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The Reason why 95% Traders fail

  • #181
  • Dec 23, 2009 8:39pm Dec 23, 2009 8:39pm
An edge is simply an indication of a higher probability of one thing happening over another. If your method/system has a higher probability of winning then you will make money in the long run (try a sample of 20 trades and take every trade according to your method). As someone said, you must learn to emulate the casino and not the everyday gambler.



"To argue is to find the truth"
  • #182
  • Edited 4:49pm Dec 24, 2009 1:41am | Edited 4:49pm
I suspect that the "95%" consists of two broad groups:

(1) those who are guilty of faulty MM, and/or indiscipline; and

(2) those who believe that they can beat randomness (or, at least, near-randomness) by simply applying MM and discipline.

I also suspect that the remaining "5%" includes a significant number of traders who use progressive sizing systems (e.g. Martingale or pseudo-Martingale) that haven't fallen over yet, or have otherwise been fortuitous thus far. Hence the number of genuinely proficient traders is probably smaller than what we've been led to believe.

[EDIT]
Another reason for the failure rate: people base their (exit) decisions around the P/L of the current trade, which has no real bearing the probabilities currently being offered by the market.
  • #183
  • Dec 24, 2009 3:33am Dec 24, 2009 3:33am
Quoting hanover
I suspect that the "95%" consists of two broad groups:

(1) those who are guilty of faulty MM, and/or indiscipline; and

(2) those who believe that they can beat randomness (or, at least, near-randomness) by simply applying MM and discipline.
Hehe, this is a very good observation. I suspect that these 2 groups cover 90% of the spectrum of losing traders as well.
The nail that sticks out gets hammered back in
  • #184
  • Dec 24, 2009 7:57am Dec 24, 2009 7:57am
Quoting hanover
Are you willing to explain how?

The way I see it, there are two ways of profit exit: profit targets and trailing SLs.

If we use profit targets..........

(1) Statistical approach - by simply taking profit at 1R, 2R, 3R etc. We can try to optimize the R-value by testing, but I see that as being prone to curve-fitting, in the same way that optimizing indicators for entry is likewise. The market doesn't really care whether a tiny retail trader is entering or exiting. Higher R-values will increase overall average win size, but will decrease...
I have not forgotten you. Will get back at this after the holidays. Have a good time everyone!
  • #185
  • Dec 24, 2009 1:40pm Dec 24, 2009 1:40pm
Just finished a quick look at the J16 material. Thanks for the reference to its existance, Bemac. Not sure why there would be so much negative commentary on this material. Seems pretty basic TA stuff to me.
  • #186
  • Edited 3:08pm Dec 24, 2009 2:00pm | Edited 3:08pm
Quoting Tjpld
I have not forgotten you. Will get back at this after the holidays. Have a good time everyone!
Many thanks. I've read many of your posts and respect your views. I'd welcome a sensible opinion on this widely held notion.

Most of the answers I get are usually something like:

 

  1. "Exits are more important than entries because Van Tharp (or some well known author) says so".

  1. "Exits are where you close the trade and bank the money".

  1. "Two traders enter at the same level, one buys and the other sells. Both can profit, depending on how they exit; therefore entry is inconsequential, and exit is key".

  1. "If you exit every winning trade when $20 ahead, and every losing trade when $10 down, it's obvious that you'll win in the long run".

  1. "You can enter anywhere, because if you hold onto any floating loss long enough, it will eventually return to profit".

  1. "It's impossible to predict price, therefore entry doesn't matter, and the only way to profit is through your exits".

IMO, there's an inherent flaw in each one of these arguments.

Happy holidays, everybody!

  • #187
  • Dec 24, 2009 6:00pm Dec 24, 2009 6:00pm
Quoting hanover
Many thanks. I've read many of your posts and respect your views. I'd welcome a sensible opinion on this widely held notion.

Most of the answers I get are usually something like:

 

  1. "Exits are more important than entries because Van Tharp (or some well known author) says so".

  1. "Exits are where you close the trade and bank the money".

[list][*]"Two traders enter at the same level, one buys and the other sells. Both can profit, depending on how they exit; therefore entry is inconsequential, and exit...

You are raising a very interesting question. I've been brainstorming for the last hour now, which has resulted in the following thought:

Entries determine the magnitude of the possible profits, while exits determine the actual profits.

This might sound pretty vague (thought the second part is pretty straight forward ), but I'll try to clarify it in a later post. I've written a lot of stuff down, but still need to get my thoughts straight. Anyway, maybe the above statement is enough to feed other minds to head for same direction share their thoughts on the exit topic too.
The nail that sticks out gets hammered back in
  • #188
  • Edited 6:50pm Dec 24, 2009 6:13pm | Edited 6:50pm
Entry Levels Matter: Especially when you are working with limited funds.

I don't know of any large account Traders that enter a Trade with minimal Lot Size thinking that "It doesn't matter, I'll hold it till it's a winner." (I wonder how they got to be Trading a Large Account. Perhaps because the knew how to...)

Entry Timing is Crucial.
Get real guys.
  • #189
  • Dec 24, 2009 6:52pm Dec 24, 2009 6:52pm
Quoting Bemac
Entry Levels Matter: Especillay when you are working with limited funds.

I don't know of any large account Traders that enter a Trade with minimal Lot Size thinking that "It doesn't matter, I'll hold it till it's a winner." (I wonder how they got to be Trading a Large Account. Perhaps because the knew how to...)

Entry Timing is Crucial.
Get real guys.

Entrys and Exits both matter equally, without a good entry you'll end up with a loss / reduced profit and without a good exit the good entry is ruined pretty much.

My focus has been mainly on entrys got that down tight but my exits are killing me.

In both a not making as much as I could be kinda way and also a not exiting and accepting a small loss when it's obvious it's going the wrong way and a bigger loss is highly likely.

Being aware of the problem is the first step towards solving it.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #190
  • Dec 24, 2009 6:59pm Dec 24, 2009 6:59pm
On exits, I have a question for the expert traders here. What is the purpose of exiting a position with profit only to look to re-enter in the same direction?
  • #191
  • Dec 24, 2009 7:03pm Dec 24, 2009 7:03pm
Quoting Turveyd
Entrys and Exits both matter equally, without a good entry you'll end up with a loss / reduced profit and without a good exit the good entry is ruined pretty much.

My focus has been mainly on entrys got that down tight but my exits are killing me.

In both a not making as much as I could be kinda way and also a not exiting and accepting a small loss when it's obvious it's going the wrong way and a bigger loss is highly likely.

Being aware of the problem is the first step towards solving it.
I hear you Turveyd. Entries are extremely important.

As far as exits go, see if you can find something on MBQ's (Mikes) 2 Bar opposite end Exit.
Failing that I have a % Trailing Stop Method that might help.
  • #192
  • Dec 24, 2009 7:03pm Dec 24, 2009 7:03pm
Quoting Lionstrike
On exits, I have a question for the expert traders here. What is the purpose of exiting a position with profit only to look to re-enter in the same direction?
a) Martingale your equity curve or build on equity
b) Re- build a position
Think trench warfare, gain ground and consolidate.
  • #193
  • Dec 24, 2009 7:06pm Dec 24, 2009 7:06pm
Quoting Lionstrike
On exits, I have a question for the expert traders here. What is the purpose of exiting a position with profit only to look to re-enter in the same direction?
A shift in impression of where the Market is headed.

Up 250P & it looks like a reversal against me for possibly 100P or so. Exit Now.
Head Fake & I was on the correct side all along.
Get Back In...
  • #194
  • Dec 24, 2009 7:08pm Dec 24, 2009 7:08pm
Quoting Lionstrike
On exits, I have a question for the expert traders here. What is the purpose of exiting a position with profit only to look to re-enter in the same direction?
Hi Lionstrike,
I guess there could be several reasons, for me it is because if I cannot monitor the trade and it backs up and kicks me out at a later date and I lose a bunch of profits in the mean time, then why not close it out at a specified target and wait for it to head back in the direction of the trend?

If I can bank all those pips then I certainly do not want to give them back with the hopes that market will get going in my direction again, I am a trend trader and good trending market will retrace back to S/R levels, so I know it is going to do it they always do, and I would have to give back pips, what I do not know is if the retracement will stop, if it does then great, I will re-enter and go for another ride, if it does not stop then I just banked as many pips as it is going to give up this time around.
Make sense?

--NM
  • #195
  • Dec 24, 2009 7:18pm Dec 24, 2009 7:18pm
Yes, I understand. You don't want to give back the pips. Bird in the hand and all that. Thanks for explaining guys.


By the way, on a completely unrelated topic from exits, I once read an interview with Bruce Kovner who was relating what Michael Marcus taught him. He said, he might try an idea once, be wrong. Twice, be wrong. Three times, be wrong. But get it on the fourth time and then double his money. Makes me wonder how that could be done.
  • #196
  • Dec 24, 2009 7:24pm Dec 24, 2009 7:24pm
Quoting Lionstrike
Yes, I understand. You don't want to give back the pips. Bird in the hand and all that. Thanks for explaining guys.


By the way, on a completely unrelated topic from exits, I once read an interview with Bruce Kovner who was relating what Michael Marcus taught him. He said, he might try an idea once, be wrong. Twice, be wrong. Three times, be wrong. But get it on the fourth time and then double his money. Makes me wonder how that could be done.
Yes it kind of makes sense, there have been times when I have entered a trade only to find out I have entered to soon and it backed up on me, well in the same session I was able to take another stab at it as there was another setup that formed and I took the second entry and it went the way it should have the ifrst time around. So yes there are second chances at the same trade. As long you keep your SL within reason you do not lose much and then it is pretty easy to recover from on the same trade.

--NM
  • #197
  • Dec 24, 2009 7:28pm Dec 24, 2009 7:28pm
Quoting Lionstrike
Yes, I understand. You don't want to give back the pips. Bird in the hand and all that. Thanks for explaining guys.


By the way, on a completely unrelated topic from exits, I once read an interview with Bruce Kovner who was relating what Michael Marcus taught him. He said, he might try an idea once, be wrong. Twice, be wrong. Three times, be wrong. But get it on the fourth time and then double his money. Makes me wonder how that could be done.
I would consider this "sniffing".
What was possibly meant by this was sending out a small "scout" position, and if the trading inference is deemed correct than, well, it is time to build on equity.
  • #198
  • Dec 24, 2009 7:33pm Dec 24, 2009 7:33pm
Quoting Lionstrike
On exits, I have a question for the expert traders here. What is the purpose of exiting a position with profit only to look to re-enter in the same direction?
This could be a fairly long list of reasons, but perhaps the PA has reached a target and you want to re-load the position at a better price. Could be you are approaching a FA and want to sideline your position. Etc. Best to flow or dance with PA to really take maximum advantage of the move. What is important is your analysis of PA and what is required in your personal trading MO to enter or exit a position. Neither entry nor exit hold a superior position over one another. Unwavering execution of your trading strategy is all that matters.
  • #199
  • Dec 24, 2009 8:08pm Dec 24, 2009 8:08pm
Right, get in at a better price or stay out of the way of countertrend pips. That makes logical sense. The act of getting back in doesn't increase my risk when I have a fixed TP. Cool, good to know. Yeah I usually trail pretty tightly and look to capture as much of the move as I can.
  • #200
  • Dec 25, 2009 10:50pm Dec 25, 2009 10:50pm
Quoting hanover
Many thanks. I've read many of your posts and respect your views. I'd welcome a sensible opinion on this widely held notion.

Most of the answers I get are usually something like:

 

  1. "Exits are more important than entries because Van Tharp (or some well known author) says so".

  1. "Exits are where you close the trade and bank the money".

  1. "Two traders enter at the same level, one buys and the other sells. Both can profit, depending on how they exit; therefore entry is inconsequential, and exit is key".

[list][*]"If...

Do you have the answers? Are you at liberty to share?
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