Why do more than 90% of traders lose?

Discussion in 'Trading' started by emg, Apr 8, 2011.

  1. You get confused about the edge from small traders and IP from institutions.
    #41     Apr 10, 2011
  2. OK, so let's run through the math on trying to steal an edge from a small trader. Let's say I know that 90% of small traders are going to lose. That means only 10% of the small traders who trade through me have anything worth stealing in the first place (maybe that percentage goes up a bit if I were to steal their strategy and implement it with my own cost of trading structure). On the flip side, I know that the traders I hire to trade my capital have a 50% success rate, once they get through my hiring process, since I only hire 1 out of every 100 people who apply, making sure I get the best people I can.

    So, why would I go through all of the trouble of setting up the infrastructure to monitor and reverse engineer small traders' accounts and strategies, especially since I don't know in advance which 10% of my small traders will be successful, so I have to track every single one of them, when I could spend that money interviewing and hiring my own traders? How in the world would a person who brought that idea up to the CEO be able to convince the CEO to go along? If I were the CEO of a brokerage firm and someone brought this idea to me, I would fire them. Not because I'm some highly-ethical guy, but because it is a stupid idea, with almost no payoff and huge risk.

    As for "grey areas" in the law, when has that ever stopped class action lawyers before? The amount of money they could make successfully prosecuting a broker who did this would absolutely give them an incentive to find cases.
    #42     Apr 10, 2011
  3. jokepie


    Lack of two things - Experience and Patience

    Some will say capital size?? It all works out if "one" moves away from $$$ to %% .
    #43     Apr 10, 2011
  4. Pekelo


    You don't mind if I point out the logical and mathematical fallacies of your post?

    Logical: They don't have to figure it out, if you are profitable, they can just back your trades with more money, or simply front run them. As long as you are with them, they are golden.(assuming they give a shit about your trades, what they don't)

    Math: You are supposed to be profitable, so even if you have 3 accounts, all 3 are going to be profitable in the long run. Since you can't select which type of trades go to which broker (winners here, losers there), they will have only 1/3 of your trades, but those trades will still be representative of your strategy, thus if they really want, they still can reverse engineer them.

    So your precaution is freaking WORTHLESS.

    Was it too complicated or should I explain it slower???
    #44     Apr 10, 2011
  5. If you really want to be in the winning ten percent you will seek answers to the following:

    1)Trade Selection- How do you decide what to trade for the day?
    2)Trade Entry: what are the signals that triggers a buy?
    3)Trade Exit: Profit exit and/or signal Sell?

    Most traders are constantly paying tuition for learning how to trade. Once you go through the learning curve and you learn how to lose money the rewards are limitless. Below are other factors for the high failure rate(my opinion):

    lack of strategy: You have to do the same thing everyday.
    Lack of risk management: Maximum lost per trade and per day.
    Over Trading: waiting for the right trade is part of trading.
    Lack of confidence: Virtual trade your strategy, gain confidence.
    Lack of Records: You need a trading log to reflect upon.

    Match you personality with your strategy! Put in the time, review trades(biggest losers). document any mistakes then avoid those mistakes. Do not complicate trading with indicators, trade the chart. The holy grail of trading is yourself.
    #45     Apr 10, 2011
  6. This reply explain why you are neither rich nor CEO
    #46     Apr 10, 2011
  7. I am too dump to understand you-LOL

    Wrong, there are always easy way is to "break" your strategy into different brokers(ideally under different account holders if possible). Let say after applying your super crystal ball, you know that an iron condor with wing will make you ton of money, and you can easily "split" the legs of this strategies into 3 different brokers, and this will appear to each of them as a simple call or put spread, strangle and not your actual strategy -got it?

    Can't believe you have 7000+ posts.
    #47     Apr 10, 2011
  8. Really? Explain how it does that? You are good at making unsubstantiated claims, less good at substantiating them.

    It's all very well and good to insult me personally, but I doubt that anyone but you really thinks that my reply explains why I am not rich nor a CEO. In fact, a normal person reading my reply is probably more likely to think, "Yeah, that makes more sense than what the other guy is saying".

    Anyway, I find the whole "your broker is going to steal your strategy and then it won't work any more" line of thinking pretty stupid. The market is going to do what it is going to do. If my strategy calls for me to go long, even if I'm trading 1,000 ES contracts and my broker trades 1,000 along with me, our 2,000 contracts aren't going to stop the market from doing what it was going to do anyway, whether that means go up and I profit or go down and I lose. Why? Because the market is too big for any one or two players to matter. You've got hundreds of thousands of traders making decisions and you think that you and the strategy your broker stole from you amount to a fart in a hurricane in that context? Get over yourself. Your (and my and almost everyone's) trading is a pimple on the back of an elephant relative to the whole market.
    #48     Apr 10, 2011
  9. I must agree.

    Crazy A
    #49     Apr 10, 2011
  10. It's entertaining to read about the conspiracy theories regarding the so called edges, I can't confirm or deny them as I honestly have no clue as to what really goes on in brokerage firms, as long as they provide good customer service, a good commission system and my capital is fairly safe with them, I honestly don't look beyond that.

    My suggestion is to build your edge around understanding price and market structure, then fact or myth no one can ever take your edge away.

    Once price is understood the next hurdle is discipline and psychology, and that could take a lifetime to master, so obviously I have no time for fairy tales and science fiction, perhaps that's why I don't think about such theories, because I think I got more important things to learn from.

    Crazy A
    #50     Apr 10, 2011