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

[Wayne Gibbous]

Quote from nitro:

I can only speak for myself. I suspect that the answers are as individual as each of us are.

...This time I blew out my _entire_ account trading futures and I am forced to get a job...

nitro

Wow. Sorry to hear that Nitro. I try to press home the fact that leverage kills, *eventually*. I know you know this (IMHO) and you knew it way before you blew out.

So I'm not preaching to you, or anybody. I've been fighting the markets on a daily basis since middle of '99. This doesn't make me an expert, of course, but I have lived through a few different market conditions.

Leverage can kill, but it is easy for me to say this. My trading account is over $120K right now, but I just trade one futures contract (and it still scares the hell out of me on occasion). Yep, just one - along with as many Naz stocks and ops as my systems alert. Usually just 5-10 small positions, but it can run 100-200, like during May/June this year.

It's easy for me to de-leverage, because I have a $100K job as an engineer and a wife that makes almost as much. No stress of trying to make a living. So there's the rub - leverage can kill, but you have to make a living. The only answer I see, is to have at least $300K and trade small.

I'm sure there are many many exceptions to this, right here on ET. But don't forget this tends to be colored by survivorship bias. The ones that don't make it after using high leverage go away.

All FWIW (not much). Anyway, keep at it Nitro. You'll make it.

Good luck and good trading to all.

 

[Vinny_Fnat]

When someone start a trading career and think to make 1 million the first years. He will fail for sure.

When someone start a trading career and know that the first years will be very hard and his goal is to learn he have already more chance to succes.

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YOUR TRADING BLOG
http://www.bloggerbull.com

 

[otcstockfund]

Quote from Vinny_Fnat:

When someone start a trading career and think to make 1 million the first years. He will fail for sure.

When someone start a trading career and know that the first years will be very hard and his goal is to learn he have already more chance to succes.

-----------------------------------------------------------------------

YOUR TRADING BLOG
http://www.bloggerbull.com

well your set for failure if your trading to meet a goal to buy something or to make > x amount per year instead of taking whatever the market gives you with the greatest amount of risk you feel comfortable with

 

[nitro]

Thanks for the kind words. I Suspect that a trading profile like yours, that is, that you have other means of income and are not desperate to force your hand by overleveraging your account, is probably a great way to trade markets. Once you reach critical mass in account size, say $300k, then consistant 20-30% returns are now in contention for leaving the other job and trading full time.

But man, trying to trade a $75K account witht the pressure of making 30% (without overleaveraging) a year so that you can make less than $25K a year before taxes is brutal when you don't live in your moms basement and have bills, unless you go to a prop or pro firm that can give you 5:1 overnight or 10:1 intraday. But the lesson is, the more leverage the more discipline is needed, exponentially.

nitro

Quote from Wayne Gibbous:

Wow. Sorry to hear that Nitro. I try to press home the fact that leverage kills, *eventually*. I know you know this (IMHO) and you knew it way before you blew out.

So I'm not preaching to you, or anybody. I've been fighting the markets on a daily basis since middle of '99. This doesn't make me an expert, of course, but I have lived through a few different market conditions.

Leverage can kill, but it is easy for me to say this. My trading account is over $120K right now, but I just trade one futures contract (and it still scares the hell out of me on occasion). Yep, just one - along with as many Naz stocks and ops as my systems alert. Usually just 5-10 small positions, but it can run 100-200, like during May/June this year.

It's easy for me to de-leverage, because I have a $100K job as an engineer and a wife that makes almost as much. No stress of trying to make a living. So there's the rub - leverage can kill, but you have to make a living. The only answer I see, is to have at least $300K and trade small.

I'm sure there are many many exceptions to this, right here on ET. But don't forget this tends to be colored by survivorship bias. The ones that don't make it after using high leverage go away.

All FWIW (not much). Anyway, keep at it Nitro. You'll make it.

Good luck and good trading to all.

 

[Bitstream]

u tellin' us u blew 75k? omfg.

with that amount u can make decent dosh tradin' stocks, dont tell me u are forced to trade futs cuz 75k aint enough. u got 250k intraday leverage that allows u to trade 5k shares and even if u make use of half of that it is still 2.5k shares on a $50 dollars stock: 1% is 1250 bucks, am i missin' somethin' here?

Quote from nitro:

Thanks for the kind words. I Suspect that a trading profile like yours, that is, that you have other means of income and are not desperate to force your hand by overleveraging your account, is probably a great way to trade markets. Once you reach critical mass in account size, say $300k, then consistant 20-30% returns are now in contention for leaving the other job and trading full time.

But man, trying to trade a $75K account witht the pressure of making 30% (without overleaveraging) a year so that you can make less than $25K a year before taxes is brutal when you don't live in your moms basement and have bills, unless you go to a prop or pro firm that can give you 5:1 overnight or 10:1 intraday. But the lesson is, the more leverage the more discipline is needed exponentially.

nitro

 

[illiquid]

Nitro, sorry to hear about your experience -- I can empathize greatly, having been through it more than once.

The leverage offered from futures must be extremely carefully controlled when starting out -- like using TNT to drill teeth. I know it's very easy to rationalize that, if you are trading liquid markets like sif's, bonds, currencies, a trade for 1 lot has no more impact on the market than trading 10 or 100. And from the market's standpoint, that is perfectly true. But from the standpoint of one's personal account, especially with the pressure from having to "live" off your week-to-week gains, leverage can and will become toxic if not strictly applied. I am 99% certain that, had I had the same access to leverage allowed from futures when I started out trading equities back in '98, I would have blown out long before I had a chance to educate myself and make some decent returns, enough to live off of while re-learning to trade in the aftermath. But learning to trade futures is just 10x as treacherous only because they give you plenty more rope than needed to hang yourself.

 

[IV_Trader]

Quote from nitro:

Thanks for the kind words. I Suspect that a trading profile like yours, that is, that you have other means of income and are not desperate to force your hand by overleveraging your account, is probably a great way to trade markets. Once you reach critical mass in account size, say $300k, then consistant 20-30% returns are now in contention for leaving the other job and trading full time.

But man, trying to trade a $75K account witht the pressure of making 30% (without overleaveraging) a year so that you can make less than $25K a year before taxes is brutal when you don't live in your moms basement and have bills, unless you go to a prop or pro firm that can give you 5:1 overnight or 10:1 intraday. But the lesson is, the more leverage the more discipline is needed, exponentially.

nitro

sorry to hear about your loss , Nitro. I hate to see hard working trader ( and you looks like one of them to me ) losing money

 

[Bitstream]

Quote from IV_Trader:

sorry to hear about your loss , Nitro. I hate to see hard working trader ( and you looks like one of them to me ) losing money

it's really sad, if the guy could put his personal/familiy probs behind him and take off ignore and listen to his closest friends maybe he could get a grip on himslef once again.
unfortuntaley it is clear he's under enormous strain and cannot think clearly: many of his late trades have been horrific to say the least and for what i heard he didnt trade like this in the past, infact he had the reputation amongst es traders as one of the best and a true inspiration. i really hope he can dig himself outta this hole; nobody deserves to go trough this shite after more than a decade in this business.

 

[Kicking]

because people are brainwashed every day on ET by self deluding wannabe traders thinking trading your account can take you from rags to riches .

Now here is the truth for all to hear : no way it can, this a pipe dream folks. The odds are so stacked against you it's not worth it.

Even the very very few succesful"private " traders are only living on borrowed time.

The money is not in trading your account, manage money , make 10-30 % a year on a few millions, OK .

But forget about making a living over the long term trading your account. And don't believe any of the liars that will tell you otherwise, even if they are not lying they are living on borrowed time

 

[otcstockfund]

Quote from Kicking:

because people are brainwashed every day on ET by self deluding wannabe traders thinking trading can take you from rags to riches.

Now here is the truth for all to hear : no way it can. The odds are so stacked against you it's not worth it.

Even the very very few succesful"private " traders are only living on borrowed time.

The money is not in trading your account, manage money , make 10-30 % a year on a few millions, OK .

But forget about making a living over the long term trading your account. And don't believe any of the liars that will tell you otherwise, even if they are not lying they are living on borrowed time

sorry to hear your not a successfull trader