Why Retail Traders DESERVE TO LOSE Money

I hope this tread will be provocative , honest/truthful and informative/educational.
OK, so pretty lofty aims here- LOL !

I doubt if there will be much 'new' content in here, most will be recycled from my other thread if only because I don't have the time to do everything:

i.e.trade, run my Self Help Group for Sharp Edge students and run 2 unique threads here on Forex Factory.

Why retail traders deserve to lose their money.
This was one of 2 contentious opinions raised in Saturday's CompassFX 'Trader Talk' webinar.

Because I missed the first 45 minutes, I had been hoping to find that the recordings (yes plural because it lasted over 3 1/2 hrs) had been
either placed in the CompassFx Sharp Edge blog : www.compassproptraders.com/blog
or left in the documents folder (folder symbol on bottom right) in the webinata room the webinar was held in.
But there is no sign of them (yet).

I have obtained a 'bootleg recording' of the webinar, but have been asked not to post it in my main thread yet.


So I will describe a bit about how I stirred things up a little in the webinar:

I told attendees about my trading 'journey' and how before I came across Ray I had spent over $30K on useless courses (plus around $500 on a course which was good but was unsuitable for me). Plus I had traded and lost over £50K in various accounts. This ignores the money I had lost by 'investing' in stocks over the years.

Some people said that sounded just like their trading history, while others said that it was a lot of money. One guy said that wasn't so much because he had lost about 3 times as much.
But I stirred things up when I went on to say that I deserved to lose that money, because I had not secured some 'institutional equivalent' education before I started trading a live account.

Trading is about the only highly skilled, highly rewarded profession where novices with little or no knowledge and resources take on some of the biggest institutions and the most skilled and resourced professionals in the world! As one attendee put it, it is like gaining entry to a modern tennis championship and then having to use a wooden racket! Or as I put it, taking on a modern fighter plane in an old WW2 plane.

So why is it that so very many people (the vast majority) don't search hard enough to find and invest in some serious education before trading a live account. I can only answer for myself - probably being gullible, thinking that SpotFX was totally different to Stock Investing, impatient, and overconfident that my 'logical', mathematical and computer programming skills would give me an advantage!

What a dumbass I was - LOL !

Although Value is the key to all types of trading, in effect you are trading against other humans - not trading against an inhuman market. This is because of the way that the institutions need to trade hundreds or even thousands of times larger size than a retail trader, they need to do everything they can to manipulate prices so that they can get the liquidity that the need both to enter and to exit.
It is their struggle to get a big enough trade on their books as they trade the 'Fundamentals', that creates all the 'Technicals' so beloved of retail trading gurus!

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The above is a response on this subject that I had in my main thread

Now here is my response to the guy who didn't like what I was saying:


Hi N....,
Obviously I have hit a nerve here:

You say "How could you have known? Ignorance, not stupidity, is why most retail traders lose their money. Are you saying that two friends of mine, both of whom blew out their account funded by their retirement accounts, deserved to lose their money? That's not only harsh, that's ludicrous and judgmental. No one knows when they first start trading what's going on. "

My point is that even at that early stage, it should have been obvious that one of the highest paying professions in the world can't really be so simple - especially for a novice who knows nothing about how the big institutions trade and has virtually no resources of any kind, much less ones of close to institutional standard.
Even at that stage I should have known that I didn't have the full picture and thus limited my trading to just demo accounts.

I do admit that it takes a while before it is possible to tell the real knowledge from the marketing B*S*, but why trade a live account when you are uncertain?

You say "If you would've known that people like Ray were teaching when you first started trading, would you have immediately availed yourself of that training? More than likely. But you didn't, probably because you had no idea that folks like Ray even existed, and few out there still do, because they have no idea that the real deal even exists."

Certainly even when I first started trading, I knew that Quants and Analysts existed. I 'd had an interest in the Stockmarkets for over 30yrs by then, I had also lost thousands of pounds 'investing' in stocks - usually selling at the bottom, but sometimes by buying at the top. Back then so-called 'Rocket scientists' were often in the financial news. Why would that have been the case if all an institution needed was an MT4 platform and some lagging indicators?
I knew that trading Algo existed, I knew that the big investment banks were pouring millions of dollars into them. Why would anybody (especially me) think that they could compete with that when using a free (Broker provided) platform and no financial training?

You say "There are lots of charlatans out there, claiming they're ex-pit traders, ex-floor traders, etc., teaching their "secret indicator" that they'll gladly sell you for a few thousand dollars, plus a thousand or more for "training" that shows carefully cherry-picked charts to "prove" that their indicator will make you money. How is anyone to know the difference?"

Several of the 'charlatans' are actually ex- pit traders (who couldn't make the adjustment into screen-based trading), or 'Bank traders' (who just filled customers orders rather than trading the Bank's own book). Plus there are those who just lie about their background, experience and wealth! But until you can at least partly replicate their claimed results and until they show that their method/system is fully consistent, why risk trading real money using it?
Are there really so many intelligent people who are prepared to gamble all their hard earned savings without any real evidence? - Well, yes there are and I was one of them - thankfully I didn't risk it all though!


PS. N... was kind enough to 'Like' my response to him

Nobody deserve bad things. But in a competitive world like this many are fish. Darwing rules...

Isn't it strange that so much 'education' and 'information' about trading (or even about investing) is provided by the Brokers?

Do they really care if you succeed, or do they just want you to keep trying so that they can make even more money out of you?

Certainly in the past when almost all brokers ran both A and B books, it was that they wanted to extract the last cent from you before you finally gave up, and they used to have an enormously high 'churn' rate of clients.

Boris Schlossberg ( of BK Forex - which is an 'educator' by the way) said in one of his emails that when he and K worked for a major SpotFX Broker they found that using the Broker's book as to how much its clients were net long or net short a currency pair was a fantastic contra indicator. So the Broker persuaded a french Investment Bank to set up a fund to trade Euro/Usd purely based upon the bias of the Broker's clients.

Apparently this fund was incredibly successful until the first Euro crisis, when of course the Euro trended down for months and even the dumbest retail traders couldn't miss it - and so the Fund was constantly long a falling Euro.
Did the Broker deserve to lose its money - yes, of course they did! -They were both dumb and greedy!

The fact is that because of the sheer size of the big institutions, they need to put large sized trades on their books. This means that they have to be patient and slowly accumulate their positions by smart use of smaller trades AGAINST their intended trade direction.

They take it higher to accumulate Short positions from all those short term trend traders (including smaller institutions) who are dumb enough to be buyers against Value.

Similarly they take it lower in order to accumulate Long positions.

It it these big guys that the Retail trader must understand - the much maligned Market Makers don't push price in big trends, they make aprofit off the spread and like to therefore keep price in a tight range so that their book doesn't get 'one-sided'. Because if the price is trending up, it means that the Market Makers are net Short and if the price is trending down, it means that the Market Makers are net Long. They are taking (as a service) the other side of every 'At Market' order being placed!

Hints on how to hook a 'fish':

Give a man a fish and you feed him for a day. Teach him to fish and he is fed for life !

The NDA I signed prevents me doing more than hint, but here are some very loud hints about the 'Institutional Trader aware' version of the popular Retail head and Shoulders trade.

Conventional Retail H&S:

Attached Image (click to enlarge)

Institutional Aware considerations on the conventional H&S:

Attached Image (click to enlarge)

I expect that at least some will be smart enough to work it out!
If they are then they will also have learned 3 other important concepts to improve their trading: 1. Narratives 2. Liquidity. 3. That trading is easier/more profitable if you can trade Multi-Unit.

I have just been told about this Audio interview with a real Market Maker.
To hear from a real Market Maker about what they do:

https://t.co/5koZ48vDIK

Can you easily identify a course/system/mentoring that is NOT worth the effort of following up?

With some it is extremely easy!

Recent example:



This one starts by saying something that is actually true - shock, horror !

But then the garbage soon follows. Here is a list of the garbage being spouted:
1). "First and foremost it must be uncomplicated and easy to learn." - Right ? - No that is so very WRONG! Uncomplicated and easy to learn is down at the bottom as a probably unrealistic 'nice to have' feature !

3). " Ideally it will have no indicators.... " - Right? - Not if the trader needs the comfort of an indicator because they don't trust their own analysis !

4). ".... minimum Risk: Reward of 2:1 " - Right? - No, this is a classic fail as well as being based on a garbage idea. The guy actually means a Reward: Risk of 2:1 meaning risk 1 for a reward of 2 times as much! But of course any Reward:Risk ratio is always only theoretical - when you enter a trade you can define your Risk (in nearly every case), but unless you are stupid and willing to be a 'Dick for a tick' and consequently have a poorer win%, you can't define your Reward. Also if you have a Reward : Risk of 3 : 1 and a win % of 25% then you break even on average. That is the same as having a Reward : Risk of 1 : 3 and a win % of 75% or a Reward: Risk of 1:1 and a win % of 50%.
Hey out of those, a 75% or even 50% win rate feels a lot better than just a 25% win rate - LOL ! Thus a higher win% makes a system easier to trade in practice.

5). "It must not rely on any EA's or electronic means of finding setups" - Right? - No, it doesn't matter so long as the trader actually understand the criteria being used and is able to do modifications if required!

6). " .. should be able to work on all time frame, to suit different types of traders " - Right? - No, it only needs to suit the actual trader who is trading it. It is just unrealistic to expect that there is a system/method which will suit all traders! In any case, in determining whether a system/method will suit a particular type of trader, it is more than the time frame that needs to be considered. Trend Followers hate Counter-trend systems and vice-versa, Scalpers get bored with a longer term Swing system and Swing traders burn out trying to Scalp, it also matters for which session the trader needs to be active, how often, and for how long each time.

".. using for many years with fantastic success. ... would like to offer it for free... a lot of time and effort has gone into writing and publishing and offering the after sales service... but we have been able to keep the price down..... " - Right? - No, that is complete cr4p! If they had really made such a lot of money for so many years and really wanted to give it away, then why couldn't they easily afford to! A). If they have been trading it for so long, then it must already be well documented. B). Just how expensive is E- publishing? - Give me a break !!!!!!

Why do the vast majority of Retail Traders either make a loss, or not as much profit as they should make?

Just to limit this for now we will ignore: lack of preparation, lack of training and trading psych problems!

Also, I will just list the reasons for now and explain them , expand upon them later when I have more time.

1. Lack of, or poor Money Management aka Trade Management. At its simplest this can be just lack of sufficient capital.
However it is many times easier and much more profitable to trade multiple units of smaller size.

2. Many Retail Traders try to Scalp, but without Orderflow tools. Since the timeframe does not lend itself to use of Fundamentals and Value they have no edge.

3. Other Retail Traders try to Fade Tops and Bottoms - yet these are the hardest trades to master. Continuation trades in the direction of the trend are much easier.

4. Nearly all Retail Traders have been sold the idea that trading is/can be easy. That you only need a bunch of highly tuned indicators, or Volume Spread Analysis, or Supply and Demand or Support and Resistance, or Market Profile or Volume Profile, or Accumulation and Distribution, or Candlestick Analysis, or Fundamentals, or Correlated Markets.
The problem with this, is that they flit from one to another of those, never becoming an expert at any 1 or 2 of them.
There is basically a choice here, traders can be successful by being one of the top experts in the world in just one of those techniques.
Or they can be successful by being reasonably proficient in most/all of them! And this by far the easiest path!

sorry, the second time i use this meme.

Have you anything constructive to say? (Either succinct or verbose)
If you don't agree with what I say, please specify which parts you disagree with and tell us all why they are wrong!

no idea where you want to hit with this thread but things are far more simple then you tend to complicate them. first i dont get it why youre kinda so against the retail traders,are you institutional?
then the question why retailers lose money in forex is wrong taken. i think is a very normal thing as a retailer and mostly as a beginner to lose money first in this.
I dont think there is a method to accumulate all the knowledge about trading and when you make your first acc and jump in the market you already know everything and so you will be profitable,i said ''profitable'' not ''you never lose''. For me losing when you do trading is part of the game and i do close orders with loss while i am trading because is part of the plan.
so as most of us if not all of us we was once newbies into this i think all we had at our first steps different sums of loss in this. the secret if we may call it so is to learn from mistakes and try improve your method while youre on the way.
retailers will always have a the biggest % part that will always lose ,but this is not something unusual and have logic based on many different logical reasons.
is well known that newbies are the most hunted ones for the signal providers who always end up bad.
is well known that newbies are the most hunted ones by those scammers with their so called holy grail indicators or advisors and those guru trainers ,again this mostly if not always will end up bad.
my opinion about all this is that are a big crap,you never need to pay anyone to teach you trading,you never need a signal,or a robot as a retailer. all you need is to practice and build your own personal method with a simple and strong MM rules and follow it strict without changing every day or week.
after all this have nothing to do with being against retailers and consider ''they deserve to lose''. is just part of the business as a logic evolution of all this we call forex. trading from home was never really such a funny thing because is challenging and does require some skills you need to accumulate with time and practice. some guys understand this and they follow the logic path ,and some just dont get it and they will always be at the hand of the things they will never can control.
For me things are more simple after some years, losing as beginner,playing around with many auto stuff and ended up with simple manual trading, is all about method and money management. if you learn to do this well and apply it properly you can have decent source of income.
is not about never lose a cent,but is about to lose some win some and when you draw the line to be at BE at least or in profit. to squeeze the best from your profitable trades is a big skill and not so many have it and the reason is simple, it need quality brain training to be able to stick with the rules and dont make a single step out of the right path. so the psychological have a great importance here , but ... like in everything you do in life i will say.
so to end this i will say nobody deserve to lose,in forex or whatever in life ,but this will often happen and it does due to the each individual choices.
cheer up

I agree with Duxis. Basically you talk with facts. Problem is your facts are right like other facts you want show as wrong. Forex is so complex for set rules about what works for everybody. Every one have adapt their skills to market for have success. Its only truth ( and only fact )

Quoting Husky77

Disliked

{quote} no idea where you want to hit with this thread but things are far more simple then you tend to complicate them. first i dont get it why youre kinda so against the retail traders,are you institutional? then the question why retailers lose money in forex is wrong taken. i think is a very normal thing as a retailer and mostly as a beginner to lose money first in this. I dont think there is a method to accumulate all the knowledge about trading and when you make your first acc and jump in the market you already know everything and so you will...

Ignored

Hi Husky, What makes you think I am 'against Retail traders' ?
- Did you read post numbers 1 and 2 in this thread?

"...things are far more simple then you tend to complicate them."
- Really? If trading is so simple, why are there hundreds of threads in here pretending to show people a simple way to trade? If any one of them worked as described (i.e. anybody can learn it and be profitable), then there would be no demand for all the others.

"...you never need to pay anyone to teach you trading,you never need a signal,or a robot as a retailer. all you need is to practice and build your own personal method with a simple and strong MM rules and follow it strict without changing every day or week."
- I agree that every trader needs to adapt their own personal method, but how can they learn enough about trading to be able to even start to design the first version? How does a beginner find those 'simple and strong Money Management rules? Actually the more you look into different ways of trading, the more you will see that there are different sets of Money/Trade management rules which suit different styles of trading, which suit different account sizes, which suit different personalities!

Perhaps I misunderstand you, but your advice for a beginner appears to be just jump in and start trading and it will all work out well in the end!

My main advice is just the opposite: Try to just learn about trading, at least until you can tell the difference between complete garbage and something that may just have a grain of truth! Then only trade a Demo/Practice/Sim account until you have identified a method/system that you can verify is profitable and works for your resources, skill-set and personality!

If that is too complicated for you, then consider that financial trading is one of the highest paid professions in the world and attracts the best, most well resourced participants.

Quoting braintheboss

Disliked

{quote} I agree with Duxis. Basically you talk with facts. Problem is your facts are right like other facts you want show as wrong. Forex is so complex for set rules about what works for everybody. Every one have adapt their skills to market for have success. Its only truth ( and only fact )

Ignored

Hi braintheboss,

So you agree with me that trading (or at least Forex) is too complex for one set of rules to work for everybody. And that everyone needs to adapt ... to the market in order to have success.

Then why do you say "Problem is your facts are right like other facts you want show as wrong." ?

If you don't agree with what I say, please specify which parts you disagree with and tell us all why they are wrong!

Because your conclusion are just opinions. Some can have some part of right but you can't apply it like immovable facts because dont have any base of demonstrable evidence.

PD: Please, write with normal font size. In forums caps or big fonts means loud talking ( or scream ). Not polite

OK braintheboss, I hope you can read this, because at my age (68yrs old ) and with all the floaters i my eyes I struggle to read a font this small. I am sorry that you consider it impolite to use a font that I can easily read.

Why do you say my conclusions are just opinions? You just said that you agree with me that Forex is complex. Don't my other 'facts' match your experience, or don't they on logically? Obviously my 'facts' match my experience of learning to trade since before i joined Forex Factory in 2007.
But they also match the experience of at least the more experienced members of the free self help traders group I run (which currently totals 380 members). Here I am talking about profitable traders with between 3yrs and 20 yrs experience, trading with institutional grade training but in the retail space.
2 of those guys used to trade Bonds for Banks before they decided to trade for themselves.

But as I asked earlier, please tell me specific things you disagree with, give your evidence and I will give mine.

OK
If you were only a drunk member passing by ...and expressing his rambling rhetoric, that's fine.
But not only you are drunk , you are carrying a commercial intent in your bag, that's a different thing.
Sorry i couldn't refrain my hostility.
We are both FF senior members , it's a pity to see someone reduced to play the role of the vacuum cleaner salesman.

My philosophy in short :

Arbitrage. Never take a position without a counterparty. Securing each decision. (A little tight poker player)

One tool : Currency Index revisited. 80% of my decision-making process.




The battle is happening here. Identifying each camp , where are the sellers , where are the buyers, the focal point of all tensions. The first step.
Finally gauging the weak points in a strategic game of communicating vaissels , scanning all combinations, pair by pair.




The task is greatly facilitated.