Why does it always rain on me?

[SimpleMeLike]

Also, most of the advice here is from master traders which are the top 1% which I am not. So I would actually suggest getting a job, and then trade part time so that your losses don't have any affect on your weekly income.

If you can actually get to the point where you can in fact make more money from trading then working, then you could switch to part time work and be a full time trader.

It puts too much stress on you if trading is your only source of income where you are breaking even or losing money.

Hello oraclewizard77,

You are soo right. OMG, I feel so bad for anyone who is new to trading trying to trade for living.

Get a job and trade part time. so muchhh easier.

My biggest ah ha ha moment I have realized is, it takes time. It takes time to shine.

 

[savoir]

Anyone who has been day trading for any length of time will have had this experience.

You watch a market for a while, and you see a nice steady uptrend lasting maybe twenty minutes or more depending on your trading timescales.

So you jump on the trend, maybe on a small pullback, and instantly the market goes against you, often to the galling extent that you have picked the exact top of the trend. If you are a real newbie, you may even suspect skulduggery by the broker to snatch your few pounds of investment. You duck out some time later with a loss, feeling very unlucky indeed. But are you?

For me, this is a variation of the gambler’s fallacy. Simply put, if a roughly even chance (say red on a roulette wheel) comes up ten times in a row, it seems to the uninitiated as if black is due any time now, and so is a good bet for the next spin. However, a moment’s thought would reveal that the wheel has no memory of past numbers, so it is just as likely to come up red again as to come up black on the next spin.

The trading situation is the reverse of this, but a similar principle. The trade has been in an uptrend for a while, so you expect it to continue. But there is no reason why it should really. Of course there is a lot of theory saying that a market is more likely to continue doing what it is doing rather than change, and this is what trend following relies upon, and over time it seems to work given good money management. But even if it was 60/40 that it would continue on the next tick, it might very well soon reverse anyway, and it really wouldn’t be as unlucky as it seems when you look at the chart.

I know most of you will know this already, but for those newbies out there, be aware that trading looks simple when you see a chart at the end of the day. All you have to do is jump early on a trend and follow it until it breaks down, and then jump out with a nice easy profit. Unfortunately, at any point on that trend, there was still a substantial chance that it would reverse at any moment leaving you with a loss. For the statisticians out there, it is the difference between looking at data a priori or a posteriori.

I am currently about breaking even as a day trader investing trivial amounts of money. This probably puts me marginally ahead of the average trader. But it has been a long hard road even getting this far. Good luck to all, just don’t bet the farm until you know what you are doing (and probably not even then).

Almost break-even is still a ways away from being operational (growing your account, sweeping initial capital after 3x). Your gambler’s fallacy analogy indicates to me that you have chosen to go down a poor path.

Trading is nothing like playing roulette. The balance of the roulette wheel doesn’t change with the scale of the betting and on which color most of the players have bet on.

 

[Blitzjoker]

Thanks for all the replies.

I trade the Dow, Dax and FTSE indices, which have plenty of trends both up and down every day, even in a bear market as we seem to have at the moment.

I trade mainly 5 minute bars, like Trader Tom, Al Brooks and a few people who post here who seem to have some success at it, so a 20 minute trend is not out of the way. Some trends actually last all day.

I am certainly not expecting to trade for a living, as I run my own successful business, which I think is good idea for anyone embarking on trading, as there are some similarities. It seems obvious that before even hoping to trade for a living, you need to be able to trade successfully and consistently with small sums, which I think is very difficult. I am not convinced that many people who post regularly here do that, though many talk a good game. Also if you are in the mind set of having a regular income, that seems to me a problem if you want to trade for a living, where a regular income is tough even for very good traders.

One advantage of day trading, if you can do it successfully, is that it is eminently scalable, which is often a problem with other types of business which face fresh problems when you try and scale them up. For trading, you ‘simply’ increase your position size, which though it may be psychologically difficult, should not be impossible. For a ‘real’ business you probably need to employ more people, increase market share, have larger premises, follow tougher regulations and a myriad other problems. By comparison, earning a living as a day trader would be very straightforward, though not at all easy as most of us here know.

The comparison with roulette is to show how probability works, not to imply that it is the same as trading, though there definitely are similarities. You need a method that shows a consistent expectation greater than zero, and that is hard to find. If it was easy, we would all be millionaires living the high life, not spending our time posting on an internet forum.

Trend following has its problems of course, chiefly in working out when a trade starts and ends. Range trading has its problems in that ranges end with breakouts more often than we would like. None of it is easy; everyone must find their own way through.

 

[savoir]

Thanks for all the replies.

I trade the Dow, Dax and FTSE indices, which have plenty of trends both up and down every day, even in a bear market as we seem to have at the moment.

I trade mainly 5 minute bars, like Trader Tom, Al Brooks and a few people who post here who seem to have some success at it, so a 20 minute trend is not out of the way. Some trends actually last all day.

I am certainly not expecting to trade for a living, as I run my own successful business, which I think is good idea for anyone embarking on trading, as there are some similarities. It seems obvious that before even hoping to trade for a living, you need to be able to trade successfully and consistently with small sums, which I think is very difficult. I am not convinced that many people who post regularly here do that, though many talk a good game. Also if you are in the mind set of having a regular income, that seems to me a problem if you want to trade for a living, where a regular income is tough even for very good traders.

One advantage of day trading, if you can do it successfully, is that it is eminently scalable, which is often a problem with other types of business which face fresh problems when you try and scale them up. For trading, you ‘simply’ increase your position size, which though it may be psychologically difficult, should not be impossible. For a ‘real’ business you probably need to employ more people, increase market share, have larger premises, follow tougher regulations and a myriad other problems. By comparison, earning a living as a day trader would be very straightforward, though not at all easy as most of us here know.

The comparison with roulette is to show how probability works, not to imply that it is the same as trading, though there definitely are similarities. You need a method that shows a consistent expectation greater than zero, and that is hard to find. If it was easy, we would all be millionaires living the high life, not spending our time posting on an internet forum.

Trend following has its problems of course, chiefly in working out when a trade starts and ends. Range trading has its problems in that ranges end with breakouts more often than we would like. None of it is easy; everyone must find their own way through.

Okay, I’ll bite. What are the similarities between trading and playing roulette?

You say the comparison is about how probability works. How does probability work in trading? The only example you gave is you brought up the gambler’s fallacy.

Does the past inform the present and the immediate future in the market? That’s all short-term trading is. Without relying on memory, the next trade would be just another bet on a spin of a roulette wheel.

But what do I know? It’s Sunday evening and this post is from another millionaire on a message board not living the high life and watching the market open for the week.

 

[Blitzjoker]

You are right; the similarities are superficial really. The main thing is that you can lose a lot of times in a row, even if the odds are in your favour. So you could bet on two columns in a roulette spin, with a probability of just less than 2/3 of winning each spin, and still lose 10 times in a row.

With trading, you might have a system which generally wins 60% of the time with a risk/reward of 1:1 (I wish I had such a system). You could still lose 10 times in a row.

With trading, yes, we hope that the past informs the present and immediate future in the market to some extent, or else short term trading is doomed to failure. Of course many people do not believe that past price action has any bearing on future price, but enough people seem to profit from the assumption, that it does at least make the proposition worth investigating.

 

[FreeGoldRush]

With trading, yes, we hope that the past informs the present and immediate future in the market to some extent, or else short term trading is doomed to failure. Of course many people do not believe that past price action has any bearing on future price, but enough people seem to profit from the assumption, that it does at least make the proposition worth investigating.

99% of retail traders look at intraday charts and little else. Since that is influencing their trading it is a certainty that recent past prices influence the near future. Some do not believe this. They are wrong.

 

[Millionaire]

You watch a market for a while, and you see a nice steady uptrend lasting maybe twenty minutes or more depending on your trading timescales.

That is not a big enough edge on its own. Will have a very small profit expectation after a 100 trades.
You need additional confidence/indicators/edge that the trend will persist. This will push the odds a bit more in your favour.

 

[GotherL]

You watch a market for a while, and you see a nice steady uptrend lasting maybe twenty minutes or more depending on your trading timescales.

A lot of intraday trends don't hold well after 20 minutes esp in a bear market.

 

[smallfil]

Thanks for all the replies.

I trade the Dow, Dax and FTSE indices, which have plenty of trends both up and down every day, even in a bear market as we seem to have at the moment.

I trade mainly 5 minute bars, like Trader Tom, Al Brooks and a few people who post here who seem to have some success at it, so a 20 minute trend is not out of the way. Some trends actually last all day.

I am certainly not expecting to trade for a living, as I run my own successful business, which I think is good idea for anyone embarking on trading, as there are some similarities. It seems obvious that before even hoping to trade for a living, you need to be able to trade successfully and consistently with small sums, which I think is very difficult. I am not convinced that many people who post regularly here do that, though many talk a good game. Also if you are in the mind set of having a regular income, that seems to me a problem if you want to trade for a living, where a regular income is tough even for very good traders.

One advantage of day trading, if you can do it successfully, is that it is eminently scalable, which is often a problem with other types of business which face fresh problems when you try and scale them up. For trading, you ‘simply’ increase your position size, which though it may be psychologically difficult, should not be impossible. For a ‘real’ business you probably need to employ more people, increase market share, have larger premises, follow tougher regulations and a myriad other problems. By comparison, earning a living as a day trader would be very straightforward, though not at all easy as most of us here know.

The comparison with roulette is to show how probability works, not to imply that it is the same as trading, though there definitely are similarities. You need a method that shows a consistent expectation greater than zero, and that is hard to find. If it was easy, we would all be millionaires living the high life, not spending our time posting on an internet forum.

Trend following has its problems of course, chiefly in working out when a trade starts and ends. Range trading has its problems in that ranges end with breakouts more often than we would like. None of it is easy; everyone must find their own way through.

Trend following is a lot simpler than day trading. A trade starts when it triggers my setups. When to exit is when the trend ends. That is when the long term trendline is broken or my stop loss is hit, whichever comes first.

 

[Millionaire]

I trade mainly 5 minute bars, like Trader Tom, Al Brooks and a few people who post here who seem to have some success at it

Have you seen proof they make money doing this. Sound like charlatans/vendors to me.