The majority of people who start businesses other than trading also fail so why does trading, especially day trading, get such a bad rap? If you started a restaurant and failed you'd get respect for starting a restaurant but if you start day trading and fail you get the proverbial, "I told you it can't be done." It <b>can</b> be done. It's that straight-forward -- it can be done!
Well stated PTF. Trading is just like any other profession, it takes time to learn and master. New traders without experience lose money just like a new attorneys without experience lose cases. It's all about weathering the storm until profitable. There are of people that make stupid sums of money trading. ProfitTakgFool is a fine example!
Interesting thread as I have thought about this. Here is what I can make out of it... A trader without an edge has almost 50/50 chance due to commissions, slippage etc. So why do traders blow up? When you risk a large percentage of the account it won't take many losses to wipe it out. When a trader makes money and the account grows then naturally so does the amount risked. But its not the opposite when the trader experience losses. Risking a set small percentage of the account is not common practice. I think that most traders blow up because they increase their bet size as losses accumulate. Its kind of like the anti-martingdale effect yet most increase bet size regardless of winning or losing but especially during losses to get back what was taken. To take the opposite side of an unsuccessful trader would wipe you out if he made more than 100% at any time before he blew up. You can make 10,000% trading yet losing 100% is 100%.
Interesting posts. has anyone heard of the odd lot theory. http://chestnutandcedar.com/library/InvestmentStrategies/LIBISoddlottheory.htm Odd-Lot Theory The odd-lot theory is based on the idea that the small individual investors who trade in less than 100 share lots are not smart enough to time the market and are usually wrong. Itâs a contrarian technical analysis approach to the market that is betting against the odd-lotters. This theory has lost its following over the years. The mere fact, however, that the professionals are âinsidersâ gives them a naturally edge over smaller investors. IF you had access to big online broker's information, you can analyse all the odd lot trading patterns and make the weak hands fold quickly.
Most day traders lose because they are unable and unwilling to cut their losses quickly when they are wrong. They hold onto losers or average down into them and hope for the market to bail them out. This doomed strategy results in a negative expectancy if thousands of trades are made. The exact opposite would be to cut losses immediately and this would lead to a positive expectancy and thus the trader should become profitable.
If I am in the UFC and I punch a guy so hard in the face that I break my wrist or hand, it doesnt mean that simply not punching him hard will allow me to win....
the barrier to entry is so much lower, hence getting much more people to try and producing a much higher faliure rate. What would be the chance of success for a resteraunt opening its doors with $5k?....
It sounds simple doesn't it? But I'm befuddled as to what it means to do the exact opposite. What is the exact opposite of buying 100 ABC units and holding them for 10 days? Selling them? Who is to say that these people don't lose too? Maybe the smart money held onto the units for 15 days before selling? Maybe they sold them after 5 days. I am part contrarian. I believe that the investing public is an ignorant and often stupid herd. I did some charts on oil bull/bear that opened my eyes to just how herdish people were. I bet on the bears in the past two months when everyone was expecting a "bounce". The herd was just too in love with chart theory to stop and think about the fundamentals. However... if you were to do the opposite of everyone at the beginning of a bull market, you would certainly be planning to take an expensive financial bath. The herd will get on board and drive the market forward. I think it is very smart to ask these kinds of questions. It shows curiosity and creativity which I think are really really important traits. If you find a way to test this idea, I'd be interested in hearing your results. Maybe it could work? Eric