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Why are most retail traders usually on the wrong side of the market?

  • #61
  • Jul 19, 2010 9:22am Jul 19, 2010 9:22am
Why are most traders on the wrong side of the market? Because they're being outplayed, like chumps at a high-stakes poker table.
  • #62
  • Jul 19, 2010 9:26am Jul 19, 2010 9:26am
Quoting Mr J
Why are most traders on the wrong side of the market? Because they're being outplayed, like chumps at a high-stakes poker table.
You make it sound like a competition!
  • #63
  • Jul 19, 2010 9:35am Jul 19, 2010 9:35am
Quoting triphop
It's my special proprietary indicator which i'll be selling for a one-off fee. Or ...
hold on a minute:
http://fxtradeinfocenter.oanda.com/o..._and_positions
use aggregate positioning to work out % of profitable and non.

And for ratios of long:short:
http://fxtradeinfocenter.oanda.com/o...osition_ratios
Thanks triphop - you're a star. Don't know if this will help my trading but interesting all the same cheers
Time hides Nothing
  • #64
  • Jul 19, 2010 9:40am Jul 19, 2010 9:40am
Quoting pipmutt
That's just based on Oanda client's positions though isn't it triphop? I think a few brokers publish the same stats, it might be interesting to compare!
Sure. Oanda's a proxy for the whole retail market. And the whole area of losing traders...
  • #65
  • Jul 19, 2010 9:47am Jul 19, 2010 9:47am
Quoting triphop
Sure. Oanda's a proxy for the whole retail market. And the whole area of losing traders...
Well they're a marketmaker with a significant share of the retail forex marketmaking business but those numbers only reflect their clients positions, it's not representative of the retail market as a whole. At a guess I would say it's about as useful as the volume indicator on MT4!

I have no doubt they're extremely well versed in the whole area of losing traders though!
  • #66
  • Jul 19, 2010 9:50am Jul 19, 2010 9:50am
Quoting pipmutt
You make it sound like a competition!
Don't say that, otherwise we'll get the Progressive/PC numpties out there demanding that losers get "Participation" awards .
  • #67
  • Jul 19, 2010 9:55am Jul 19, 2010 9:55am
Quoting Mr J
Don't say that, otherwise we'll get the Progressive/PC numpties out there demanding that losers get "Participation" awards .
Well now you come to mention it.......

Maybe they could operate some sort of star award system like McD's do, the more stars you've got says a lot about you!
  • #68
  • Jul 19, 2010 11:42am Jul 19, 2010 11:42am
Quoting pipmutt
Well they're a marketmaker with a significant share of the retail forex marketmaking business but those numbers only reflect their clients positions, it's not representative of the retail market as a whole. At a guess I would say it's about as useful as the volume indicator on MT4!

I have no doubt they're extremely well versed in the whole area of losing traders though!
Well you know what they say about guesswork Pip. I'll leave you to it
  • #69
  • Jul 20, 2010 3:09am Jul 20, 2010 3:09am
Quoting pipmutt
I don't need to have worked in a bank, it's the logistics of marketmaking and aggregating clients positions, I shouldn't think the residue is very much in the scheme of things.

For banks to actively try and guess retail traders positions and then manipulate the market in an attempt to trigger their stops would probably be an exercise in futility, and certainly not worth the effort, don't forget 95% lose without any assistance, and their money invariably goes to either the marketmaker or towards paying out the winners rather than to banks!
I get information from banks about retail stops being taken out. Currenex for example does 200bio worth of volume on a daily basis. Dont you think they sell the flow to banks? I'm not arguing that alot can lose it on their own, but banks will know where the flow is. They will inforce magnet stops.
  • #70
  • Jul 20, 2010 7:15am Jul 20, 2010 7:15am
Quoting CindyXXXX
Good points pip - But to be right in the first place you need to be on the "right side" at some stage, and to make more than you lose same thing
Almost all trades are in profit at sometime.

And a trader can be 'right' and lose due to bad money management, or because of any of all the other reasons retail traders fail, but there is a lot more to it than that.

There is generally a long(ish) term underlying trend. Trades in the direction of this trend statistically speaking have the best chance of success.

But as a general rule, retail traders tend to be on the opposite side of this trend. For months now there have been around 4 times as many retail traders betting that the Yen would rise against the US Dollar for example.

It's not as simple as retail traders not having a clue. If that were the case they'd be just as likely to enter long as they were to enter short. They're not. They're likely to be net short when the market is moving up and net long when the trend is down. And I wanna understand why this is.
  • #71
  • Jul 20, 2010 7:19am Jul 20, 2010 7:19am
Quoting CindyXXXX
Thanks triphop - you're a star. Don't know if this will help my trading but interesting all the same cheers
The 2nd link he gave you is particularly good on the EURUSD, probably because lots of traders trade it so the values on their books is more likely to be a representative sample.

It's amazing, retail FX have been net short on the EURUSD for around a month as it's gain. When the retail traders start going net long watch what will happen, the pair will start a long decline.

It's like the 'wisdom of the crowed' principle in reverse. Some of the reasons for it allude me...
  • #72
  • Jul 20, 2010 9:34am Jul 20, 2010 9:34am
Quoting Davidee
Almost all trades are in profit at sometime.

And a trader can be 'right' and lose due to bad money management, or because of any of all the other reasons retail traders fail, but there is a lot more to it than that.

There is generally a long(ish) term underlying trend....
4 times as many retail traders betting that Yen would rise against the US Dollar. Why doesn't it go in their favour? Because it goes against the institutions. Why do people look at whether a stock is held mainly by retail clients or institutional investors? Stock will always fall when it's in poor hands. Well most of the time.
  • #73
  • Jul 20, 2010 10:52am Jul 20, 2010 10:52am
likely due to dollarcost averaging, hedging positions, trying to fade the trend... traders always wanna pick the very lowest point or call the turn and be right and amazing... but the trend is quite persistant.. trade with the trend on long term charts and u have the banks at your back.. not traders.
  • #74
  • Jul 20, 2010 11:12am Jul 20, 2010 11:12am
Quoting domino
likely due to dollarcost averaging, hedging positions, trying to fade the trend... traders always wanna pick the very lowest point or call the turn and be right and amazing... but the trend is quite persistant.. trade with the trend on long term charts and u have the banks at your back.. not traders.
Trading the trend on a longterm chart will have many traders missing out on early gains, and experiencing late losses. Too slow to get in, too slow to get out. Trading the trend itself is probably only marginally profitable, if that. Good trend traders aren't good because they trade the trend, but because they trade well.
  • #75
  • Jul 20, 2010 12:01pm Jul 20, 2010 12:01pm
Quoting Mr J
Good trend traders aren't good because they trade the trend, but because they trade well.
Disagree. And so does almost the whole hedge fund industry BTW. Yes they still need to be good though.

Good traders understand how much easier (i.e. profitable) it is to trade with the trend than against.

Simple as that.
  • #76
  • Jul 20, 2010 12:06pm Jul 20, 2010 12:06pm
Quoting Mr J
Trading the trend on a longterm chart will have many traders missing out on early gains, and experiencing late losses. Too slow to get in, too slow to get out. Trading the trend itself is probably only marginally profitable, if that. Good trend traders aren't good because they trade the trend, but because they trade well.
ok well the reason I say that doesnt have to do with just the trend itself.. it has to do with efficiency.. sometimes an edge cant overcome the costs associated with trading it.. look at scalpers.. risk 7pips to win10 or 11.. well eurusd eats 30% of profits.. vrs long term.. risk is usually much lower as lows are more meaningful.. rewards are higher as long term trends remain intact longer than short term ones.. they are also more stable and the waves are easier to trade and build into.. so for a risk of 400 pips I could make 1500 that 1 pip spread is meaningless... and the increase in efficiency in the trade means less edge is needed to turn profit. as for late losses and early gains not sure how trading a longer term trend would cause this as all the entries and exits match those that would be performed on short term charts.. you have a better ability to lock in profits as you move do to the stability of long term charts. If your careful about fundamentals you can even get paid to hold long term positions which reduce RISK as time passes increasing R:R

just trading well doesnt ensure profitability on short charts .. they are gambling. efficiency diversification fundamentals and a good battle plan using price action on long term charts is all you need R:R doesnt matter but its good to know... while short term traders are more worried about gaming theory R:R 50% hit rate.. all of a sudden people are casinos.. its gambling sorry.. and sure I can trade 15M charts take a look at my thread I hammer out 15M just to show trades faster.. but would I trade them with firm capital...no...

Building a trading buisiness isnt about FV=PV(1+r)^t or initial deposit high turnover... its about FV=(PV+D)(1+r)^t..slow and steady boring growth mixed with previous earning potential... just as with any business
  • #77
  • Jul 20, 2010 12:31pm Jul 20, 2010 12:31pm
Quoting SunTrader
Disagree. And so does almost the whole hedge fund industry BTW. Yes they still need to be good though.

Good traders understand how much easier (i.e. profitable) it is to trade with the trend than against.

Simple as that.
You missed my point. I didn't say good traders don't trade the trend, I just said they do it well because they're skilled. It won't much help a poorer trader.

Quoting domino
just trading well doesnt ensure profitability on short charts
It does, variance aside. If you're trading well, it means you're overcoming the cost of the trade. Someone may be skilled enough to almost breakeven scalping a tick chart, but it doesn't mean they're trading well, as trading well would mean choosing a timeframe where skill overcomes the cost of the trade.

Quote
slow and steady boring growth mixed with previous earning potential... just as with any business
Trading isn't like just any other business though, as aggression and scale can be adjusted easily. And this may be a little petty, but "slow and steady" is subjective. Slow for many skilled independent traders is going to be fast for a large fund, as independent traders are more likely to have a higher tolerance of capital fluctuation.
  • #78
  • Jul 20, 2010 12:35pm Jul 20, 2010 12:35pm
most people don't even bother with accepting the fact that trading is about winning and losing but being profitable on the average

the second thing they don't accept is that rules are made to be followed, if you start trading like you know better then expect to lose anytime soon

third thing, their rules might be wrong and incomplete, it's like calling bets with weak hands, so you should try to call the only hands that give you the best odds to winning money

fourth, this takes time and most losers will rush their trades

fifth, most traders consider their methods bulletproof but don't realise that their trades depends on the trades of others, so your trading system should actually try to discover where the money will flow, not where you'd like it to go
  • #79
  • Jul 20, 2010 12:38pm Jul 20, 2010 12:38pm
Quoting Mr J
You missed my point....
Completely agree.
  • #80
  • Jul 20, 2010 12:55pm Jul 20, 2010 12:55pm
Quoting Mr J
It does, variance aside. If you're trading well, it means you're overcoming the cost of the trade.Someone may be skilled enough to almost breakeven scalping a tick chart, but it doesn't mean they're trading well, as trading well would mean choosing a timeframe where skill overcomes the cost of the trade.
then your jsut saying trading well is making profit.. then all it is different words.. people can be good traders but just get weeded down in non-sense I see it all the time..
Quote
Trading isn't like just any other business though, as aggression and scale can be adjusted easily. And this may be a little petty, but "slow and steady" is subjective. Slow for many skilled independent traders is going to be fast for a large fund, as independent traders are more likely to have a higher tolerance of capital fluctuation.

slow and steady isnt subjective.. as you increase leverage and aggression you increase risk and explode risk of ruin as it works as a product of the amplification of risk from leverage.. the scale isnt adjusted in a position to amplify profit you increase exposure through diversification and number of spread trades. firms know how to increase exposure without amplifying these effects this sets traders apart from each other as well.. an independent traders feels he has a higher tolerance for capital fluctuation but doesnt realize that account death probability will increase maybe to 95% as a product of the increased exposure even with a profitable strategy..
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