Winners / losers statistics

[Boib]

95% lose because of human nature. Fear and Greed. Most of us are more afraid of missing a move than we are of losing money.

A “system “ is only effective if the trader follows it. Discipline!!

I’ve read that you should be able to write your system on a single sheet of paper in simple enough language that a teenager would be able to trade it.

For example:
Throw a dart to pick a stock.
Buy that stock
If it goes up stay with it until it drops 25 cents, then sell it.
If it goes below your buy price sell it.

Obviously this system can be improved on, especially if you pick your stocks by some other method, but if you follow the system it will make you money. Keep loses small and let the profit run.

Most won’t take the initial loss. My own experience is that my trading turned around once I decided that if the stock didn’t do what I wanted I would get out and wait for another. It’s not how much you make, its how little you lose.

 

[PitchBlack]

Quote from Boib:


I’ve read that you should be able to write your system on a single sheet of paper in simple enough language that a teenager would be able to trade it.

Keep loses small and let the profit run.

Most won’t take the initial loss. My own experience is that my trading turned around once I decided that if the stock didn’t do what I wanted I would get out and wait for another. It’s not how much you make, its how little you lose.

High profitable systems are not simple, they are complicated.
20 years ago you could make money with a simple system, but not anymore. If simple systems would work there would be much more winners. People take over the saying about simple systems from traders that traded years ago. Most of these traders wouldn't be able anymore to make money as they did. The markets have completely changed. Much more people trading, internet, computers.... all has completely changed.

Keep losses small and let profits run. Indeed, but how? Making the statement is easy, but executing it is something else.

I completely agree with your last statement except for the last sentence. It does matter how much you make, because that is the profit. The cutting of the losses will not generate profit, it preserves profit.

 

[Alexis]

Do you really believe that psychological aspects of trading explain that 8 in 10 people lose money

Honestly, "follow tour rules and be disciplined" is know by heart by erery single trader on earth. Most trading books are just dealing with that.

 

[candletrader]

The simple fact is we individuals will rarely, if ever, be able to compete in trading when the primary question is why prices move. However, if we change the essential question to what a price has done in the past and is doing now, then we can compete. ‘Why’ is concerned with knowledge; ‘what’ is concerned with observation… Therefore, the correct approach for the individual trader is to trade on what you see, not on what you think. The majority of so-called technical traders correctly ignore the 'why', but have not quite absorbed the notion of 'what', even though they continue to delude themselves that they have... the failed trader and successful trader are both highly knowledgeable in the areas of risk and trade management and other complex areas, but I contend that the thin line between success and failure lies in the perception of 'what'... namely in how the failed trader and how the successful trader observe price at its most basic level...

 

[illiquid]

If candletrader is obi-wan kenobi, then I think this is what darth vader would say . . .

The simple fact is we individuals will rarely, if ever, be able to compete in trading when the primary question is why prices move. That is our lot, as individuals, in order to compete, and why the success rate is so slim; trading is a process that rarely, if ever, rewards taking the easy route. ‘Why’ is concerned with knowledge; ‘what’ is concerned with observation… Therefore, the incorrect approach for the individual trader is to trade on what you see, not on what you think. The majority of so-called technical traders incorrectly ignore the 'why', and therefore have not quite absorbed the notion of 'what', even though they continue to delude themselves that they have... the failed trader and successful trader are both highly knowledgeable in the areas of risk and trade management and other complex areas, but I contend that the fat line between success and failure lies in the perception of 'why'... namely in how the failed trader and how the successful trader observe price at its most basic level...

Seriously though, I sincerely think what you wrote is a great insight into succeeding as a technical trader. But in retrospect, for me the biggest step taken was finally understanding that insight -- and then adopting it's mirror-image. Just my .02 for the dark side . . .

 

[Everest]

Quote from Riskmanager:

O.K., we've all heard about the supposed statistic, according to which 90-95% of all traders lose money in the markets.

I've actually had the opportunity to talk to the CEO of a day trading brokerage here in Europe about that. His customers primarily trade european & US-futures and CFDs & forex.
And trust me guys, his brokerage is not a rip off, but their commissions and trading platforms are among the best in that country for retail clients.

Now, according to that gentleman:

- it takes the average client 3 months to go broke
- about 90-95% of all futures traders lose money
- about 70-80% of CFD-traders (i.e. leveraged stock traders) lose money.

Edit: Oh, and I also asked him about his opinion why most traders lose money. He said it's because they don't let their winning trades run long enough but rather prefer to take a small profit in order to feel good in the short run.

And ?

 

[SethArb]

would any prop shop or retail entity out there

in either stocks or futures etc be willing to

enlighten us as to how "their traders" are doing

since 2000 ?

:eek:

 

[Donkell]

Don't hold your breadth for a straight answer to your question.

If they were to admit loss and profits it would be difficult for them to recruit new members.

Everyone seems to toss around percentages. A page back or so Alexis says he doesn't believe, and then states he has been making 30%.

My question is 30% of what? If you have a minimum daytrading account and are making 30%, which would be very hard to do, you could not live on it.

Can you make a living? Check the statistics on mutual funds. The total number of funds that are under or negative for 2004 and 2005 tells a story. Most small retail folks are too underfunded to hold on to a good trade that goes south for a few days or even for a few mins.

Again with the statistics. The market wants to gain and over the years it has. But the daily pull backs etc makes what might be a winner into a looser.

When to hang on and when to throw in the towel is different for each person.

Most people think others or at least someone knows what's going on so a lot of folks become followers instead of thinking for themselves. If you are spending all day or a good part of it watching what the markets are doing I would think you could figure out a way to make money at this.

Just my 2 cents

 

[Boib]

Quote from spike500:

High profitable systems are not simple, they are complicated.
20 years ago you could make money with a simple system, but not anymore. If simple systems would work there would be much more winners.

Keep losses small and let profits run. Indeed, but how? Making the statement is easy, but executing it is something else.

Maybe that's the problem. The systems are too complicated. Its human nature that drives the market. Fear and greed. The fact that <b>"The markets have completely changed. Much more people trading, internet, computers.... all has completely changed".</b>hasn't changed human nature.

All the indicator are bacically based on price and volume action. They just manipulate the numbers to show a trend. Its all based on history and although history tends to repeat itself it's not a sure thing. All the backtesting in the world won't tell you whats going to happen tomorrow.

As you stated they problem with most systems is the unwillingness of the human operating it to execute the system. Take a few losses in a row and they start tweaking the system. Take a loss and watch it reverse and take off , the next time your likely to give it a "little more room",which may result in a huge loss. Being human we rationalize this and blame someone else.
Specialists, insiders, accountants,or the dreaded shorts.

The system can be simple it's the traders ability to execute that makes it tough.

 

[SizePlaya79]

Quote from yeayo:

Trading is a negative-sum game - give 100 traders 100 million. And all of them combined will lose 50 million to the broker. The remaining 50 million they lose to each other, maybe 10 of them will take a cut of 50 million and 90 will lose a cut of 50 million. The broker always will make the most money. This is just my theory but you get the point and I'm sure the reality is pretty close to it. That's why I don't understand why traders give so much money to the broker by trading an insane amount of shares. Of course the positive thing about brokers getting rich is increased liquidity.

This is why you don't trade through a broker, for this specific reason. Brokers will churn you and burn you, they don't care if you make profit or not on the trade, they are in it cause they make commissions on the share count. Any active trader (and I do mean really active, as in doing over 50k a day) who trades through a broker is retarded, do you realize how much money you are just giving away to your broker for executing trades for you? Do yourself a favor and go prop or go class B at a firm so you bypass the broker altogether. There's a commercial out there that has the slogan "Experienced traders don't pay unnecessary fees and commissions." For an active trader....a broker is the unnecessary fee that you can avoid by going prop or Class B. But if you don't want to put in the time to get NASD Series 7 and 55 licsened then I guess you are going to be stuck in the retail account world and getting screwed by expensive brokers' fees. Just my opinion, but getting licensed was well worth it.