults to do as they pleased... was completely crushed out of existence.

Institution of the new & unconstitutional income tax, alcohol prohibition, drug prohibition, Overregulation of business, abandonment of the gold standard, Millions of new political prisoners... it just got worse and worse and worse... Until now?: Police State run amuck. The principles upon which the nation was founded- GONE. Right to bear arms- GONE. Right to due process-GONE. More marijuana possession arrests than all violent crime arrests combined! <b>400,000</b> incarcerated political prisoners for the 'crime' of violating drug prohibition.
Right to privacy- GONE. Protection from unreasonable search & seizure-GONE.
...but its all <i>for the children!</i> Right?

Stockgirl's reaction?: "Thank you sir, may I have another?"
 
stockgirl

Thanks for starting an important thread.

The requirement for protecting traders may best lay with those who give them accounts.

Accepting a person's capital is a place to focus, perhaps.

I meet a lot of people who have had all kinds of accounts. Most of them at this point are tee'd off at the person who gave them the account. The ill feelings come from their not expecting to lose money.

Now they are correcting their, what I call dependnancy, on others.

You are looking at the big picture and the way an individual can get into a bad place. you see it as kindred to a driver's license or fire arms permit.

Franco Modigliani looked at family financial trauma and saw that 70% of families experienced it and had a life style change downward. (1985 Nobel Prize winner)

Frankly, I like the driver's permit part of getting a driver's license. A person can do it as part of high school or as part of a family thing where parents do the traing using the family car.

Money is a funny thing though. Getting the permit to use money, risk capital, could be worked on like the NFA regulation 208 E parts a through e. Here you prove that you are an amateur periodically and you state that the money part falls into defined categories of importance.

Over in the tax world there are types of corporations that are allowed to use money without regard to taxation. I like this world. The government makes a person do a lot of narratives (Part IV of form 1023) that are "processed" against a standard. the standard is legislated in general and refined as executive branch regulations.

So the state, or a professional organization or the federal goverment have been examples above and also people connected to the money person have been mentioned.

So far the public interest hasn't been served formally with respect to the person you are talking about. A noobie or something.

Pros in this field can get letters after their names. The path to getting the letters is hilarious as it relates to making money in my opinion.

There is a huge roadblock for learners and new practitioners out there as well. It is the sales driven pseudo educators and services and materials and software providers.

With regard to mentoring those learning I used to do it 1 on 1. Then, I guaranteed their potential losses for the mentoring consideration which was non financial. Those who couldn't trade, quit fairly soon.

I think every family should have an investment strategy and use an assortment of of some of the 22 intruments that are available to the family.

So the solution is actually found here in this assortment of family support instruments that are now available.

It goes like this. A pooling concept is required. And a term of risk concept is needed. A capital interconnection is also required. That is it. Lets put the pieces together. And a contract is required.

An aspiring trader just makes an appointment with the contractor. The papers are fairly standard. The risk is transferred to the contractor and a premium is paid to cover that risk for a period of time. the contract has many risk minimization aspects to it and one of them is who controls the capital at risk. Over time and performance the control is shifted from one place to the trader. The premium payments are also shifted and rerated according to performance. If for any reasons the trader does not reach a level of performance at the milestones specified, the contract is terminated and the trader must withdraw his capital that is risk from the market and place it under the control of someone else to manage it until the original capital is totally restored and it has grown according to conventional growth standards.

So who will play this game. It is a slam dunk for the financial industry especially those corporations that are already running pools under federal regulation.

I know my post is a long one but it was necessary to get some stuff on the table before giving you the business and regulatory answer to your question. All problems such as you suggest have self policing answers. The 90% of traders who fail can do that and at the same time thier families do not deserve the treatment that could easily be avoided.

as a practical and historical answer, I went through this drill, de facto, in the educational system. as a prof type guy I was expected to go with the flow interms of my salary and retirement. a popular way to handle this stuff was for theinstitution to contract with a retirement something or other. TIAA- CREF or somuthing was popular and it required an employee contirbution as part of the deal.

I stepped up to the line and said I couldn't afford it it was too costly to piss away my money and get those types of returns. It was agreed that I could be an exception if the TIAA people approaved of my alternative use of my salary contribution. they looked at my track record, did not understand anything but the bottom line. I was exempted and told to keep my mouth shut.

So you see my model is laying there in disguise right now. All that is needed is private enterprize to step in and start contracting with noobies.

In ET it is not possible to really entertain the noobie issues. Too many non performing traders... too few buiness people .. and you can't expect a new trader to understand his life style responsibilities.

Good thread though. I usually wait to page ten of a good thread like this. I generally wreck the thread from the viewpoint of most people. Watch out for Maria.
 
Quote from stockgirl:

Ok then Don, should the general public be allowed to trade without training or certification?
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Why not, they are only losing their money.

Do you need proper training to enter a boxing match? Yes

Do you need proper training to beat yourself up? No

-Kastro

P.S. - To be honest, you do need proper training to be a great trader. To be great at math/physics/programming (and derivatives of those sectors) is what makes a good trader in most cases.
 
Quote from stockgirl:

If +90% of people fail at trading then why would anyone risk trading any type of investment vehicle when the odds are stacked against the average retail investor?
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Well it looks easy.
Where can price go? It can only go up or down.
Therefore it is very alluring.

No regard is paid to the needed outcome of success which lies beyond most in most things.
And next, the best part, there is no limitation on human gullibility and stupidity where the blind hope of riches is in their dreamscapes.
:)
 
Note that starting a business - ANY BUSINESS has the same failure rate. It is hard to imagine opening a burger joint being risky but imagine after you invested $20k in a new joint - McDonalds moving in right next to you. Why people do it ?Because it sucks working for that McDonalds too.
Quote from stockgirl:

If +90% of people fail at trading then why would anyone risk trading any type of investment vehicle when the odds are stacked against the average retail investor?

Also, should retail investors be allowed to trade stocks without some type of certification or training?
More...
 
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