Is this the reason why so many fail?

Discussion in 'Psychology' started by afto, May 6, 2010.

  1. afto


    80..90..95% failure rate.
    The numbers don't make sense if you believe that there are only two results for a trade - win or lose and therefore profit or loss.
    A monkey tapping orders from a keyboard should have a better chance of success even accounting for commission and slippage.
    My explanation;
    The high loss rate is primarily due to poor money management.

    Trader A has a relatively high batting average (in terms of win/loss ratio) but hasn't learnt to capitalize on his winners
    Trader B has a lower than average batting average and is unfamiliar with the concept of capitalizing on his winners.
    Trader C also has a lower than average batting average (perhaps less than 30% W/L ratio) but has learnt to push his winners.

    Who wins?
    Trader B is soon out of the game. He might return but unless he's modified his behavior then chances are that he suffers the same fate, repeatedly.
    Trader A stays in the game and might even make a buck or two but he tends to fight the market and the end result is usually borderline at best.
    Trader C is much more likely to be and to stay in the 5% class because he has learnt to do what the majority of traders have most difficulty with.

    Conclusion. Its not so much about picking the winners but rather its about riding the winners.
  2. Thanks for sharing your thoughts. I agree with your analysis. These aren't all of the reasons, but I venture to guess they are a large portion of them.

    Trading is not hard but the mental demons are a killer!
  3. Money management, position size management, trade management along with the inability to make adjustments to exploit key changes in volatility (riding those winners) when such occurs in favor of the trade position.

  4. What is a crucial component to riding winners?? TIME... It takes time for a winning position to build... Therefore trade duration is key, IF YOU CAN..

    Excellent afto...
  5. Correct Risk Management is of the utmost importance, and is a prerequisite for successful trading, but, will not in itself make a trader successful.

    How many people have lost most, if not ALL , of their trading capital after still using a strict money management approach!

    A lame horse will never win the race, no matter how good the odds are.

  6. afto


    After Thursdays debacle, pause for thought indeed.

    I'm sure there were many grey faces from investors who'd spent months building up their position only to see it wiped away in one crazy day.
    Thankfully I wasn't overly exposed and whilst the drama unfolded, I spent my time under the sink fixing the garbage disposal.

    So, yes there must be a better way to skin the cat (charming expression!)
    I'm following your main thread with interest as I'm always looking for new ideas to improve on my performance.....

    so is my wife ;-)


  7. A person could look at alll the traders, past and present, and simply categorize them by their wants, needs, approaches, and personal characters.

    Dwelling on the early person success of individual traders is probably the most incitful. Did the people you keep in touch with get off to an early personal success? None of the one's I do fit any of the OP's A, B or C categories. Why would he bring those up?
  8. Kosharie


    I was talking to my futures broker and he told me that 90% of their clients take profit the moment they see it.
  9. afto


    A couple of weeks back a real nice lady came to me for advice as she was preparing to open an account to trade part-time with the intention of eventually going full time.
    Her start up equity was $5K and her expectations were sky high.
    Now, how do you politely tell someone that they probably have a better chance of bumping into BO at a KKK rally than making $70K net pa off the bat.
    If she is willing to totally lose her stake without regret, considering it an educational expense, then she's in the ball game. Lesson one therefore is about money management.

  10. Can't solve the wife bit for you, but maybe a little TIME before the action starts might help:D

    The main reason why so many fail, is, because they do not have a clue about what they are doing:eek:

    They think that books, courses and visiting websites:D will help them make some money, but, they never really stop and ask themselves, "what the FUK am I actually doing":confused:

    It helps to know a few KEY things before you trade:cool:

    #10     May 29, 2010