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New study shows only 1% of traders are consistently successful

  • #81
  • Apr 2, 2010 4:42pm Apr 2, 2010 4:42pm
Quoting pipmutt

I wonder what Freud would make of all this!
You're just sexually repressed. And that will be a $100 ( or a wheelbarrow of Deutschmarks), please..............
  • #82
  • Edited 1:59am Apr 3, 2010 1:01am | Edited 1:59am
Quoting hanover
So c'mon folks, how difficult can profitable trading be?
Quoting H. Rearden
I know consistent profitability is possible - not remotely but quite easy if the rules of the game are known and respected.
Quoting hanover
Run with the probabilities; and manage risk to reduce the potential effects of the "dark uncertainty"
Quoting endroute
I find it ironic that so many people assert that trading is impossible and yet they still trade and post on message boards
Quoting Lionstrike
Critics of technical analysis attack not what it can do - which is control risk, but what they wish it could do - which is show a direction to trade in. Direction is simply trader's momentary choice


Just a few great quotes, in my opinion! (I've probably missed loads of others, I couldn't quote the whole thread though, lol )





Quoting babyleaps
You're just sexually repressed. And that will be a $100 ( or a wheelbarrow of Deutschmarks), please..............
lol, a bargain at twice the price, my wheelbarrow is in the post!

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  • #83
  • Apr 3, 2010 2:08am Apr 3, 2010 2:08am
Quoting FX-Petra
David, ...........
"When price hits the 38.6 fib for the first time on a 15 min chart, it will reverse for 10 pips 60% of the time."
With casino-type games, it's possible to calc probabilities precisely, and in advance. In contrast, with markets, it's possible to calc the probability of a pattern causing subsequent directional bias only on the basis of historical tests, and then only within levels of statistical confidence. In that sense, market probabilities are vague and less reliable.

Even with a whopping 10% edge over the market, that does not mean you will win your trade. You could lose, lose, lose and continue to get your teeth kicked in over your 1st 100 trades, or even 1000 trades.
Sure. The smaller your edge, the greater the probability that statistical variance can harm you. Like I said in my prior post, there's risk involved, and the best anyone can do is size positions conservatively, and hope that a 'freak' run of losses doesn't cause irretrievable drawdown. I agree that it's impossible to manage risk completely. If a trader isn't willing to embrace these kinds of possibility, then his only alternative is to quit trading.

As I said in my prior post, I don't think it's possible to prove that profit can be attained indefinitely. Conversely, I don't think it's possible to prove that, given long enough, everybody will lose. Let's just agree to differ on that last point, if need be.

Bottom line is that we either accept that there are folk out there who make money on a fairly consistent basis, and we give it our best shot, doing whatever it might take, to try to emulate them...... or we quit. If I believed that ALL of the folk who say they've been profitable for many years were either BS-ing, delusional, or just plain lucky, then I'd quit myself.
______________________

No offense to anybody, but I seem to be retyping the same old stuff over and over again. I've lost all enthusiasm to debate theory relentlessly; to whatever extent I might be wrong, so be it, I don't really care. I just want to focus on my own trading now.
  • #84
  • Apr 3, 2010 11:19am Apr 3, 2010 11:19am
Quoting TradeRunner
Dieting has a "negative expectancy". Only 95% are successful at it (according to stats).
Just human nature I guess. So maybe forex isn't that much harder than dieting?
I think you mean 95% of people who diet to lose weight put it back on within two to three years.

Dieting and forex trading go hand in hand. Leverage your account up to the max and you'll lose your money and your weight. As I've said a few times on this forum, it saves paying for liposuction
Nothing worth having is easy.
  • #85
  • Apr 3, 2010 11:44am Apr 3, 2010 11:44am
Quoting hanover
No offense to anybody, but I seem to be retyping the same old stuff over and over again. I've lost all enthusiasm to debate theory relentlessly; to whatever extent I might be wrong, so be it, I don't really care. I just want to focus on my own trading now.
At some point, a point I think we have passed long ago, this whole discussion starts to sound like a discussion about religion and the bottom line is that people are going to believe what they want to believe right wrong or otherwise.
  • #86
  • Apr 3, 2010 11:47am Apr 3, 2010 11:47am
Quoting pipmutt
Just a few great quotes, in my opinion! (I've probably missed loads of others, I couldn't quote the whole thread though, lol )







lol, a bargain at twice the price, my wheelbarrow is in the post!

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Pipmutt, I want to add something on the concept of risk control. (When I say risk, I mean a choice, because risk is both a negative and a positive.) Normally when one you mention risk control to a trader, they might think of a stop, but that's merely a form of risk control on a positional level. The way you control risk from a price interpretation standpoint is to constantly evaluate upside versus downside risk, and to always position with what you believe is the less "risky" side. In other words, only one direction at a time. And, to do so flexibly, meaning your view can change instantly, or can last for a while.

If a trader doesn't utilize the concept of only one direction at a time, flexibly - a trader does not have any risk control at the "price-interpretation level". But, I realize some will disagree and try to identify precise moments in the markets in order to get an idea of direction. That is their prerogative.
  • #87
  • Apr 3, 2010 12:22pm Apr 3, 2010 12:22pm
Quoting Lionstrike
Pipmutt, I want to add something on the concept of risk control. (When I say risk, I mean a choice, because risk is both a negative and a positive.) Normally when one you mention risk control to a trader, they might think of a stop, but that's merely a form of risk control on a positional level. The way you control risk from a price interpretation standpoint is to constantly evaluate upside versus downside risk, and to always position with what you believe is the less "risky" side. In other words, only one direction at a time....
I'm not sure I follow exactly what you're saying regards risk being both positive and negative, how can you have positive risk? Sorry, am I being dense?

I'm all for unconventional thinking so I'm interested to know what you're saying, it's not something I've heard before.

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  • #88
  • Apr 3, 2010 12:30pm Apr 3, 2010 12:30pm
Why does nobody state the obvious facts???

Every year, there are different world events that are reflected in the charts. If a setup worked 100 times in a row, and then a new world order occurs, the setup may fail due to the market's change in behavior.

Need an example? The EURUSD after the banks collapsed. ATR went crazy.... volatility like that had never existed in the 8 prior years. My bread and butter TA strategy imploded.

So all this chit chat about quantifying Kelly Criterion and expectancy is really a fallacy... the charts are reflecting reality, not history... TRADER BEWARE!
  • #89
  • Apr 3, 2010 12:34pm Apr 3, 2010 12:34pm
Quoting tdion

... the charts are reflecting reality, not history...
They reflect both don't they?
  • #90
  • Apr 3, 2010 12:41pm Apr 3, 2010 12:41pm
Quoting pipmutt
I'm not sure I follow exactly what you're saying regards risk being both positive and negative, how can you have positive risk? Sorry, am I being dense?

I'm all for unconventional thinking so I'm interested to know what you're saying, it's not something I've heard before.

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Risk has come to have a negative connotation everywhere. Risk is in reality, a choice. In taking a risk, in making a choice, there can be a negative outcome, but there can also be a positive outcome. In the infinite space of possibilities that exist, the positive outcome of a risk is at least as equally possible as the negative outcome is. For traders that means that the trader himself or herself is the key to how a taken risk (or choice) turns out over the long run, and not the markets' activity.

But since risk has come to mean a negative, most traders are fearful and anxiety-filled. They always need to know more. Two simple pieces of information, for instance, - like two moving averages - aren't enough. They need to know more to relieve anxiety. They need fundamental data, they need orderflow data, they need all sorts of indicators to assuage their anxiety. That actually increases adverse "risk" because it causes hesitation and prevents them from acting on reality, but I digress. But again, risk is actually choice. One must have the maturity and self-trust to act in an environment of insufficient information, to understand that that "insufficient" information is enough to make an informed choice.
  • #91
  • Edited 2:26pm Apr 3, 2010 2:15pm | Edited 2:26pm
This study (and many similar ones) are totally irrelevant for several reasons:

1. Trading conditions were completely different in the 90s

2. All these studies always calculate the percentage of successful traders among ALL traders at all. This is seriously misleading. Comparing a successful trader with complete newcomers is nonsense.

It is like stating that less than 1% among all people who have ever run in their life are successful professional runner sportsmen.
Or that less than 1% of all people who have ever played football are professional football players.

There are so many people beginning and giving up trading every year, that one could safely say that over 90% of all traders at any point of time are newcomers. Can you seriously compare a newcomer giving up after 6 months losing everything with a seasoned, experienced trader making a living on his own? Or even with someone seriously trying to learn it?

A fairer statistical approach would be:
Which percentage of people trading 1 year are profitable?
Which percentage of people trading 2 years are profitable?
Which percentage of people trading 3 years are profitable? ....

And so on.

I think within the group of people trading for 3-5 years the percentage of consistently successful traders might be significantly higher.
And among those trading for 15 years....?? The successful ones might be the majority.. LOL

But there are no statistics like that. The existing "studies" and statistics are mere sensationalism.
  • #92
  • Apr 3, 2010 3:05pm Apr 3, 2010 3:05pm
Quoting Lionstrike

In taking a risk, in making a choice, there can be a negative outcome, but there can also be a positive outcome. In the infinite space of possibilities that exist, the positive outcome of a risk is at least as equally possible as the negative outcome is. For traders that means that the trader himself or herself is the key to how a taken risk (or choice) turns out over the long run, and not the markets' activity.
Sorry, I'm still not getting it. Risk, by definition, is a negative thing. Ok, taking a risk in order to potentially reap a reward is perhaps a more positive way to think of risk but it's still risk.

I agree with the second part though, a trader is totally in control of the long-term outcome.

Maybe a practical example will help me understand. Say my plan is to buy one lot of Eur/Usd at 1.3080 and have a stop at 1.2960 and a target of 1.3260. My risk is 120 pips, $1200. If price goes to 1.2960 I will lose $1200. How is that potential loss (the risk) a positive thing?
  • #93
  • Apr 3, 2010 4:02pm Apr 3, 2010 4:02pm
Quoting pipmutt
Sorry, I'm still not getting it. Risk, by definition, is a negative thing. Ok, taking a risk in order to potentially reap a reward is perhaps a more positive way to think of risk but it's still risk.

I agree with the second part though, a trader is totally in control of the long-term outcome.

Maybe a practical example will help me understand. Say my plan is to buy one lot of Eur/Usd at 1.3080 and have a stop at 1.2960 and a target of 1.3260. My risk is 120 pips, $1200. If price goes to 1.2960 I will lose $1200. How is that potential loss...
Who's definition? To me risk is simply a choice. When one says "take a risk", it's the same exact thing as saying "take a chance". Would you say all chances that one can take in life are negative? Of course not. That's where making an informed qualitative assessment comes in. This is where one puts the pieces together, where the whole truly becomes greater than the sum of the parts. Only when you put something in the context of something else, like in your example, can you say "this is a favorable risk to take", or "this isn't a favorable risk to take".

This is why, like FXPetra said, any singular moment in the markets is random, because it's not putting anything in subjective context. Intelligent risk cannot be taken without subjective context. Simply waiting for a moving average crossover, or maybe a candle of a certain exact size or shape is not putting something in context of anything else.

Only with self-created context can you define what is a positive to a risk and what is a negative to a risk. In your example, your potential loss isn't the positive, your potential gain is the positive. But you cannot have some type of a gain without exposing yourself to some type of a loss. You cannot have something for nothing. A risk is the act of giving up something in order to try to get something else. Like in crossing a street. You give up some momentary safety for the reward of getting to the other side. It is not always negative to cross the street because one can get hit by a car, because of the "reward" at the other side.
  • #94
  • Edited 5:22pm Apr 3, 2010 5:01pm | Edited 5:22pm
Quoting pescador
2. All these studies always calculate the percentage of successful traders among ALL traders at all. This is seriously misleading. Comparing a successful trader with complete newcomers is nonsense.
It is like stating that less than 1% among all people who have ever run in their life are successful professional runner sportsmen.
Or that less than 1% of all people who have ever played football are professional football players.
I see your point, but consider this:

1. Trading and sports are different. If I play tennis, for example, I don't have to be as skilled as Roger Federer in order to compete and enjoy myself at my local club. Even as a rank beginner, I can have some expectation of success as I play opponents who are at a similar level to myself. However, as soon as I open a live trading account, I'm effectively competing against the most successful and experienced traders in the world, from day one. My expectation of success should be defined in relation to the relevant playing field.

2. Statistics that include the wanna-be traders among the experts do a fair job answering every newcomer's inevitable question: "what are my chances of making as living as a trader, from my current perspective in time?". If we simply said that "X% of traders who make it past the N-year barrier will eventually succeed", then that's not telling him what he really wants to know. If you see the number of times this question gets asked on forums, you'll know what I mean.

I think it's fairly obvious that the longer a 'trader' survives, the greater his chances of attaining success. What level does one have to attain, in order to call himself a 'trader'? And how do we measure it (win rate, profit factor, annual return percent, dollars per month, ....)? If we raise the bar to say that only those 'professionals' who make a consistent income from trading can call themselves traders, then the success rate is going to be 100%, which doesn't really tell us anything.
  • #95
  • Apr 3, 2010 5:10pm Apr 3, 2010 5:10pm
Quoting Lionstrike
But you cannot have some type of a gain without exposing yourself to some type of a loss. You cannot have something for nothing.
Exactly. Many traders seem to think success is the product of maximizing return while minimizing risk. But the reality is that - at least the vast majority of the time - both are in some way directly proportional to each other. Or to put it succinctly: "no guts, no glory".

"This is why, like FXPetra said, any singular moment in the markets is random, because it's not putting anything in subjective context. Intelligent risk cannot be taken without subjective context. Simply waiting for a moving average crossover, or maybe a candle of a certain exact size or shape is not putting something in context of anything else."
I'm not sure that I understand this part, though. When you talk about "subjective context", do you mean a context that exists outside the realm of TA? If so, what is that context? Orderflow? Fundamentals? Intuition? Or something else?
  • #96
  • Apr 3, 2010 5:56pm Apr 3, 2010 5:56pm
Quoting Lionstrike

In your example, your potential loss isn't the positive, your potential gain is the positive. But you cannot have some type of a gain without exposing yourself to some type of a loss. You cannot have something for nothing.
"your potential loss isn't the positive", right, so we've reached agreement, potential loss (risk) isn't positive.


Quoting Lionstrike
It is not always negative to cross the street because one can get hit by a car
No, but actually getting hit by a car (the risk) would be. The reward, getting to the other side of the road, is the only positive. We take a calculated risk based on probability, with the knowledge we have available.
  • #97
  • Apr 3, 2010 6:01pm Apr 3, 2010 6:01pm
Quoting hanover
If we simply said that "X% of traders who make it past the N-year barrier will eventually succeed", then that's not telling him what he really wants to know. If you see the number of times this question gets asked on forums, you'll know what I mean.

I think it's fairly obvious that the longer a 'trader' survives, the greater his chances of attaining success. What level does one have to attain, in order to call himself a 'trader'? And how do we measure it (win rate, profit factor, annual return percent, dollars per month, ....)? If we raise...
I understand what you want to say, but every wannabe should know even before asking these questions, that absolutely everything in life has to be learnt at first.
Learning takes time.
Learning ANY profession at a level that can be called "professional" activity, takes at least 3-5 years.
Why should it be different with trading?
I understand that wannabes do not want to hear the truth, that they will need at least 3-5 years in order to have anything like a faint chance to be able to compete in this market.
They just want to hear that with some LUCK!!! they can become millionaires within a half a year.
But they should hear this truth.
And the chance of learning trading and becoming a professional trader who is able to survive in the trading world should not be calculated based on the overwhelming majority of those beginners who are not willing or able to dedicate that time to learning.

There are good possibilities to learn, provided one has the will and time.
One can practice with a realistic demo account (not so good because the possibility of cheating oneself)
Or one can open a tiny Oanda account and practice with really tiny lots, as long as needed.

I understand your point, but misinformation of the newbies is much worse.
And misinformation of the public, with unrealistic statistics does not do any good for those aspiring, who are willing to put in the needed resources (money, time and energy) in order to really learn the job.
  • #98
  • Apr 3, 2010 6:06pm Apr 3, 2010 6:06pm
Quoting hanover
Exactly. Many traders seem to think success is the product of maximizing return while minimizing risk. But the reality is that - at least the vast majority of the time - both are in some way directly proportional to each other. Or to put it succinctly: "no guts, no glory".
Not necessarily, it depends on your approach and how you manage a trade, your risk, and your money.

Isn't it better to maximize return and minimize risk, that's the ideal and it's perfectly achievable. Too many traders get stuck in the rut of the more basic risk:reward or "no guts, no glory" as you put it, think creatively!
  • #99
  • Edited 8:53pm Apr 3, 2010 8:25pm | Edited 8:53pm
Quoting hanover
Exactly. Many traders seem to think success is the product of maximizing return while minimizing risk. But the reality is that - at least the vast majority of the time - both are in some way directly proportional to each other. Or to put it succinctly: "no guts, no glory".

[i][color=RoyalBlue]"This is why, like FXPetra said, any singular moment in the markets is random, because it's not putting anything in subjective context. Intelligent risk cannot be taken without subjective context. Simply waiting for a moving average crossover,...
I mean entirely subjective, like intuition, yes. You know the Clever Hans phenomenon? Clever Hans was a horse a long time ago and everyone thought he was some sort of a mathematical genius. You see he had one trainer, and the trainer would pose to him a math question, and he would swipe the ground with his hoof multiple times to indicate his answer. Everyone in the crowd thought this was fantastic because he got the answers right. What nobody knew, including the trainer himself, was the Clever Hans was actually responding to small, minute changes in the trainer's body language. Without realizing it, the trainer tensed up at the beginning and then relaxed just as Clever Hans finished "answering".

I believe it's the same way with the markets. You have to look at a few single pieces of information together - the human brain can't handle more than maybe seven or eight at once - and form a single "picture at once" of what's happening, and act on it, just as if YOU were Clever Hans. You have to see stuff in the process of formation and assume its completion - and do so before others do.

Let me just say though, that I am not a successful trader, so I'm just stating an opinion here purely out of thin air.

http://www.ukskeptics.com/graphics/CleverHans2.gif
http://en.wikipedia.org/wiki/File:CleverHans.jpg
  • #100
  • Apr 3, 2010 8:27pm Apr 3, 2010 8:27pm
Quoting pipmutt
"your potential loss isn't the positive", right, so we've reached agreement, potential loss (risk) isn't positive.




No, but actually getting hit by a car (the risk) would be. The reward, getting to the other side of the road, is the only positive. We take a calculated risk based on probability, with the knowledge we have available.

Semantics I guess. Maybe. "Upside risk" (benefit) and "downside risk" (cost) don't mean the same thing. I'm very careful about how I define risk. Anyway, a lot of this stuff I took away from Justin Mamis's book, "The Nature of Risk". He makes a lot of good points and I've incorporated a lot of what he wrote about in my thinking.
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