Why do Newbies Lose?

Hi all,

Just wondering what exactly do newbies do to lose?

I mean when you open a trade, regardless of any analysis you do, you are issued a 50:50 chance of winning/losing, so how do you lose overtime?

Well, i guess the first thing is trading cost, every trade you make it will cost you about 3 pips, so if a newbie makes 100 trades, 50 wins and 50 losses of equal size, they will end up down 300 pips. I think newbies have a tendency to make many many trades in a short period of time, the market rise a few pips and they buy, the market falls a few pips and they sell, expecting some massive rally/selloff to start, (i know i did). So this is going to cost them. The next thing i guess is they tend to close a trade as soon as it moves into a few pips profit, and hold a trade as it moves further and further into loss, but how does this result in net loss? surely you would just end up with many small gains equalling a few large losses, unless you MC the account altogether.

Anything else? using too much leverage?, this only accelerates the process of winning/losing, so can't really be assigned to the cause of losing.

Anyone care to share?

Most of them wanna be milioner in one day...

Chance of winning/loosing is not 50:50.

It's not true that currency can go only up or down and that's why it's 50:50.

If it would go up or down, nothing would be easier then open short and long same time, put 10 (15, 25 or whatever) pip SL, one gets hit, other trade runs profitable = more than SL that got hit + spread.

With those two trades (short/long same time) and TP bigger than SL both SL-s can get hit easy if market is ranging just a little.

Some days chance is 50:50, some days 40:60, some days 17:83 ... damn, not days, we can say minutes. And you can't guess those endless combinations for every minute, quite impossible.

First i dont know why you think you have 50 % chance to win ?

First in Forex we have spread(2,3,4,8...) that mean chance is always lower than 50.
Second thing,FOrex is job that mean you need to learn to work on job,example is like medic,you must finished colage to be a medic same is here,you must learn to trade,you must trade years for expirence,knowloage...

Also one of things,you can use strategy you like butr if you dont work on that strategy years and always change and instal new you will never earn money from Forex.

I will tell you one thing put one Average as you like, trade in direction and retrace ffrom that average with 2-3 % risk on balance you will have postiive results at end of month or trade on every good pin on daily chart and put sl 20 pips above pin also you will have positive results but point is you must work one strategy you was choise...

Also this is hard buisniese and you must know 20 main rules if you dont respect just one your chance for profit is lower.


My advice find strategy for your personality m5,h1,h4 whaterver you like and trade on DEMO 6-12 month if you have positive results you can slowly go to live with smal acc..

Added > Never expect main earnings from Forex,put money you can live withaout them and trade just for extra profit.Also i will tell you one thing 97 % milioners from Forex were very rich before Forex....

Cheers and happy trading

If you open a trade in a random direction, lets say short, with a spread of 3 pips (lets ignore all other trading costs) and you set a TP of +47 pips, and a Sl of -53 pips. these corresponded to a rise or fall on the bid price by 50 pips each way. so if you loose, you get -50 pips - costs (3 pips) = -53 pips, if you win you get + 50 pips - costs (3pips) = 47 pips. So probability that bid price with rise by 50 pips is 50% and that it will fall by 50 pips is 50%, (on average). so you are trading with 50:50 odds, you just pay trading costs on every trade

Its a very good question, and its extremely rare to find new traders who can beat a random system. The amazing thing is just how much worse they do

In general we are pre programmed to do all of the wrong things, we take excessive risk when we should be conservative (e.g. allowing losses to run), we are are conservative when we should take risk (e.g. taking profit rather than letting profits run)

We focus on short term variance rather than long term performance.

We have trouble understanding the nature of the random distributions in returns, we have completely unrealistic expectations that are practically impossible to achieve.

As you point out, trading over too short a time duration is a major factor.

Incorrect position sizing plays a role.

Most people fail at most things !

Its just down to a complete lack of experiece and knowledge. The situation is made worse because practically all of the advice available is at best of no value because its context sensitive, advice that may be beneficial in one situation is detrimental in another, and at worst, much of the advice offered or sold is complete nonsense.

Trading forex is complex and requires a level of patience that is off the charts if you want to be extremely successful. When you first start trading, the amount of patience required is beyond most people's understanding. You can't gain that level of patience unless you have experience. You can have all the trading talent in the world, but w/o experience you are at a disadvantage to a more experienced trader. Things that I considered weird, as far as price action is concerned, a few years ago are actually quite normal now.

There are two types of talented traders IMHO. There is the trader who has no analytical skills, no natural talent, no original trading ideas BUT has good communication skills. This type of trader will seek out a mentor and will extract ever usable information from that mentor until they have a viable strategy. The other type of trader is one who is extremely talented but has no experience. They will "get it" eventually because they are simply that talented.

Ooops....I meant to say that there are two types of TRADERS....because the first trader supposedly does not possess any trading talent as it were.

It all starts with them spelling it loose rather than lose.

They lose because they suck. They lose more than the spread/commissions for the same reason that poker fish lose more than the rake: they are up against vastly superior opponents. Yes, poor risk management is responsible for a fair share of failures, but no amount of risk management skill would help the majority of losers. Actually it would, since a losing trader that is risk averse would stop trading.

Personally, I don't go along with the idea that the vast majority of people lose instantly or that blowing an account or two is "part of the process".

It's just that newbies who lose whine and b*tch about it, and so that's all you ever read. Some people just give it a bash and go just fine and sit quietly in the corner counting their money.

Same with the 95% fail rate, I'll agree 95% of accounts are losers, but unsuccessful are more likely to open a second account if there's an offer, and let's be honest, most people with accounts are doing it to have a flutter not trade, I'm sure the success rate of people who take trading seriously is much much higher than 5%.

The reasons as per my experience:

1- They take forex to be a casino.

If you think you are betting then law of averages what will happen after some time.

2- Infrastructure

You need the correct set-up for trading. This includes: atleast 2 net connections(I currently have 3). Fail-safe power options. Back-up of charts.

3- Money management/Leverage:

Understanding leverage is very important. If you are putting in 100 USD and taking trades worth 10000 USD well chances are one mis-step will spell the end of your account or worse make you place irrational trades after 1 loosing trade.

4- Psychology

Trading is not an easy job. The most important thing to develop is your psychology, if you cannot keep cool when your position is loosing money and make decisions based on facts rather than emotions you dont stand a chance.

5- Performance

Every trader at their 1st account tries to get a performance equal to their demo account. Well, there is a huge difference between demo and real accounts, dont try to match the performance just look to preserve your capital. If you can do that I guarantee by the 5-6 month your performance will be better than the interest your money earns in banks and how the markets perform.

Because 'they can'...and so can you.

MM is the secret.

Well, it's a two dimensional market.... it can only go up or down (theoretically).

So, you've got a 50/50 chance of getting it right.

But, somehow, it seems you've still got a 95% chance of getting it wrong.

Yeah, I know. Here's my take on it....

http://www.forexfactory.com/showpost...25&postcount=1

....becouse they are dumb, and dont have a slightest idea about sucesfull trading!??

You started 2 threads (more than 6 months ago which you never posted again at) and which you said ....... ummm ................ nothing really.

It appears from your spelling English is a second language so something must be lost in the translation. So what are you really trying to say?

Well for a start the odds are never 50/50, the spread assures us of that.

And secondly, it's probably what newbies don't do (rather than what they "do") that increases the probability of failure.

Your question is a good one, and it is probably worthy of an entire book, or two, but my 2 cents is this:

Most newbies think that forex or trading in general can be "cracked" by the discovery of a "system" that will make them wealthy and happy. It is usually assumed that the "system" needs to be based primarily on technical indicators, which are available on most trading platforms. These assumptions lead to behaviours which result in losses - simple. (No wonder why almost all retails EA's eventually fail..)

Trading requires years of learning and skills development - that's the part that people usually "don't do." Trading success does not reside in the "system" - it never has, and it never will. It resides in the development of the trader and in the ongoing development of their total trading methodology.

Easy answer - bloody hard work to implement.

A few of the big reasons would be:

undercapitalised

poor system

lack of patience to implement system properly

..and simply a lack of experience. It does take a while to learn how to do anything properly, in some cases years.

Im a noob myself, but since I have put in a year and a half to prepare for this, i'll take a shot.

1. Lack of a trading plan

Ex: Trader A when asked about his plan, replies 'I buy the pinbar everytime the RSI is overbought and the trend is up', well that is not a plan.

Trader B might list out the general market conditions that need to be in place for his system to even take the trade, after which there could be two set up conditions, an entry trigger, a methodology of measuring risk on the trade (which means setting stops), a multiple lot trade management strat that manges his exits, and a position sizing algorithm that can gear sizing according to his objectives and tolerance for risk. All this is then combined with actually how much capital from his equity can he optimally allocate to the system (keeping its P/L in mind both forward and backtested). This could be the outline of a plan, think of it like a pilots check list.

2. Lack of accurate or timely record keeping

Different ways of doing this. But lets visit Trader A again, whose idea of record keeping might be the system he is using, his R:R details and the final outcome.

On the other hand Trader B, goes through his trading plan checklist, basically filling in the values for his system on preferably a pre existing form of sorts, takes a minute to write down his personal feelings (emotions) and general plan of action (which his plan should indicate, but this is a summary in words), and all this before the trade. He also takes a snap of the charts (about 3 or 4 per trade), once before, once during and one on exit. He then prints the charts and sticks it into a binder along with his recordings for that particular trade and his personal view (if any) before, during and after the trade. He might even go a step further and monitor the particular market where the trade was taken, a day after exiting and record this chart too and his out take (giving him more of an objective view of both his entry and exit).

At the end of the week it is the journal that will tell him how many 'good' trades he made. A 'good' trade being one where he followed his plan, and a 'bad' one being where he did not. Wins or losses are immaterial. Since the trader plays with a positive edge, the whole battle is putting in your trades in a planned and proper fashion, the money will take care of itself, just book 'good' trades. At this point he might choose a few trades to revisit at a later point (possibly monthly or quarterly system review).

This is not easy work, you are going to have thick binders of hand written records (or gigs of word and excel whatever). Say you do 100 trades a month (this is subjective a lot), thats 40 hours of paperwork for the month. Yes, just like cops and ceo's, we also have grunt work to complete every day/week/month over and over again. This paperwork is indispensable and cannot be done without, period.

3. Overtrading - Moving up a time frame or two helps, but if you follow step 1 and 2, 3 will take care of itself, lol.

4. Incorrect position size

Here is a thought, if you are an expert card counter in blackjack, well then you are familiar with the fact that there comes time when the player actually has an edge over the house. Well if he still bets more than optimal size here, he can and will go broke, it does not matter how good or big (within reason) the edge itself is.
It should be noted that if he bets less then the optimal size, has a better chance of being profitable (a route which a lot of pros take), but will end up with less money. This is an acceptable trade off to pros, actually the lower you get in position size, the higher probability that you will make money (provided you have an edge). So people choose their spot on the scale according to their personal preferences and objectives (utility).
Matter of fact if you do not have an edge at all and neither did the casino (the market), perfectly 0 ev for both, you will still go broke if playing against an infinite bankroll. So err to the side of conservatism and bet low, till you can quantify your edge properly ( a big problem, to determine optimal f). The one thing newbies dont.
Matter of fact if every new trader just bet 1% per trade, edge or no edge, plan or no plan, journal be damned, he would take soo long to blow his acct, that he would learn 'the trade' while losing. Incorrect lots is devastating, more then any other single factor.

These are my primary 4 reasons. Just as a final note, they say 'the system is you', referring to trader psychology being supreme in this business, and I agree, because it takes a lot of mental fortitude to continue to fill that damn journal and go through that checklist, trade after trade, day after day while you are going through a 3 month drawdown. And the tendency to not lose focus and risk 10% on the next trade to 'draw level' is one that many mortals cannot withstand.

Those that can become legends. This is a hard business, not just for newbies either.