Why do traders find it difficult to make money?

[volpri]

Hey volpri. Appreciate and agree with your posts as always.

My thing is though, your above list won't do much for you without having a proven edge that has produced verified positive expectancy over time.

So I think a good question for someone with your experience level that seems to hold their own at this point would be:

What content would you direct to study or advice would you give to aspiring traders towards developing said edge? Because without that at the center I'm pretty certain the rest won't help.

Take care.

My advice would be learn price action trading. That is my edge. How price moves and why and how to capitalize on that movement.

There are many that teach “price action” trading. By far the most comprehensive is Al Brooks. I know people don’t like him or his style of talking or writing. Or they get upset that he won’t post live trades or an audited track record. None of that has ever bothered me but a few times a laugh or two was elicited from me because of his expressions like “a failed failure”. I have never had any need to see proof of anyones track record. If they can explain their concepts I figure I can test them in live markets and see if they work. I don’t need to see that THEY made them work or not. I just need to see if they will work for me!

MY JOURNEY into price action began over 12 years ago (i think..i got the date written down in one of his books but at the moment am too lazy to hunt his physical book up). Up to the beginning of my journey I had never heard of the concept of PA. I have always been a scalper but that scalping was based on what the specialist did in stocks on the NYSE and AMEX back in the day.

Back then I even designed software and had a programmer write it up for me to trade futures or stocks. I used it mainly to day trade penny stocks..yes..penny stocks. Then the markets went to decimal and that wiped out my edge and rules changed for daytrading too. Finally, Microsoft Windows kept putting out new versions and the day came that my carefully thought out software no longer worked with Windows. I had the source code but to add insult to injury my programmer hightailed it out of Mexico to somewhere in Canada. And the source code was strangely a mixture of spanish and english. I am not a coder so I could not figure out the code other than minimal changes in the code and then compile it again. So my software went the way of all programs. Progress made mine obsolete.

So, I was back to square one in my trading.

Then I came across Mr Brooks. That was 12 to 15 years ago (i think). For some reason or another (I don’t know why) i just instinctively knew he was the real deal. I had NO PROOF. But I just “knew”. Something about him resonated deeply with me. So, I bought his first book. I tried and tried to understand his thought processes. It was no easy task. Then the day came I found us on the same “wave” length so to speak. I finally grasped his “modus operandi” of explaining things. Next I bought his trilogy on price action. Then I bought his trilogy in digital form so I didn’t have to lug the monster books around with me when flying..etc. Next I bought his main video course. Back in the day when they first came out you could download the videos and carry them with you. Now they have no process to download them. You have to log onto a website to watch them. Then they reworked them making them better. I got really pissed that I could no longer download them for my own use. I eventually overcame my frustration and gave in to the new rules. What choice did I have? Then Mr Entwistle (whom I blame for the new rules ..but I could be wrong) must have made some kind of deal with Brooks to make an introductory but much shorter video course for less than 70 dollars. So, I bought it. It is actually a very good introduction to the main Brooks video course. I would certainly recommend both courses.

Bottom line if I had to do it all over again I would do it in this order:

1) The Entwistle DayTradingInsight Course (it is mostly Brooks doing the teaching)

2) Next Brooks main video course

3) Next Brooks 4 books. As reference ..like encyclopedia.

I would begin practicing the concepts from both video courses on a live SIM over and over until I could assimilate the concepts and the execution of them became second nature for me.

I would look to the written text books for deeper explanations of the concepts expressed in the videos.

Finally, I would test my mettle trading live the concepts with real money. In my books no sense in trying them with real money until I understood them, assimilated, them could skillfully execute them, and they become second nature to me, So, first on a SIM. Sim serves to hone the skills.

Unfortunately most aspiring traders will never do the above. They will give up. They won’t even wade through the first book. That is unfortunate for them that they give up on Brooks.

I have learned so much from Brooks and some of the things of what I share on ET is how I apply, in my experience, some of the concepts I learned from him and some I invented too. And a few I have learned from others.

So, there you go! Another short story made long!

 

[birdman]

I have gone the long way around to answer your question so to answer it directly: in your wording of RR (i.e. risk to reward) yes often my INITIAL risk will be 2:1, 3:1, 4:1: even 6:1 depending on where I manage to get in on the move. That is , I may be risking initially (emphasis on initially) twice the amount or three times the amount to my profit target. But My PT is hazy. 1 to 8 points (not set amount) when I take my profit depends mostly on PA and momentum once I am in the money. So there you go! I just made a short story long!

Thank you kindly for your reply! Although i posed the question of RR as risk : reward, in my notes to myself i also use Reward : Risk but either way is equally good. I appreciate you sharing. I only trade NQ and lately i have mostly been using bracket orders, which i can overide but seldom do. Friday i used 140 Ticks Win - 20 Ticks Loss for a ratio of 7 win to 1 loss and only had the one trade on the opening 1 minute bar that ran over into the second minute before the bracket exited me for $700 gain. Seems like most of the NQ waves will be $900 to $2000 or more in the first 2 hours. I often use 500 Ticks Win - 20 Ticks Loss too. Of course my stop gets hit quite often, but these 2 bracket orders have served me pretty well.

I've experimented quite a bit with 30 ticks Win - 30 ticks Loss and 20 - 20. From looking at charts i think i need a 30 Ticks Win - 180 Ticks Loss (or thereabouts) to near-replicate what you do. I'll try that setting on a demo and see how i fair with it

Have a great weekend! Thanks Volpri!

 

[jimbo1747]

I think most people have trouble because they don't really understand how the market works before they start trading. Having a solid foundation of what is actually going on will make things much easier. Start with a weekly chart of the DJI. Put a 20 day ema, a 50 day ema and a 200 day ema on the chart. Notice what happens when the ema lines cross over each other versus when only market price crosses over/under the ema lines. Notice what can happen when the market drops and rises back up to the last swing high. The same patterns repeat over time for the most part. Then, you should figure out ways to make money in the different market environments. When the 20 day ema is over the 50 day ema and both are over the 200 day sma, you then need to figure out strategies to make money if the price is moving up quickly, slowly or at a medium pace. You will probably come up with different things for each of these. Do the same thing when the 20 day ema is under the 200 day sma. At that point, you can look at daily charts and once you are used to those look at hourly charts. On the hourly charts, use a 60 minute ema, a 15 min ema, and a 10 day ema. Notice what happens when the ema levels cross at these points. My ultimate goal is to have some sort of trading plan for each different market environment that will(can)occur on the weekly spy chart. Also if you have good capital behind you, trade the weekly or daily chart instead of a lower timeframe for sanity sakes. If you pull up side by side charts of one weekly bar and an hourly chart showing all of the activity that occurred in that one weekly bar, which looks easier to trade with also a higher probability of success? I currently don't have a solid method for trading corrections and high volatility that occurs above the 200 day sma. That is what I am working on now. I'm thinking futures are probably a good bet as you don't have to worry about non weekend gaps for the most part. I am targeting using the 15 minute chart, and waiting for 3 minute ema crossovers of the 15 minute ema, before I trade trying to catch big juicy moves only as a day trade. We will see how testing goes. I tinkered around with so many different things in the last 10 years of trying to learn how to trade. I think doing the above would have significantly cut down my learning time.

 

[Illini Trader]

Volpri my friend, it is great to see your trading action again like you did in your journal. I notice you have switched from the 2 minute charts to 5 minute charts. Is this a progression for you or do you still trade both at times?

 

[volpri]

Volpri my friend, it is great to see your trading action again like you did in your journal. I notice you have switched from the 2 minute charts to 5 minute charts. Is this a progression for you or do you still trade both at times?

I trade usually 5 minute charts and that has been mostly what I do. However, at times I will trade 1 minute charts if I am feeling giddy and thinking fast that day. Or in a hurry.

 

[ironchef]

Why do traders find it difficult to make money?
Because it is a skill to be profitable as trader. You need a lot of screening time to be a good discretionary trader. And discretionary trading is where the big edge comes from and not from backtested systematic things. See this latest science study attached as proof.

I find it generally true, in my day trading experiment, that intuition (or gut feel), which comes from time spent tracking price movement, is much better than any algorithm I developed.

And thanks for the video.

 

[Snuskpelle]

Some nice beginner level insight in this thread but I can't help to think a signficant number of contributers are bots. Don't feel offended there are obvious humans as well.

 

[Sekiyo]

Actually … it’s not difficult to make money.
Everyone can make decent profits.
But it’s hard to keep it

Even a broken clock is right twice a day (1/12)
Some traders are profitable with a 20% hit rate.

The key is to earn more than you spend.
You can’t spend 10ticks to get one.

Look for Reward to Risk asymmetries (edge)
Then size your bet accordingly (risk mgmt)

pb-q/b

ps: the bot is above.

ps: a basic strategy would be to buy higher lows in an uptrend, sell lower highs in a downtrend, fade extremes in a range.

 

[Andrei_65]

Making money in forex is tough—good analysis helps, but emotional discipline and patience are what really get you closer to success.

 

[777]

The great majority of retail traders have negative exception on the total dollar amount they trade.

Other retail traders take on too much risk.

What is needed:

Enough Edge
Risk management
Opportunity cost consideration