Why Traders Lose

[deaddog]

let me summarize - traders lose because they don't know why they lose lol.

look at this thread, 8 pages long and only a couple of guys hit the nail on the head - the real reason is 'no edge'..

and the other 98 guys are saying 'too little capital.. over trading.. cut winner short' etc... all the peripheral stuff that have not much to do with the core issue.

this thread itself is a confirmation of the stats that only 1% can make enough to live on.

I don't know bout that.

Yes you have to have an Edge. If you can't define it you don't have it. Having an edge is only part of the equation. You have to be able to manage the trade and your emotions in order to succeed.

The trader with an exploitable edge who is under capitalized, over trades, cuts his winners short, lets losers run and lets their emotions manage the trades is probably going to fail.

 

[GotherL]

"Poor, young men, who live in urban areas and belong to specific minority groups invest more in stocks with lottery-type features."

I think this one is actually wise. When your account is tiny you just gotta play stocks that have the potential of running 100%-1000% in a short period. That is the only way to grow the account. You can't invest your $500 lifesavings on stocks like msft, appl, wmt and wait a year for it to go up 5%.

 

[smallfil]

That (watering down) is what also dilutes losses, right? And smooths returns so management can see their variance shrink against the market? So, two sides of the same coin, which in a bull market makes the manager look like a schmuck, and in a plunging market, makes 'em look like a friggin' genius. ("Yay, my team!!")

At any event, CNBC just put the kibash on my (narrow-climb) market thesis: Mike Santoli (always a voice of reason) just reported that the equal-weight S&P500 is just a percent-or-so behind the actual S&P500 for the year -- NOT what I had thought at all.

(On a side note, /ES volume this morning was way low, VIX9D was very flat-and-low, AND behind the VIX by 1.5pts., and the TRIN was weirdly flat -- no motion to it. This reminds me so much of December-into-January: like the BUYS are with reluctance, while everyone has their finger on the SELL button, waiting to flush. Trying like hell again, to keep all my option positions on top, while selling nothing on the bottom. FUCK this is how people get old. Fast.)

Well, you can't win them all so, why keep trying? If your losses are small and your gains multiples bigger then, you should end up okay with decent profits. I do not expect to be rich being as I am retired and trading my IRAs, a small part of it on stock options and spending most of the gains anyway but, I am fine with that! Sure beats a 9 to 5 job with a nasty boss on top of that! Occasionally, you get the windfall profits like on TWTR. Looks like a flag formation.
I will probably, get back in depending on where it breaks. It breaks out to upside, I buy calls.
If it breaks down, I will buy puts on it!

 

[deaddog]

"Poor, young men, who live in urban areas and belong to specific minority groups invest more in stocks with lottery-type features."

I think this one is actually wise. When your account is tiny you just gotta play stocks that have the potential of running 100%-1000% in a short period. That is the only way to grow the account. You can't invest your $500 lifesavings on stocks like msft, appl, wmt and wait a year for it to go up 5%.

Depends on your time frame. If you are wanting to use the proceeds for your retirement, don't discount the power of compounding. Look where you'd be if you bought any of those stocks 30 yrs ago.

 

[1a2b3cppp]

No one here gets it.

Without a profitable system, none of this auxiliary stuff you guys are talking about applies.

Everyone wants to discuss this because it makes them feel like the problem is something they can beat. If you're not making money it's because you don't have a profitable system. If you're in the huge minority of people who have a profitable system but can't follow it, then find a trading psychologist or something. But that's not the problem for nearly everyone.

The gigantic majority of discussion on a trading forum should be about discovering a profitable system. At least the forex forums have it right in this aspect. Edge is the most overused concept ever. Your edge is your profitable system. Do you have the fastest data connection in the world? It doesn't matter if you don't have a profitable system. I completely guarantee you that the complete arrangement of people asking what's your edge do not have a profitable system. Your edge is that you've found a profitable system.

Do you know why I make so many threads about scalping? Because I want to get a profitable scalping system. Do you know why I quote @JigsawTrading in so many posts? Because I think maybe this software can help. But since they never reply I am developing my own in SierraChart. Do you know why I make so many questions asking about counter trend? Because I want a profitable system that does that. Are you aware of the reason I make so many threads about position sizing? Certainly it's because I think it might be relevant to developing a profitable system.

The only time something like having a better computer is an edge is if that is the limiting factor in making your system profitable instead of not. These threads are not helpful at all because it's bunch of people saying gibberish other than getting a profitable system.

The thread should be called, how many excuses can you come up with besides not having a profitable system.

 

[smallfil]

No one here gets it.

Without a profitable system, none of this auxiliary stuff you guys are talking about applies.

Everyone wants to discuss this because it makes them feel like the problem is something they can beat. If you're not making money it's because you don't have a profitable system. If you're in the huge minority of people who have a profitable system but can't follow it, then find a trading psychologist or something. But that's not the problem for nearly everyone.

The gigantic majority of discussion on a trading forum should be about discovering a profitable system. At least the forex forums have it right in this aspect. Edge is the most overused concept ever. Your edge is your profitable system. Do you have the fastest data connection in the world? It doesn't matter if you don't have a profitable system. I completely guarantee you that the complete arrangement of people asking what's your edge do not have a profitable system. Your edge is that you've found a profitable system.

Do you know why I make so many threads about scalping? Because I want to get a profitable scalping system. Do you know why I quote @JigsawTrading in so many posts? Because I think maybe this software can help. But since they never reply I am developing my own in SierraChart. Do you know why I make so many questions asking about counter trend? Because I want a profitable system that does that. Are you aware of the reason I make so many threads about position sizing? Certainly it's because I think it might be relevant to developing a profitable system.

The only time something like having a better computer is an edge is if that is the limiting factor in making your system profitable instead of not. These threads are not helpful at all because it's bunch of people saying gibberish other than getting a profitable system.

The thread should be called, how many excuses can you come up with besides not having a profitable system.

No one is going to give you their trading system because they devoted a huge amount of time and effort including, research to find it! Why would they give it out so that, it gets diluted and made useless? Information I post is available in the internet. However, I try to point people in the right direction because not everything out there in terms of information is good for one's trading. There is a lot of disinformation out there. Now, it is up to people to develop their trading systems that suits their personalities and biases because admit it or not, people have biases which affect how you approach trading. Elitetrader is like a buffet of trading ideas. Now, it is up to you to pick and choose. I have learned some things from other traders but, pick and choose which ones to pay attention to! Other methods do not interest me as I would not ever use them! Those methods that complement my trading methods I will pick up and study further!

 

[1a2b3cppp]

You didn't refute my post. I'm saying absence of profitable system is the number 1 reason people fail.

 

[Simples]

You didn't refute my post. I'm saying absence of profitable system is the number 1 reason people fail.

Circular logic does not sum it up.

 

[bone]

You didn't refute my post. I'm saying absence of profitable system is the number 1 reason people fail.

Unless you fully automate your trading system, it is not very difficult at all for a human being to turn a "profitable" trading system into a money losing system.

I have seen several college graduates, all 'trained up' on the exact same trading system in the same classroom by the same teacher by a certain prominent Chicago Prop Firm in the late nineties - then they were each given the same CQG screen with the same study and rules set for the same market (German Bunds). They were seated into a neat row next to each other, and each trader had the TT X-Trader execution platform using the same ECN network and FCM.

And guess what - their P&L's were wildly different.

In fact, by the early 2000's many of these firms had employed 'trading coaches'. It turns out that human beings do all kinds of stupid shit. Human beings sabotage themselves for a number of psychological reasons. Human beings think that they are smarter and know better than the market. Human beings think that they are correct and everyone else (tens of thousands of market participants) is wrong. Hubris. Cognitive dissociation. Boredom. The inability to admit an error. Being gun-shy. Being traumatized.

A profitable trading system for one trader can be a financial disaster for another trader.

 

[1a2b3cppp]

Unless you fully automate your trading system, it is not very difficult at all for a human being to turn a "profitable" trading system into a money losing system.

I have seen several college graduates, all 'trained up' on the exact same trading system in the same classroom by the same teacher by a certain prominent Chicago Prop Firm in the late nineties - then they were each given the same CQG screen with the same study and rules set for the same market (German Bunds). They were seated into a neat row next to each other, and each trader had the TT X-Trader execution platform using the same ECN network and FCM.

And guess what - their P&L's were wildly different.

In fact, by the early 2000's many of these firms had employed 'trading coaches'. It turns out that human beings do all kinds of stupid shit. Human beings sabotage themselves for a number of psychological reasons. Human beings think that they are smarter and know better than the market. Human beings think that they are correct and everyone else (tens of thousands of market participants) is wrong. Hubris. Cognitive dissociation. Boredom. The inability to admit an error. Being gun-shy. Being traumatized.

A profitable trading system for one trader can be a financial disaster for another trader.

This assumes you have a profitable system in the first place.

The onus of proof is on the person making the claim.