This is why 95% of retail traders lose!!!

I'd like to start out by saying I'm not really a new member here. I just haven't been active on these forums until now, simply because within a couple months from now I'll either have "made it" or have quit spot trading and left it for good. I started trading in January 2018. I wanted to voice my opinion of forex trading, strategies, the FX community before I leave. As of this time I will be active in this thread hopefully we can get some meaningful response. I'm gonna just throw up this disclaimer because I don't want to get flagged for anything.

Disclaimer: The purpose of this thread is to voice out my experience, my opinion and finally my subjective conclusion on how the forex market works, why strategies and expert advisors fail over time, and why most retail traders end up either quitting or a light bulb appears upside their skull and finally "gets it." This is in no way shape or form an attack on your beliefs and opinions. All I want is for this thread to expand on other's experiences and to share insights on the manner that way this thread is productive. Please refrain from destructive criticism, thank you.

My experience
That aside, I have an approximate 1 year and four months worth of trading. I've traded nano, micro, mini and standard sizes across multiple brokers. My favorite pair that I usually traded for the longest time was EUR/USD due to its lowest spread(1-2 pips). For the lot of you who are either "experienced" or "professional" that may be simply a blink of an eye, but my core trading style is scalp/intraday and I've had plenty of screen time looking repeatedly at charts. In all my time I've had to learn the ropes on my own, learned strategies and how to use indicators. I use tradingview for analyzing charts. I encompass the following "technical analysis": Multi-timeframe analysis, Stochastic RSI, T/L, S/R, chart and candlestick patterns. My best week ever was 300 percent in one week on a 1:500 leveraged account. This was back when I was scalping on the 5m chart using a simple RSI on stock settings. I lost it all the following Monday. Price went against me in a very slow and painful manner. I've also tried naked chart trading, worked for a little but ultimately failed. MACD, Bollinger Bands, moving averages just to name a few, trust me, I've tried em', ultimately it didn't work.

In terms of trading I found lots of people in the community have mixed views about where price goes, even among the "experienced" ones. It's either a hit or miss. We're usually told by the more "experienced" traders to cut your losses short and let your winners run. What they didn't tell you was that market volatility is part of the game and you must accept drawdown in order to gain profit in case the market turns in your favor. What they didn't tell you was that letting a winner run can just as easily reverse against you. We're told "the trend is your friend". What we're not told is that it may be too late to join the trend. You may very well end up entering at the start of a pullback or even worst, a full blown reversal.

My opinion
I think a lot about trading is relative and actually holds no merit. What may be an uptrend to you(1-4hr chart) is actually a downtrend(weekly-monthly chart). A 30 pip spike in any direction would be seen across intraday traders but swing traders simply shrug the move off. When you think about it, the forex market is in its own merit a living breathing system. I took a break from trading for a few weeks to really dig myself in how the forex market works.



This is a equity curve of a basic moving average EA on a 15m tf, pair is EUR/USD. It took me hours to find the best setting for this particular setup. The trades take place from January 2019 to Febuary 2019. Initial deposit is $10. What I want you to pay attention to is from the start all the way to the first peak. This thing peaks at $553 on January 18. It's not a smooth curve up but it's the smoothest on the screenshot to prove my point. After that, the equity curve started to take a dive. From that point(despite it peaking again) we do not see a smooth curve up again and over time the settings where absolutely useless as the equity kept going lower and lower over time. What this means is a forex strategy that is static is absolutely worthless. Those that have rigid strategies(most are taught to us retail traders) will not work over time because A)You have to look for the setups to form, and B) Even if the setup forms, you can't be certain the same outcome will repeat itself. Market conditions change and there's too many factors to consider for a retail trader to fully grasp(I'll get to it on the next part).

Let's face it, the very fact that retail traders, yes, you too, even the most "experienced" and "professional" traders, have to have risk management because we're all speculating on past data and we're not sure if the result will be in our favor or not. Albeit, with strict money management, a loss can still be dwarfed by a huge win but the point I'm trying to make is NO RETAIL TRADER is 100 percent certain about market direction. The moment even just the mere concept of "risk" is involved, traders are basically speculators. Which brings me to the meat and potatoes of this thread.

My theory
As I've mentioned I took a few weeks break from trading. I wanted to wrap my whole head around the concept of trading currencies so I started from looking at the history, the fundamental aspect of forex trading, what it has evolved into, etc. The last strategy I tried to utilize was the use of currency strength meters and matrices. Basically a formula is used to measure how each individual currency is doing against the other. Surprisingly I was able to make a few well placed trades looking at the spaghetti indicator alone without looking so much as a chart but it ultimately failed because either currency strength suddenly diverged or an expected decline or rise in strength/weakness also ultimately failed. When I looked at the chart I immediately concluded something that you'll probably never hear elsewhere: Charts are useless.

You read that right. Charts are actually as useless as indicators. Let me explain to you why. The concept of forex trading is speculating against the strength/weakness of two currencies(because they're traded in pairs). What you'll find over time if you haven't already is that indicators in themselves are either useless or at least not consistent. Somewhere down the line of code, it's averaging "price" over a certain period of time, something you see in a chart just as well. All indicators rely on "averaging over time". Oscillators have a limit and can stay overbought and oversold regardless of timeframe. So we can conclude that indicators is a result of price action. So here's the next question: What is price action the result of? Well the answer is simple. It's the result of the strength and weakness of one currency over the other. Now, for the million dollar question: Who drives price action? Congratulations if you guessed correctly, it's the central banks. All the major pairs traded are central bank-backed.

My conclusion
When you take a look at the hierarchy of forex trading, it goes something like this:
Retail traders gets their quotes from retail brokers
Retail brokers get their quotes from liquidity providers
Liquidity providers get their quotes from banks
Banks all get their quotes from the central banks

We retailers are the last ones to get crucial information. Now, disregarding possible manipulation via spread widening and slippage, its impossible for retailers to enter the market TO THE MICRO-PIP of any turning point in the market regardless of timeframe. To simply put, retailers won't know it. You see the trend happen AFTER it's formed. You see the trend end AFTER the reversal happens. You can confirm it was just a pullback AFTER price finally retraces. Do you see the trend yet peps? We work with information that has already happened. It's yesterday's news. The reason why we retail traders are speculators is because we speculate on what either has already happened or what might happen. But we'll never know. This is what will always be the gap between retailers and institutional traders. Now my theory is that because banks have clients be it a person with a deep wallet or businesses, if money needs to be converted for a cheaper price then that's where price is gonna go. Either that or central banks will move quotes in response to major news events either from them(interest rates) economical, or political. Sorry, but I'm not buying "traders move the market". Not even the brokers and hedge funds combined can move the market, simply because they're not the central banks. Central banks set quotes on a criteria I reckon.

Using order flow, order books and volume, it's all meaningless. Forex is decentralized. What orders and volume you see for one broker isn't going to be same for all the other brokers, not to mention the underlying fact that brokers themselves don't dictate price movement. The only people I firmly believe who can consecutively, without much risk at all, TO THE PIP, enter and exit the market with flawless precision are those with inside information. It's the only way. Either that or your trading for the bank yourself. "Experienced" and "professional" traders may have a good track record, but they always have to use risk management. They don't 100 percent know where price is gonna go, but they've traded longer and seen market movements over an extended period to know if a setup is gonna fail or succeed with high accuracy.

Thread's up peps!
Well, sorry the long thread. I just had to get this out. This was basically therapy for me. I hope I didn't offend anyone over this "rant". Noobies, experienced, professional, institutional, speculators, all of you are welcome to share your experiences and insights.

Update 11/28/19:
Okay poll is up. This is an update to this post seven months later. I've continued trading as I said I would and I'll be ending my trading career very shortly in about 2 months to rack up a total of a perfect 2 year trading career since January of 2018. Over the course of the months however aside from testing and trading strategies the world over I dug up some very important information, information that will give you a glimpse of the bleakness of the retail trading industry. This'll be almost somewhat of a 'Anton Kreil schools brokers' thread but I believe since I'm leaving the Forex market soon I want to give a very lasting impression upon the community, an impression that should benefit greatly for those who are just starting on their trading journey for spot fx. The goal of the poll as well as its proceedings is to inform the "average joe" so to speak so you can either take what I've got to say with a grain of salt and trade your merrily way to a negative balance OR you can use the information that I'll share(as my educated opinion) to navigate around these nuances, or save your money altogether. Let's see how this goes.

tldr, so what is the reason why 95% traders lose?
if you know what reason why now, are you within the 5% traders that profit?

Based on your question I could only conclude the two following scenarios:
1) You didn't understood what I had took time to write down so I suggest you read it again to get a grasp of the retailers situation.
2) You simply looked at the title, disregarded the post and assumed I'm the 5% winner which again the post clearly says otherwise.

Try again boss

Than you for this post. There's so much nonsense in forexfactory that your basic, down-to-earth view on the Forex is quite refreshing.

You make a great point about central banks. I have had similar thoughts about this matter for a while now.
I think there's a great misconception flying around - that price is changing due to the buying and selling activity of the market participants. I too think that price we (everybody who is counterparty to the central banks, including all other banks) get is solely decision of central banks. They make their money by spread. Ideal situation for them is where buying and selling activity is in balance. That way they can always take the spread with very low risk. When they see an imbalance between the buyers and sellers, they take the price to the new level.

Ordinary wisdom says, that if there are more buyers than sellers, the price will rise. I tend to think otherwise (but I'm not completely sure). I think that if there are more buyers than sellers then they LOWER the price until everybody is AFRAID to buy more (because if you buy now, when the price is falling, you are buying high). That fear forces the buyers to flip their positions and GREED forces more participants to take selling positions (got to get to "riding the trend") until there are more sellers than buyers. After that, a new cycle will begin. If it where to be the truth, I'm sure it's safely hidden here in the rookie section. In any case, I hope that it was helpful to at least somebody.

It's very simple people who fail at trading do not concentrate on the main thing which is risk management. Here is what i have found why people fail

1. Trading too small time frames
2. Trading too much size
3. NO RISK MANAGEMENT
4. Trying to make money too quickly
5. Not paying enough attention to fundamentals

Until new guys concentrate on the less sexy stuff of trading they will not do well.

1) first and the main problem: NO EDGE.
2) too much risk

Yep agree.

my friend; your conclusion is wrong.

Quotes are driven by supply an demand; mainly from commercial entities; like foreign trades, foreign investments, transfer of funds from country to country, etc.

no customers, no banks

we always think there is a conspiracy, like when we were caveman and other cavemen were coming to steal our wives, afraid then, afraid now

Thanks for replying. Actually, NO. "NO EDGE" is not the problem. An "edge" as you call it is relative. What may work today may not work tomorrow. Retailers being misinformed about the market is the problem.

Thanks for replying. This thread isn't about risk management, its about misinformation to retailers. Not much of a contribution but thanks for trying.

Actually yes,

If you use a strategy with no positive expectancy = edge, you won't earn a penny in the long run. If the market changes you have to adapt your strategies in order to get a new edge /positive expectancy.

Thanks for replying alphadude. You did read the post right? I covered that banks converting currencies i.e. transactions is what really drives the market. I agree with supply and demand. You seem to know more about forex than what traders are seeing simply by looking at a chart. However that's not something retailers will see behind charts, only the after-effects. What people say about banks leaving footprints behind is like footprints in the sand, over time it's meaningless. Thank you for your contribution sir.

AAANDD BINGO!! You hit the nail on the head DavidRP! Hopefully you really did read my post. Actually I was hoping someone caught on. But I already did mention this: static strategies = RIP account. The thread here is about what lies beyond what traders can only see. Thanks for your input.

No, no conspiracy here. But I can surely say this, forex isn't, "What you see is what you get." Though thanks for your time perhaps

NOT much of a contribution hahah that's the problems people should be preaching about how important risk management. Also how one can be correct even 50% of the time and make money.

CHARTS ARE NOT USELESS they are what we can use to find good level to trade from, that's the only information we have.

I have been taught by institutional guys who now trade for themselves and guess what THEY USE INDICATORS AND USE CHARTS

why are they good because they manage risk well.

It's simple economics.

Most traders fail because it is their duty to fail. To be of benefit to a free market economy speculators must lose so that the real contributors to society (people who MAKE THINGS that are USEFUL to others) can prosper.
If you are a consistent loser at trading, then congratulations, you are a valued contributor to the free market economy. Keep up the good work.

First I'd like to thank you for taking the time in contributing to the thread. It's nice to see that we have similar thought processes. Actually, my view on the market is quite morbid and pessimistic. It's based off a hunch due to a certain law of thermodynamics. But I digress. This post is really more from a realistic standpoint. Everyone is like "Oooh, there's 'resistance'! It's bounced on the same level!!" and while everyone is shorting the market, you and me go, "Why did price stop there? What's the reason?" And if price shoots through the roof and takes out their stops a trader using what's called "technical analysis" immediately starts looking left of the chart for possible points of another level of resistance. I'm not proposing a conspiracy, this thread is really trying to get to the bottom line of forex trading, not for us noobs but for all people.

Thanks for replying. I'm not sure if your comment was directed to me in a literal sense or to people who generally fail. But I also agree with your concept, the losers pay the winners. If everyone wins, nobody loses which means the market will be illiquid. But this comment isn't really helping the thread though it's just something we traders all know and have to live with.

I understand your point sir. And thank you for taking the time to reply. Risk management along with a "edge" as you peps put it is what makes a profitable trader/EA. What I'm getting at though is the sole fact to why the majority still lose. Even with risk management you take losses. The purpose of this thread is "why do we lose?" The thread is to get to the bottom line. But I appreciate your efforts, thanks