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Now I know why 95% of traders are on losing side

  • #21
  • Oct 19, 2007 8:22am Oct 19, 2007 8:22am
Quote
2. Most traders DO NOT know when to take profits. They look for 50-100 pip profits instead of 5-10 pip profits. The market gives you plenty of 5-10 pips profits every day, but only a few 50-100 pip profits a month. And the longer you stay in the market the bigger the chance of the market turning against you and hitting your trailing stop loss and/or stop loss. I read a thread (25-50 ema) where the originator of the system recommend that you put a 200 pip stop loss. Now that is plain silly. Profitable traders realize that playing $10 lots and only looking for 5-10 pip profits are a safer way to make money. If you can get a 5-10 pip profit every day then you can almost double your account in a year. And i still dont see the sense in entering 2 lots ($20) and then taking 1 lot ($10) profit at say 10 pips ($10x10pips=$100) and then close the rest of the trade after another 20 pips ($10x20pips=$200) or letting it run till it gets stopped put either by trailing stop or stop loss. Do you realize that when you close your trade bit by bit your profit is actually getting smaller and smaller. You made only $300 while getting 30 pips profit. When you closed your whole trade after only 20 pips you would have gotten $400 (20 pips x $20Lot=$400).

Even if I agree with most of what is written on the original point I totally disagree on this particular point.
As SeekingLight said, I think it is the other way around. Most of the beginners want to scalp the market and are afraid to lose any small profit. So they will take a lot of small profits and large losses.
In an analogy to physics I would say that they try to trade the noise instead of trading the signal. So they win small on the noise and loose big on the signal (the trend).
Of course some scalpers have very good results but it is definitely not a game for beginners.

Linked to that is the tendency to overtrade and to look very low time frames. The reason for that is the need for action and excitment of the beginner. The beginner even if he says he wants to make money doesn't really want it above all. What he wants is excitment. Then he gets it but as for any hobby you have to pay for it.
in my opinion good trading is boring and profitable!
  • #22
  • Oct 19, 2007 8:25am Oct 19, 2007 8:25am
I really think that number is way off.
Forex brokers have statistics about how many traders fail and how many accounts each trader blows. I have blown an account. 2.5 years ago when I was learning forex from Dustin Pass I blew an account. Since then I quit CFG and started to learn how to actually trade. Since learning how to trade scalps and swings I have been profitable all but 3 months and my returns are better than most people on this forum. I say most because there are a handful of traders here that are some of the best in the world. I will aspire to be half as good as them in my future. Back to the % idea. I think the number is way off because on average a new trader blows 3 accounts and this is most likely construed as 3 losers rather than 1 losing trader and this losing trader is only losing until he has his epiphany and begins to trade correctly with fundamentals and technicals and entering at better than market.
This job is so very true that you get out of it what you put into it. I spent the first year working 80+ hour weeks in forex. The last 2 years I've only put in 60 hour weeks because of the girlfriend.
The thread starter made a comment about scaling out of a position. It does work if you are a trend trader and you are in the direction of the tech and fundamental trends. Your last 1/3 or 1/5 will run for 200 pips many times if you are an accurate tactician. Also if you ever say anything that John Carter does is ineffective; may the Lord have mercy on your soul. (Joking and serious all at the same time.)
Last point. If you are new you need to get with a group of traders in a chat room that know what they are doing. Don't inundate them with tons of questions or emails because they will quickly tire of you. To them trading is a job. You clock in and clock out. You take time off just like a job. It's also very simple just like a job. It's redundant. So when you ask how to be profitable 10 different ways to the trader he/she is going to be frustrated with you because you have not grasped the simplicity of trading yet and you need more screen time before the trader dumps systems on you.
Sorry one more point. I have a couple EA's that make money. You can make money with strict criteria. To think you cannot make money with an EA is very near sighted. This response is long in the tooth. Have a good weekend and think about how simple trading is.
It really is that easy.
  • #23
  • Oct 19, 2007 8:26am Oct 19, 2007 8:26am
Another downfall is overconfidence. A beginning trader will string together a few winning trades, then, mentally, it just seems you are indistructable. Then, they enter positions that before that would not enter. They overmargin, as to think, "I am doing so well, I can get the big kill here." Disaster is sure to follow if you do not stay within the parameters of your methodology.
  • #24
  • Oct 19, 2007 8:27am Oct 19, 2007 8:27am
Quoting william5
IF everyone knows the answer, why do 95 % still fail ??????
Because they cannot control themselves.

Sometimes I check a chat where traders say what they do. There are some pretty experienced people but still:
- even if they know that they should trade with the trend they short in a long trend (currently the euro for instance) trying to get the top, and they average the loss.
- they let run the loss and cut the profits
...
They just survive because as they are experienced they have a very low leverage. But with the Euro trend I can tell you that they start to sweat
  • #25
  • Oct 19, 2007 8:43am Oct 19, 2007 8:43am
Quoting iandekoker
After reading numerous of these threads I realize why most traders DO NOT make money in forex. It's because of the following reasons:

1. Traders open a mini/micro account with $500 and then play volatile currencies with $1 lots. Now this is a sure way to blow account after account. Besides you will NOT make money trading a mini/micro account. The odds are against you. That is the reason why brokers allow you to open a mini/micro account. They know sooner or later you will get your leverage and/or stop losses wrong.

2. Most traders DO NOT know when to take profits. They look for 50-100 pip profits instead of 5-10 pip profits. The market gives you plenty of 5-10 pips profits every day, but only a few 50-100 pip profits a month. And the longer you stay in the market the bigger the chance of the market turning against you and hitting your trailing stop loss and/or stop loss. I read a thread (25-50 ema) where the originator of the system recommend that you put a 200 pip stop loss. Now that is plain silly. Profitable traders realize that playing $10 lots and only looking for 5-10 pip profits are a safer way to make money. If you can get a 5-10 pip profit every day then you can almost double your account in a year. And i still dont see the sense in entering 2 lots ($20) and then taking 1 lot ($10) profit at say 10 pips ($10x10pips=$100) and then close the rest of the trade after another 20 pips ($10x20pips=$200) or letting it run till it gets stopped put either by trailing stop or stop loss. Do you realize that when you close your trade bit by bit your profit is actually getting smaller and smaller. You made only $300 while getting 30 pips profit. When you closed your whole trade after only 20 pips you would have gotten $400 (20 pips x $20Lot=$400).

3. New traders all look for a "trading system" comprised of Indicators. Indicators are lagging and will NOT make you money in a ranging market which happens to be 70% of the time. So many systems are based on the 4hr chart. Do you know how many pips the market can move in 4 hours? By the time you get into a trade the big dogs are ready to take profit. That only leaves you with a small gain and sometimes even a loss.

4. Most traders don't know what is the driving force behind a currency. If you don't know what is driving the Aud, and Jpy, and Cad then rather not trade those currencies because you will end up getting burned as soon as the driving force changes course. (Aud get driven by goldprices. Jpy currently driven by carry trade. Cad driven by oilprices)

5. But the biggest mistake any trader can make it to take advice from an amateur trader. Amateur traders teach amateur traders to trade like amateur traders.

1. not true. if you know your MM the losses are counted in pips not in dollars. it's a % of your account that you lose, not a # of dollars.

ex. if i open an account with 50.000 usd and my friend open one with 500 usd and we both open same position, both of us hit sl at 1% MM, then
- i lose 500 usd on that transaction
- my friend loses 5 usd

same % for winning positions


2. this is a little player attitude regarding winnings.( i do it myself though) it's exactly the way the broker wins because they have a winning card : they chase and eventually take your sl one by one if you play small ball, plus the spread who's adding in each and every trade you take.

and

b) the market moves more than 100 pips a single day ( look at min and max values on daily bars) so what you are saying about plenty of 15-20 is also true for 50 pip moves, in fact 'the dogs' play only 100 pips and above a single trade

3. have you ever heard about OSCILATORS? they are a family of indicators too. The nice thing about'em is they ( and mainly they ) help you make money in 70% ranging markets. .. again 4h TF you are referring is just a problem of MM OR % ( EXPLAINED ABOVE)

4. i reccomend you to read Technical Analysis Of The Financial Markets--John J. Murphy It's a great book on technical analysis, most traders consider it like a Bible. It analyses John Dow theory in TA.

5. COMPLETELY AGREE WITH YOU HERE.

peace
The risk is what gives value to an investment.
  • #26
  • Oct 19, 2007 9:13am Oct 19, 2007 9:13am
Quoting iandekoker
(Aud get driven by goldprices. Jpy currently driven by carry trade. Cad driven by oilprices)
Very interesting post. Could you elluminate what is driving force behind EURUSD and GBPUSD.
Is it fair to say that euro is driven by the belief that US economy is finished as a global leader?

Not that I could use this info in my 5-10 pip trading, but curious.
  • #27
  • Oct 19, 2007 9:25am Oct 19, 2007 9:25am
Quoting william5
IF everyone knows the answer, why do 95 % still fail ??????
Because knowing isn't doing.
Trust price. Know yourself.
  • #28
  • Oct 19, 2007 9:28am Oct 19, 2007 9:28am
Another point: most people simply do not want to take time to study the chart. They get into a hurry. Then they go short, when the chart plainly says go long.
Can't say that I agree with the 5 or 10 pips business. That takes too much trade hunting. That gives you that many more opportunities to make errors. But to each his own cup of tea.
  • #29
  • Oct 19, 2007 9:32am Oct 19, 2007 9:32am
if i see this baseless "95%" cliche one more time im going to puke. :

instead of figuring out "why" 95% lose money, shouldnt we first prove that it is actually true??
Relax and be happy.
  • #30
  • Oct 19, 2007 9:48am Oct 19, 2007 9:48am
Quoting blueruby
Good post, I've certainly been guilty of all the above (1 through 6).

I don't agree entirely, though.

1. Absolutely.

2. Different things work for different people. My impression is that there are more successful traders that trade on 30M and up than on t/f less than 30 minutes. Going for 5 pips when you're paying 2 - 5 to the broker handicaps a trader. And if you don't catch larger moves you won't make up for losses. It all comes down to expectancy of a system.

3. Not all indicators are lagging, no matter how many times people say it.

4. It's the fundies vs. technical argument. There are successful traders on both sides.

5. Yup. Newbies read everything, try everything, lose everything. After a few of those circles, a person figures out whose posts to read.

Edit:

6. This comes after a person has HIS (or HER) system locked in, knows their edge, and has total confidence it that system. Most of us are not there yet, we're still trying different things to find what works for us.

Your second point is a bit of a misunderstanding that seems to prevail in this forum in many of the threads that I have red. I trade only the 1/5 minute charts. There is an element of randomness I do not deny this but look time in relation to price. Using a bar chart will help you control the trade. Using the bar chart has also an other point it will help you decide weather to hold on to the trade longer in case there is a sign of a larger move. Stop loss is also smaller and like I said winners can be small and big depending what the bars are telling you. When I cannot read the bars this is when price is taking the random walk but when the bars are readable I pick my trades. Very simple but it takes time learn. I believe the onlyone who has a similar way of trading is linuxtroll but on an even lower timeframe. By the way this way of trading is not scalping. When I enter a trade I never know how much I am going to make, in other words when a scalper closes a trade after 2-5 pips I look at what the bars have to say. I believe if you go to higher timeframes your odds of making a bad trade a greater. What happened yestorday has nothing to with what will happend in 5 minutes or in 1 hour and so on. You are trading the history this way, when you should be as close as possible to what is happening now. One 4 hour bars is telling you what happened during the last four hours. Do you think the following bar will respect the information of the previous bar? Information gets old, it becomes discounted in the price. In lower timeframes information is relatively fresh and price can for a moment be driven too high in relation to the information that came to the market at that precise moment or too low. It is not machines that buy or sell, people and people make mistakes. This is when there can be made money in a quite safe manner.
  • #31
  • Oct 19, 2007 9:57am Oct 19, 2007 9:57am
Regardless of whether the 95% figure is correct, it is pretty obvious that most want-to-be traders do fail. Why is this?

There is a wealth of information on sites such as this - all a person has to do is spend enough time researching here and they will inevitably figure out a system that fits their personality. At this point they will have won a small portion of the battle. The biggest portion ultimately, however, will be their own psychological make-up. Do they have the patience necessary to look for perfect setups and to let a position run into profit? Have they managed to overcome greed & fear sufficiently so that it will not affect their trades?

Most people are conditioned to react emotionally to emotionally-charged situations. When threatened, we either punch back or run away. This type of attitude will not work in trading. You cannot 'Punch the Market' back into compliance, neither can you 'run away' from a trade gone awry (altho you can exit gracefully within the boundaries of your established system).

Traders also must deal with the issues of winning & losing. Face it - we are a 'MUST WIN' society - sometimes at any cost. We are taught from birth that the successful win while the losers lose. This brings us to the issue of 'tilting' which is a poker term used to describe a player who basically loses it after experiencing a bad loss (or a string of bad losses). These players will usually throw all caution and strategy to the wind and start aggressively attacking in an attempt to win their losses back. Suicide to be sure!

I speak from experience here! Every loss I have experienced within the boundaries of my system has been a perfectly acceptable loss - one which I would have quickly overcome & moved on to greater profit. The other losses which I have experienced outside of the realms of my system(s) were due to my own emotions getting the better of me. Acceptable losses soon became unacceptable losses - which can make things even worse emotionally (vicious cycle) and can inevitably lead to account blow-up.

The solution?? Realize that a properly structured 'system' must incorporate losses into it's creation! I hate the term 'loss' really as they are a necessary part of this game - they only serve to even out your wins to the level that the market is willing to give up.

LOSSES HAPPEN IN TRADING! WE CANNOT CONTROL THIS!

What we can & must learn to control, however, is how we perceive & react to them! Stop looking at them as losses and start seeing them as the cost of doing business!

Just my .02c

D.

Quoting william5
IF everyone knows the answer, why do 95 % still fail ??????
  • #32
  • Oct 19, 2007 10:08am Oct 19, 2007 10:08am
Quoting merlin
if i see this baseless "95%" cliche one more time im going to puke. :

instead of figuring out "why" 95% lose money, shouldnt we first prove that it is actually true??

Hmmmm..didn't Darkstar or Rustyforextrader or somone post a broker survey or similiar info in this regard? Citing certain numbers, statistics or similiar? I'm not sure...think I remember something vaguely..

But obviously the problem is having a representative global statistic.
It's probably near impossible to get really statistically significant figures about a statement in this magnitude I guess. No idea.
Trust price. Know yourself.
  • #33
  • Oct 19, 2007 10:49am Oct 19, 2007 10:49am
that is 95% possibility to fail i guess, (it is better seen this way)
mathematic maybe has good example
1 + 1 = 2, the other number don't fit as answer, so the possibility to guess the answer correctly is almost like 1 : infinity ........ but yet most of us can answer it.
i hope we can profit, thou the possibility to fail is unlimited .
  • #34
  • Oct 19, 2007 10:59am Oct 19, 2007 10:59am
Although I am not profitable yet. I want to show you guys something that has helped me alot.


This is called Backtest. Backtest is the way you try your system in past prices. Guys, believe it or not, this is the best method that ANY trader can use to get accurate results of your system. IT does not matter if you are a technical or fundamental trader. You MUST try a system that fits your personality and style OVER PAST PRICES TO SEE IF IT REALLY WORKS.

I must say I am more technical than fundamental, but either way you can backtest being fundamental by seeing how indicators has affected prices in the past.

It has happened to me a million times that for example I see a perfect setup on my system, I take the trade, set a stop of 35 pips and a take profit of 45. The price goes to 25 in profit then goes and stops me out.

the next day. I see another setup. take the trade and the same thing happens again. I figure out then that after 25 pips in profit I should move stop to breakeven!!!. this sounds logic right !!?? well, this is the most stupid thing that you can do. YOU CANNOT MODIFY OR CHANGE YOUR SYSTEM BECAUSE 2 OR 3 OR EVEN 20 TRADES DID THE SAME THING. You must BACKTEST and use probabilities. You should sit down and try your system on one whole year, and try million things that you see can work out to exit your trades and see which method has more probabilities of winning in the LONG TERM.

It has happened to me that I think something works perfectly, when I backtest the results are horrible.

I hope this could help you traders,
masterzeus
  • #35
  • Oct 19, 2007 11:17am Oct 19, 2007 11:17am
Quoting iandekoker
2. Most traders DO NOT know when to take profits. They look for 50-100 pip profits instead of 5-10 pip profits. The market gives you plenty of 5-10 pips profits every day, but only a few 50-100 pip profits a month. And the longer you stay in the market the bigger the chance of the market turning against you and hitting your trailing stop loss and/or stop loss. I read a thread (25-50 ema) where the originator of the system recommend that you put a 200 pip stop loss. Now that is plain silly. Profitable traders realize that playing $10 lots and only looking for 5-10 pip profits are a safer way to make money. If you can get a 5-10 pip profit every day then you can almost double your account in a year. And i still dont see the sense in entering 2 lots ($20) and then taking 1 lot ($10) profit at say 10 pips ($10x10pips=$100) and then close the rest of the trade after another 20 pips ($10x20pips=$200) or letting it run till it gets stopped put either by trailing stop or stop loss. Do you realize that when you close your trade bit by bit your profit is actually getting smaller and smaller. You made only $300 while getting 30 pips profit. When you closed your whole trade after only 20 pips you would have gotten $400 (20 pips x $20Lot=$400).
I disagree. I would risk 50pips and make 100pips. I would risk 100pips in order to make 200pips. But risking more then 10pips to make 5-10pips isnt smart. I have never heard a trader who is making a living this way. Even if there is, I still dont belive him. Sorry.


Quoting iandekoker
5. But the biggest mistake any trader can make it to take advice from an amateur trader. Amateur traders teach amateur traders to trade like amateur traders.
I couldn't agree more.
I Love Forex Factory!
  • #36
  • Oct 19, 2007 11:32am Oct 19, 2007 11:32am
I make my living off of 5-10 pip moves, over and over again.

The key is proper MM and knowing when to increase and decrease your lot size and having a feel for when momentum is entering the market. When I see/feel it, I go for it.
  • #37
  • Oct 19, 2007 11:34am Oct 19, 2007 11:34am
Quoting Daemien
Regardless of whether the 95% figure is correct, it is pretty obvious that most want-to-be traders do fail. Why is this?

There is a wealth of information on sites such as this - all a person has to do is spend enough time researching here and they will inevitably figure out a system that fits their personality. At this point they will have won a small portion of the battle. The biggest portion ultimately, however, will be their own psychological make-up. Do they have the patience necessary to look for perfect setups and to let a position run into profit? Have they managed to overcome greed & fear sufficiently so that it will not affect their trades?

Most people are conditioned to react emotionally to emotionally-charged situations. When threatened, we either punch back or run away. This type of attitude will not work in trading. You cannot 'Punch the Market' back into compliance, neither can you 'run away' from a trade gone awry (altho you can exit gracefully within the boundaries of your established system).

Traders also must deal with the issues of winning & losing. Face it - we are a 'MUST WIN' society - sometimes at any cost. We are taught from birth that the successful win while the losers lose. This brings us to the issue of 'tilting' which is a poker term used to describe a player who basically loses it after experiencing a bad loss (or a string of bad losses). These players will usually throw all caution and strategy to the wind and start aggressively attacking in an attempt to win their losses back. Suicide to be sure!

I speak from experience here! Every loss I have experienced within the boundaries of my system has been a perfectly acceptable loss - one which I would have quickly overcome & moved on to greater profit. The other losses which I have experienced outside of the realms of my system(s) were due to my own emotions getting the better of me. Acceptable losses soon became unacceptable losses - which can make things even worse emotionally (vicious cycle) and can inevitably lead to account blow-up.

The solution?? Realize that a properly structured 'system' must incorporate losses into it's creation! I hate the term 'loss' really as they are a necessary part of this game - they only serve to even out your wins to the level that the market is willing to give up.

LOSSES HAPPEN IN TRADING! WE CANNOT CONTROL THIS!

What we can & must learn to control, however, is how we perceive & react to them! Stop looking at them as losses and start seeing them as the cost of doing business!

Just my .02c

D.


I disagree one can control losses and winnings or more precisely the way one takes them. This is the way I do it. I have kept records of the trades I have taken during the years and summed up. I update it every 6 months. I calculate odds. On average 1.32 losses occur for every 10 trades. So after 8-9 winning trades I look always for the loss to come it is more probable than a winner. Also I have never had 2 consequtive losses so after one loss I know that odds for the next trade to be a winner are higher than for a looser. This is not a perfect system but it gives me a good idea. This way nothing really surprises not even the occasional exceptions. If you have problems accepting losses I suggest this is a very good way to put them in perspective.
  • #38
  • Oct 19, 2007 1:13pm Oct 19, 2007 1:13pm
"What we can & must learn to control, however, is how we perceive & react to them! Stop looking at them as losses and start seeing them as the cost of doing business!"

True but,Traders must learn to control/limit losses.
Rule No.1 is to learn how to protect your capital.
This before you ever place a trade!!
  • #39
  • Oct 19, 2007 2:43pm Oct 19, 2007 2:43pm
Simple: The main reason most traders lose is randomness plus costs. Trading is a negative sum game.

David
  • #40
  • Oct 19, 2007 2:44pm Oct 19, 2007 2:44pm
I think you misunderstand the point of my post. A workable system will play it's part in the mechanics of minimizing & handling losing trades. There is no such thing, however, as a system that will show 100% winning trades.

What I am referring to is the fact that most new traders cannot handle loss psychologically. This is something that everybody has to deal with and get over in order to become a successful trader.

And keeping a log is a very good practice, I do so myself

D.

Quoting Northernstar
I disagree one can control losses and winnings or more precisely the way one takes them. This is the way I do it. I have kept records of the trades I have taken during the years and summed up. I update it every 6 months. I calculate odds. On average 1.32 losses occur for every 10 trades. So after 8-9 winning trades I look always for the loss to come it is more probable than a winner. Also I have never had 2 consequtive losses so after one loss I know that odds for the next trade to be a winner are higher than for a looser. This is not a perfect system but it gives me a good idea. This way nothing really surprises not even the occasional exceptions. If you have problems accepting losses I suggest this is a very good way to put them in perspective.
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