Squilly D - You make some great points. Spoken like a wise person.
Why do traders fail?
- Thread starter Tradester123
- Start date
Jason Rogers
ET Sponsor
You make a great point and this is where risk management comes in. For example, let's compare two traders. Trader A risks more per trade than he seeks as reward. Trader B seeks more as reward than he risks per trade.
Trader A
- Win percentage: 66%
- Average amount made on winning trades: 52 pips
- Average amount lost on losing trades: 122 pips
- Expected value = (0.66 * 52) - (0.34 * 122) = 34.32 - 41.48 = (-7.16)
Trader B
- Win percentage: 34%
- Average amount made on winning trades: 122 pips
- Average amount lost on losing trades: 52 pips
- Expected value = (0.34 * 122) - (0.66 * 52) = 41.48 - 34.32 = 7.16
A high percentage of winning trades is not as important as having a positive expected value. A big part of achieving a positive expected value is having a good risk/reward ratio. It's a good idea to seek more as reward than you're willing to risk on a trade.
It's interesting you should mention that. The analysts at DailyFX actually use an indicator called the Speculative Sentiment Index (SSI). It shows the ratio of long to short positions in a given currency pair among retail traders. For example, an SSI value of 1.80 means there are 1.80 long positions for every short position. An SSI value of (-3.13) means there are 3.13 short positions for every long position.
SSI is used as a contrarian indicator meaning if the majority of traders are long a given currency pair, that is actually a bearish indication that the price may drop. Conversely if the majority of traders are short, then this is a bullish indication. The was an article today on DailyFX.com about latest SSI readings.
Itâs sad commentary that Emg seems to take delight in berating or rather browbeating those with small accounts. He probably does so out of ignorance, surely not out of malice I hope.
I truly find fault with Emgâs viewpoint. We are a community of traders, and it would surely be of great benefit for Emg to extend a hand, or to take someone under his wing for example or provide some insight in what he knows about the markets so that many can benefit instead.
I also find it baffling how people expend vast amounts of energy in these forums browbeating instead of providing insight.
Emg insinuates that heâs one of those individuals that make up the 10% that consistently win, and rarely lose. I wonder how it would be to have Emg under a microscope or to watch him put on positions over time, then analyze his outcome and truly see if heâs consistently in the negative column or not, really getting to the truth of what heâs claiming. Then we would surely know if heâs being arrogant, or sincere. Irregardless of the outcome though, of greater value would be for someone of his enormous intellect to give back to the community.
Emg also claims that Higher Education is key in order to become a successful trader. Not so. Just look at some hedge funds that imploded in recent years, Amaranth Advisors, Long-Term Capital Management, the list goes on and on⦠itâs obvious that those hedge funds were being operated by individuals that had trophy rooms filled with advanced degrees. Of what value was higher education in these instances? What does this prove?
What an advanced degree typically does provide is an opportunity; doors do tend to open up, which has some value in todayâs economy. I definitely will give credit where credit is due. But it surely does not give any person a greater zeal or make a person become a more ardent student of the markets over a person that has little or no education.
Chris Gardner the homeless individual that was portrayed by Will Smith in the movie, The Pursuit of Happiness, was he so inept that he could not succeed? Did Mr. Chris Gardner even have time to contemplate Emgâs claim that he had to pursue an advanced degree in order to put food on the table or have a roof over his head?
Michael Parness is another example of a person that went on to become wealthy trading the financial markets without higher education. Mr Parness was ironically advised by his broker friend who had higher education at the start of his career which in turn caused him to lose a vast fortune. Again, what benefit did higher education have here?
Desire and hunger for something better is often times the key in order to become a success, not always an advanced degree. Many leaders of industry in the corporate world do not have Higher education as Emg arrogantly puts it.
I truly find fault with Emgâs viewpoint. We are a community of traders, and it would surely be of great benefit for Emg to extend a hand, or to take someone under his wing for example or provide some insight in what he knows about the markets so that many can benefit instead.
I also find it baffling how people expend vast amounts of energy in these forums browbeating instead of providing insight.
Emg insinuates that heâs one of those individuals that make up the 10% that consistently win, and rarely lose. I wonder how it would be to have Emg under a microscope or to watch him put on positions over time, then analyze his outcome and truly see if heâs consistently in the negative column or not, really getting to the truth of what heâs claiming. Then we would surely know if heâs being arrogant, or sincere. Irregardless of the outcome though, of greater value would be for someone of his enormous intellect to give back to the community.
Emg also claims that Higher Education is key in order to become a successful trader. Not so. Just look at some hedge funds that imploded in recent years, Amaranth Advisors, Long-Term Capital Management, the list goes on and on⦠itâs obvious that those hedge funds were being operated by individuals that had trophy rooms filled with advanced degrees. Of what value was higher education in these instances? What does this prove?
What an advanced degree typically does provide is an opportunity; doors do tend to open up, which has some value in todayâs economy. I definitely will give credit where credit is due. But it surely does not give any person a greater zeal or make a person become a more ardent student of the markets over a person that has little or no education.
Chris Gardner the homeless individual that was portrayed by Will Smith in the movie, The Pursuit of Happiness, was he so inept that he could not succeed? Did Mr. Chris Gardner even have time to contemplate Emgâs claim that he had to pursue an advanced degree in order to put food on the table or have a roof over his head?
Michael Parness is another example of a person that went on to become wealthy trading the financial markets without higher education. Mr Parness was ironically advised by his broker friend who had higher education at the start of his career which in turn caused him to lose a vast fortune. Again, what benefit did higher education have here?
Desire and hunger for something better is often times the key in order to become a success, not always an advanced degree. Many leaders of industry in the corporate world do not have Higher education as Emg arrogantly puts it.
Quote from emg:
Here is an interesting article:
An Analysis of Public Day Trading at a Retail Day
Trading Firm
http://clem.mscd.edu/~mayest/FIN360...ding at a Retail Day Trading Firm.pdf?ptid=16
of the 26 day trading (short term trading) accounts, only 1 will have a successful account.
Higher Education is the key to become a successful trader!
Higher Education! [/B]
Michael Parness ? then how come he wound up pimping nonsense for a living on the radio?
http://www.scamdetective.com/Offlin...ness/Michael-Parness-sincere-business-opinion
http://www.programcritique.com/subcategories/offlinegurus/MichaelParness.html
Anyone who names a clown like this as an example is a pinhead/fraud/or Parness
http://www.scamdetective.com/Offlin...ness/Michael-Parness-sincere-business-opinion
http://www.programcritique.com/subcategories/offlinegurus/MichaelParness.html
Anyone who names a clown like this as an example is a pinhead/fraud/or Parness
I think Qwerty makes a good point because most traders who fail are that of illustrious college prodigies, stay at home types with no education, and/or regular part time working class people.. It doesn't matter to me which cloth you are cut from, as long as you have a true desire to learn and grow your knowledge, then I'm happy..
Most traders fail not because of a college degree or lack of education, but making bone headed moves that cost them dearly... Qwerty has some good points and although I don't agree with everything he has said, I agree with 90% of it.
Traders fail because they do not have the necessary experience and basic knowledge required to understand the state of the market. 
The FXCM data posted by Jason is interesting. It shows clearly that retail traders are more interested in a high win rate than in profitability. As the SSI data from DailyFX show, they also tend to be countertrend traders. So to sum up, bad traders take larger losses than wins, maximize win rate over profitability, and tend to countertrend trade. Now I know all of this . . . and I still do stupid things like pull stops and countertrend trade (but getting better . . . ). So again, the point is that it's not a matter of knowledge, it's a matter of avoiding bad habits. And those habits are very hard to avoid, usually by traders who believe that the problem isn't staring them in the mirror, it's that they haven't hit on the holy grail yet.