Many a struggling trader on ET and they must wonder why. There are diverse reasons, numerous reasons, but I'll start the ball rolling first with one reason. Here is a usual challenge which hits me time and again but am aware of to the extent although it continually surprises me it doesn't surprise me. As a longer term trader, I trade stocks, I call myself an active investor, I hunt for quality stocks, not overbought and attempt to trade between the tops and bottoms of trends, that is I attempt to enter right on bottoms and exit near tops. (I find bottoms are more obvious than tops.) This is my issue and I'm sure it affects many other traders. I'll get a top or bottom signal which looks very obvious and hit selected stock(s) with an order. However very often there is a delay by usually around 3 days. If you look at many large cap stocks as an example, you will see large volume spikes often a few days prior to trend turns, this indicates to me even institutions experience similar issues. Now, just clarifying a point, these volume spikes are not part of my trading signals, I'm looking at different signals, but just using this as an example of how many other traders are probably experiencing premature order placement. How does this apply to my subject heading, 'reasons for trading difficulties?' Well, many struggling traders I would imagine are getting signals but abandoning their trades prematurely, not allowing the trade to work out. In my younger years this happened frequently to me, but experience has taught me the delay between signal and market action is a frequent occurrence.
Here's an example except I was nearly bang on... https://www.elitetrader.com/et/thre...-today-on-12-20-18.328147/page-3#post-4778694 And another where I missed the major bottom but caught a minor downtrend https://www.elitetrader.com/et/thre...isk-in-the-sp500.85694/page-2174#post-4760374
by definition zero sum games are supposed to be 'difficult'. why bother when qqq has been returning 13% a year since the day it was born.
Yeah good point except I can't trade QQQ on the ASX from my account unfortunately, we are very limited here unless one wants to pay very high brokerage plus there are couple of other complications. However if I could trade QQQ I would still trade the trends, am not a buy & hold advocate.
The challenge for me is misreading the stockcharts. It happened to me recently, and I suffered consecutive losses one after the other. I stopped trading for about a week and reviewed my trading journal. I found the mistake and made changes to my trading plan. These March 15 2019 expiration, the first option trades I placed after my adjustment of my trading plan will end. My backtest, consisting of actual option trades I placed and simulated paper trades showed promise with good returns. However, the data in the backtest is limited as to the number of trades. These coming 6 months should tell me for sure if I have solved my problem. By then, I should have enough actual trades to tell me if I succeeded in correcting my mistake.
Picking tops and bottoms is the hardest thing traders try to do! Most traders fail. You do not need to get the absolute top and bottom of a trend. It is a bit unrealistic. When you follow the trend, you should be able to get 80% of the trend without any problems. Far easier and less stressful. Just my 2 cents.
It was for that reason many saying it was nearly impossible which set me out to try. Another reason, the very top and bottom moves are often large, I figured if I could grab that it would create a healthy addition to my acc balance. Like anything if you focus on a challenge you can often crack it, it's rewarding just beating the odds and it's do-able. Trading against the general consensus of opinion is fun when at extremes. That's another trading difficulty.
QQQ was born 20 years ago at $50, currently $170. Even with dividend reinvest, that is no where near 13%. It is more like 6.5% a year and you had to take a 85% drawdown to earn it. Even Gold has outperformed QQQ over the last 20 years. But the real question is what rate of return do you think you are going to get with QQQ over the next 20 years and what kinds of drawdowns do you expect?
sorry I meant the NDX - http://financeandinvestments.blogsp...nasdaq-100-1986.html?_sm_au_=iVV5DG4THZsvJsGs that's long enough for a reference. right now with 10-year yielding 2.6% and SP500 earning yielding 6%.... stocks are dirt cheap... then you add the consideration that tech will be the driving force.... there is no other asset class as attractive as US equities right now, especially the techs.
and 1 more note about zero-sum. and I have written about some of this before.. - why play zero sum when there is so much money out there for you to grab in positive-sum games.. unemployment is at all time low, skilled workers pay is on the rise.. most people who try to trade are really losers who don't have the skills to do anything else... get some training.. employers are desperate right now and they will hire anybody who can do a decent job; - and if you have to play zero-sum.... where can you find the most dumb money? in the stock market you are competing against the best and the brightest; how about poker? sport handicapping? betting on horses? I don't touch those but common sense tells me there is more dumb money there than in stocks... I have been on ET for long time and I can tell you 98% of ET is dumb money; gotta keep a trading journal; gotta correct my mistakes; gotta work on risk control; yada yada... I see people come and go, thru this never ending amateur meat grinder, with 98% have nothing to show for in the end because they were on the wrong path in the beginning. - and if you have to play stocks... why not ride the BIG trend, the upward drift, easy money policy, economy firing on all cylinders etc... and people are trying to make 25 cents a day with 'trading'... pathetic.