(Why) do most traders lose?

Discussion in 'Psychology' started by kiwi_trader, Jul 25, 2006.

Why do traders lose?

  1. Undercapitalized

    23 vote(s)
    8.5%
  2. Trading Strategy: Entry

    20 vote(s)
    7.4%
  3. Trading Strategy: Exit

    26 vote(s)
    9.6%
  4. Psychology/Discipline

    137 vote(s)
    50.6%
  5. Money Management

    65 vote(s)
    24.0%
  1. read your PM, thanks

    vital analitics
     
    #61     Jul 27, 2006
  2. Wish you would share your views on backtesting here as there has been a lot of debate on this issue recently but be ready for some lively rebuttal.
     
    #62     Jul 27, 2006
  3. taowave

    taowave

    one would think with a user name of vital-statistix you would find some value to backtesting.....

    Perhaps alittle clarity wouldhelp...

    Do you make a distinction between trading systems and backtesting???

    I find it hard to believe you would think there is no value to backtesting and looking at various distributions and "vital statistics"..
     
    #63     Jul 27, 2006
  4. the emphasys is on backtesting, not on testing in general. The premise upon which backtesting is based is totally flawed and results 99% of the time in curvefitted systems.

    one can take an example how testing is being accomplished in neural networks where data is split up in three pieces: one for the development, one piece for the back testing and one piece for forward testing.

    but having said that the whole principle of testing in this manner is fundamentally flawed but I do not want to get into that as it gets too close to my trading philosophy.

    statistics are an integral part to my trading environment, but these are not implemented in the "tradional" way

    vital statistics
     
    #64     Jul 27, 2006

    • Ranked
    • Retail Traders are under-capitalized.
    • Retail Traders do not know how to take losses.
    • Retail Traders are not realistic when it comes to their goals and their risk.
    • Retail Traders are Gambling and are not doing the boring job of execution. They need the exhilaration and the adrenalin rush, from what they perceive as trading.
    • Retail Traders do not have a complete plan to follow.
    • Retail Traders most of the time do not keep a trade journal and refer to it.
     
    #65     Jul 27, 2006
  5. Statistically speaking, that is not called Statistics. :D
     
    #66     Jul 27, 2006
  6. I know I'm going to get a bunch of flak about this comment, but backtesting is of little value for most trading strategies and decisions, IMO. To do so properly, one would have to take into consideration so much peripheral data that it would become onerous. History, only adapted to current interest rates, current "global" conditions, gold, oil, war....and then overall volatility....dollar valuation, etc. etc. Simply reading what "was" without all the reasons for "why" it was, seems like a false reading to me.

    However, backtesting to see how Specialists handle such things as opening prices, MOC's, intraday gaps, etc., would be of some benefit.

    Just MHO.

    Don
     
    #67     Jul 27, 2006
  7. Butch,

    You've got a serious inferiority problem.

    Perhaps you'd find some success in trading if you focus on individual actions in place of some poorly conceived notion of social economic class hierarchy.
     
    #68     Jul 27, 2006
  8. taowave

    taowave


    Interesting....But if you find backtesting of little to no use,than what is it that you could possibly find useful.Every form of technical analysis from Gann-Elliot-Edwards/Macgee-Wycoff is visually(and imprudently) backtested at a minimum,and clearly fundamental data has been rigouously backtested..

    Statistical arbitrage and all mean reversion strategies as well as option dispersion strategies involve intense mathematical modeling and simulations...

    I understand where you are coming from,but certainly see it in a different light..
     
    #69     Jul 27, 2006
  9. I actually agree, to a degree. I fully agree that to just back test in a vacuum and not take into account tax policies, price of gold, geopolitics, dividends, interest rates, market psychology etc............... Is just back testing for the sake of back testing. I also think there's too much emphasis on rigid trading "systems" as well.

    I personally think that at some point trading becomes an ingrained process and instinctive. That's not to say that there aren't things/indicators a trader should use, but those are just pieces of the puzzle and can often serve as points of fascination/distraction from the 'big picture". When it's all said and done, this isn't a pure scientific/mathematical practice. There is a lot of art to this game.
     
    #70     Jul 27, 2006