Why Traders Lose

[panzerman]

Traders lose because they are making market timing decisions on an essentially random moving target. Random walk is not a perfect description of price movement, we all know that, but it is still the best model. Traders use indicators in an effort to get better than 50/50 odds, but random walk shows us that's not generally possible (notice I didn't say impossible.)

I'm not a big fan of options for a number of reasons, but how can one trade probabilistically on just the underlying, and not use options.

 

[MarkBrown]

I'm not a big fan of options for a number of reasons, but how can one trade probabilistically on just the underlying, and not use options.

how can one trade probabilistically on just the underlying

^
this is what they are not selling at any store. but hey you did identify the missing piece of the puzzle. that self awareness itself is monumental in finding the answer.

 

[dozu888]

retail traders are at great disadvantage.

- no education/training... most just pick it up with 'stocks for dummies'
- no information edge... most reads 'yahoo finance'... which leads to..
- no media machine edge.. I list it separately because it's a big one... the big boys control the media, the narrative, and can spread rumors as they wish;
- no trading edge, period... most have no system, no positive expectancy... making trades flying by the seat of pants.
- no psychological edge.

 

[smallfil]

The current U.S.) bull market is an exception to an old and well-heeled rule (re: diversification), as this bull has taken up a lesser amount of equities (but to enormous heights). *Unfortunately*, this will correct over the next generation, and "Diversification" will become the new thing.

I am going to disagree because various stocks take their turn in the spotlight. Even the likes of Coke, Dell, Walmart, etc. at some point was the stock to be in. The problem with diversification is if you own 500 stocks in a mutual fund, you in effect dilute the few outstanding performers in that fund. The bad stocks will drag down the entire fund because of it!

 

[deaddog]

It is really very simple why traders lose.

1 Under capitalized.
2 Don't keep losses small
3 Unrealistic expectations
4 Don't have a plan or the discipline to follow their plan.

 

[smallfil]

traders can never improve as long as they never discover what they are missing.

it's like doctoring in the 1800's all the logs and analyzing will get you nowhere because germs had not been discovered.

now put this into the context of trading successfully, where few know about the germs and they are not really feeling the need to help mankind.

The point of trading logs is to improve your own performance and correct your own mistakes.If you correct mistakes you continually, make because you are unaware of it, you in effect improve your performance.
It was not intended to know everything about the market because the trading logs function is not that! All you are doing is improving yourself and your trading. Nothing more and nothing less!

 

[Stocktracker]

retail traders are at great disadvantage.

- no education/training... most just pick it up with 'stocks for dummies'
- no information edge... most reads 'yahoo finance'... which leads to..
- no media machine edge.. I list it separately because it's a big one... the big boys control the media, the narrative, and can spread rumors as they wish;
- no trading edge, period... most have no system, no positive expectancy... making trades flying by the seat of pants.
- no psychological edge.

Forget about all that stuff. All you need is to Learn how to follow the trend and buy low and sell high or vise versa. Its that simple.

 

[dozu888]

Forget about all that stuff. All you need is to Learn how to follow the trend and buy low and sell high or vise versa. Its that simple.

it's not.

why are the CTAs getting killed in late years.. most of these guys do trend following... some form or shape of the turtles.

you might have gotten lucky in recent years in the equities, it's been a smooth rise since 2009... but that does not mean it's simple.

 

[dozu888]

It is really very simple why traders lose.

1 Under capitalized.
2 Don't keep losses small
3 Unrealistic expectations
4 Don't have a plan or the discipline to follow their plan.

these days with $1 commissions, I don't see capital as that critical.. small account, small position.

the other 3 things - bottom line is people don't have a legit plan... legit being a key word.

I have recommended often, just buy the damn QQQ and hold.. that plan beats 99% of money managers.

but people are greedy, they want 50% return with 1% draw down, but there is no such thing.. and some fantasy plans they come up are probably from curve fitting and fall apart too quickly.

I'd even go a step further, with 1% success rate.. 'trader' is not a legit line of business at all.. it's worse than sports betting, worse than poker... at least in poker you don't have wall street whales swimming around to kill the small fish... so you are just competing with a bunch of other small fish.

this 'trading' thing... is the worst.. odds are stacked overwhelmingly against the small guys.

 

[Stocktracker]

What is so hard about buying retracements and pull backs using support and trend lines?