DislikedBecause they assume the market falls into a bell curve probability distribution?Ignored
Possibly, in some notable cases definately, but in most cases I think probably not. Long Term Capital Management is an example of what happens to traders that use a bell curve model for their risk management. They made lots of money for years, then lost it all when one of those market moving events that are so extreme they should (according to the bell curve model) only happen every few thousand years actually happened within 5 years (I think it was) of them starting up.
If the bell curve risk management was the problem traders would turn that retail £2,000 account into £5,000, then into £10,000, then turn it into £20,000 and then one day bang, lose it all in one of those 1,000 pip in a day market moves that happens every few years. That doesn't seem to be what happens to a lot of them though, many of them seem start losing within weeks if not days of starting trading.
Still, risk management does seem to be a problem, so I'm going to think carefully about what you said before commenting on the bell curve further...
Just a thought though... I tried to imagine what the market would look like if it had only 100 people trading. If they each had an equal amount of money the side with the most traders would win until almost everyone was on that side when it would then fail due to lack of traders to push it even higher. If however, 2 or 3 of the 100 traders had way way more money than everyone else, those rich few traders could guarentee they ended up with most of the other people's money simply by taking the otherside of the trade that the majority of the small traders were on until the small traders ran out of money and gave up on those positions.
I actually don't think that is what is happening though and think it was the 2nd option I gave and wrote a small article about it on my website. But I'm not 100% sure that's not what's going on