Congrats! You just joined 5% or less

Why do more than 95% traders fail?

1. Many inexperienced traders do not try to maintain capacity of absorbing 10 to 12 or maybe few more consecutive losses. If trading edge is the probabiility of more positive outcomes in long-run, one should be ready to accept a series of negative outcomes. Despite knowing how my edge works, I still feel depressed after getting more than two losses in a row - human nature. I am damn sure if at some point of time I hit a series of five or six losses, no one would visit my already somewhat deserted and boring journal.

2. I am not sure about other threads, whenever on EURUSD thread, even a few pip change in PA direction creates havoc among traders. Some relaxing their TPs and others getting out or partially closing trades, shouting in excitement, revising their plans by hundreds of pips on a 10 pip but sudden move, etc. etc. All indicating that they are either not aware of or do not accept volatile nature of forex market.

3. Their brains can be easily polluted and thoughts manipulated with any kind of BS that is convincingly presented. They do not want to look at the things from their own perspective and test at least logic in what is presented before them. They want to "believe" in and do not want to "test" any new or old idea. It took me several years to believe that there is some truth in "trend is a friend". However, see many traders blindly following this phrase. Another is "cut your losses down and let your winners run". Blindly following such "universal truths" is probably the greatest hinderance in their learning.

4. Then there are "holy grail" methods. I spent hours and hours, day after day, month after month and year after year to find a flaw in various gambling and speculative businesses. Believing that there should be one and that would give me a risk free edge. But this thought never ever crossed my mind that I should check if someone is selling a "holy grail". Why? because a "holy grail" is simply not something that one would put on sale, and by whom? a trillionaire? . But it is unbelievable that many traders spend thousands to buy and try such BS systems. If any automated or mechanical system can work the way new traders perceive, there would have been no markets by now.

5. Then there is a calculator, a certain percentage and certain number of trading days. 1% a day and 365 days a year makes it 365% a year. Discount it for working days and contingencies it comes to 150% a year- Wow!. Compare it against investment return by banks, and boom - here we go!. Once this is conceived, the next step is to check in how many days, weeks, months or years a $5,000 investment will multiply to $20 million and more probably $200 million. Apply some sensitivity analysis by chaging certain assumptions or percentages and we get $200 million in 8 years from an initial investment of $2,000 in a micro account. This does not stop here, on trading live, these years get converted to days and days get converted to hours at a leverage of 1:400 and with almost nothing or lunch money to lose.

6. Then there is a small loss, next position is bigger than previous. Again a loss and again even more bigger position after a few minutes. Again a loss, but no issue. Here comes a "once in a lifetime trade" with almost 100% assurance. The whole farm (or whatever is remaining) goes off.

so are you in the top 5%?

Will tell the truth. Have no reason to believe that I am not.

Chicky
I have a mantra I repeat to myself every day. In it is the line:

"I will become the world’s best at my style of trading. I take full responsibility for my actions as a trader."

I focus only on my style and will someday be the best. I rarely if ever read the Interactive forum - cannot recall last time I was in the journals etc. I read the rookie, trading discussion and lounge - sometimes i read through the Systems to see if anything catches my eye. My point being I want to be the best - I dont focus on losers or why they are losers - I focus on winners and why they are winners in what ever field they are in.

Right now Caesar is top most in my thoughts:
"The keynote of Caesar's generalship, as the Commentaries themselves frequently state, and everywhere imply, was speed, swiftness (celeritas). He was swift to calculate and decide, swift to move—and by movement to keep the initiative, to surprise the enemy and divide his strength; swift, in the hour of battle, to seize the tactical opportunity, to remedy the tactical mistake ; swift always in pursuit, knowing full well that he only who pursues till he can go no further secures the full fruit of victory. Such speed in war as Caesar's was no gift of fortune: it depended on certain conditions in himself and his army. He had an energy which was invincible and irresistible : he had that courage which ignores fear or danger,1 but which refuses to be foolhardy. In his expeditions he combined boldness [and caution; he fought his battles not only of design, but as opportunity offered.." (Edwards, Quoting Suetonius, in his introduction to 'The Gallic War')

Damn, he would have been a hell of a trader.

This is second time in about a year I am benefiting from your vision and experience. First time, it was about taking responsibility for one's own action. I remember that one as fresh as the first day because it is worth remembering and in this way.

One of the wisest decision I made in my life on an advice from "Stewartr" was to keep a journal of trades. This helped me knowing how important it is for an individual to be an individual trader (or original). Yes, I have selected a method for myself and promise to master it.

Few years ago printed a copy of "Art of War" by Sun Tzu to read and re-read over and over again. Find it very similar to The Gallic War quote you gave above. Trading seems to be an art that focuses on getting advantage using strategy and tactics. Most great warriors would have made good traders.

Thanks for the input and again a good advice. I will focus on what needs to be focused.

ps. I appreciate you being quick in providing first guidance to new friends on FF. Thanks.

soo true....emotions are a trader's worst enemy.

A trading journal is one of the important things cause of studying your strengths and weaknesses.

Then you're also able to study the strengths and weaknesses of the markets and work out good strategies.

You will become more and more focused,experienced and successful.

Yes, the interactive forum is like watching the hippies on Whale Wars try to navigate the seas. Truly comical.

I keep asking this and never have got an answer.

How do we know that 95% of traders fail?

Who collects this data?

How is it collected?

Where can it be found and verified?

Billbs, approx 80%, with 15% keeping their head above water according to my last broker at any rate.

Retailers love ranges, inverse disposition and innapropriate variation of position sizing to name but three of their sins.

My point is that no one could know that, not even your broker.
He might know how many of HIS customers make money versus how many lose money, but that's all he could know.

He doesn't know, for instance, how many of his customers have accounts with other brokers and how much they make or lose with them.

Someone could have doubled a 50K account with one broker and lost $1,000 with another.

A few months back, someone posted data from retail forex brokers (I think in EURUSD thread). The percentage is eye opener. If I correctly remember the data showed less than 1% success, including marginal success. This data focused on how many new traders registered with certain brokers and what happened to their accounts in about two years.

ps. Title of this thread uses 5% because this figure is most popular.

Well yes, that's what he meant, of his customers. However, if you're a big broker, the more statistically relevant your dataset is. From memory too, the futures market has something like an 80% failure rate.

Chicky, now that is interesting. Any ideas where? I had a search but I'm not sure I've got the stomach to churn through that lot. Was it recent?

I tried to search but couldn't find the post. I think it was posted sometime in February / March this year. If I correctly remember the data was very very discouraging two in couple of thousands or so manage to continuously grow their accounts. That post also mentioned average amount new traders lose to brokers within two to three months.

There is a similar post by one other poster "Twocents" but that is not the one we are looking for.

I think the poster picked this data from a website.

I will continue looking for this post.

I like threads like that... the human nature in trading, probability, reactions, etc..
Keep them up!

I spent half the day 'monitoring' the EUR thread yesterday and it was very comical but it was also very revealing. It was a fantastic snap shot of herd mentality. Most of the calls made were wrong and even when the market went against them they were still married to some illusion about a trendline that will break in the opposite direction. I can't imagine if any of the people on that thread were following a defined set of trading rules and were just seeing something they liked and praying. If you need any indicator of what 95% losers were doing just visit such a thread. FF the best indicator in the business.

it is true..theres no plan people just following hunches, but hey we need this otherwise there wuld be no money..zero sum game

What I find truly sad are the posters who seek advice..."should I still short?". WHY are these people trading?????????? There are much more fun ways of throwing your money away than staring at pixels all day. I'm thinking call-girls and extacy. Geez.

If you need any more proof, go over to Trading Systems and do a search for "martingale". You'll get over 700 hits.

"Congrats! You just joined 5% or less"

I am wondering how big is your sample space i.e. over how many trading sessions are you claiming this achievement. Whether you are sure if this achievement is just not because of random events that by chance happened in your favor i.e. how good are your risk management capabilities.