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

  • #81
  • Jul 20, 2010 5:15pm Jul 20, 2010 5:15pm
It is really clear to me that the snake that bites is two-fold. Too many new traders have no vision as to what the market is doing. They have no idea as to what the trend is really doing and they have no grasp as to the price action levels that control the movement of the pairs.

Following that there execution could not be worse. They "see" a trend and then they enter way to early or way to late, and once they have entered they fail to have a target for exits.

That is a deadly combination. It is not a 50/50 guess of long or short. It is much more complex with many issues leading to a successful trade.
  • #82
  • Jul 20, 2010 9:13pm Jul 20, 2010 9:13pm
Quoting domino
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...
Of course it's subjective, otherwise we would not disagree. I view 2% as very reasonable, while others view it as too aggressive (especially those with investors).

Risk of ruin exploding? Talk about being dramatic. I don't see anyone suggesting to start risking 10% of the account while scalping for ticks (boom!). And please don't be arrogant and assume that the independent trader is going to blow his account. Yes, some people do have a higher tolerance to capital fluctuation. Many people seem to have a hard time understanding that "more aggressive" doesn't mean "overly aggressive", and than more than x% may be reasonable depending on the trader and situation.
  • #83
  • Edited 9:59pm Jul 20, 2010 9:31pm | Edited 9:59pm
I think the reason many end up on the losing side is because they probably ignore the trend. Lets say a surfer, has to wait for a nice wave to come by and ride it in the wave direction, or else he will get knocked down but the trend itself is only part of it. Almost anyone can look at a daily chart and see the trend is up or down but when does one get in at a good point to ride it. I use the daily chart myself to identify which way the market is currently trending then i will scale down to the 4HR or lowest 2hr and look for trades in the daily charts trend direction. However one has to be able to read price action IMO to spot entries and that takes some time to learn and get down (trading without any indicators except for candlesticks).

And one more thing, probably the most important thing a trader should pay most attention to is Money Management and control position sizing, risk/reward ratios. IMO thats the number one account killer, having too large a position to ride out small draw downs and i think thats why many smaller account traders fail, everyone wants to make the big bucks and thats fine but you must build the account so that one can afford to enter a bigger lot and the account can absorb the loss if it occurs with minimal damage.
"The market doesn't beat them, they beat themselves" - J. Livermore
  • #84
  • Jul 21, 2010 12:30am Jul 21, 2010 12:30am
Many good opinion guys.

My experience;
1. One must trade with enough capital
2. Analyzing the trend is a must, not an option
3. Patience, waiting for entry and exit
4. Control your greed

Like most people said, bfore u cross the road, look left and right, and left again.......or else
  • #85
  • Jul 21, 2010 1:36am Jul 21, 2010 1:36am
I think it's because unsuccessful traders do not know how to exit.

Try placing a buy or sell randomly. Most position will be profitable, even for a minute. If you're lucky .. you will still be profitable after a few hours with tens of pips.

Even if you follow the trend, you will be in the red if you dont exit before the trend reverse.

Any position can be profitable, but profit cannot be realized without exit.

IMHO, exit is the hardest part about trading.
  • #86
  • Jul 21, 2010 2:24am Jul 21, 2010 2:24am
I think alot of retail buy when the price is going up and sell when the price is going down. They take profit too early and run losses. A retail client could be successful if they had a risk reward ratio of 1:1, but they never do.

Scalping can be profitable over a short period of time.

Swing Trading or scaling into a trade on troths is alot more profitable, but only over a longer time period.

Scalping daily profit may look like this +10,+10,+10,+10,+10.

Swing trading will look more like this +50,-20,+30,-10,+40.

Swing trading just depends on how good you are at taking losses.

Leverage is the biggest player though. Swing Trading is alot easier with low leverage.
  • #87
  • Jul 21, 2010 5:15am Jul 21, 2010 5:15am
A big bunch of retail traders went into Forex without any basic knowledge.

There are really too many of them out there.

To them, forex market is like an exciting gambling casino.

They do bet they can make fortune out of it.

There is really a huge percentage of them out there & is increasing daily.
  • #88
  • Jul 21, 2010 5:22am Jul 21, 2010 5:22am
Quoting dProf
Like most people said, bfore u cross the road, look left and right, and left again.......or else

Nowadays they teach kids to look both ways, and keep looking both ways until you've crossed over
The quality of your life is brought about by the quality of your thinking.
  • #89
  • Jul 21, 2010 9:19pm Jul 21, 2010 9:19pm
Quoting Troikaone1
I agree 100% with this post. Every day of the week, fresh meat (retail traders) enters the FX market. It takes a tremendous amount of hours to master trading. As an example, there are only 12 NFP reports per year. That is not nearly enough time for a new trader to understand the dynamics of the NFP report in their first couple of years. Because it is not so much what happens on that one NFP report day, but the week before and after that causes problems for traders. Also, you can't forget about the market dynamics of the FOMC announcements. There...
Troikaone1

on average, how many trades a day do you take ?

Thanks a lot.
  • #90
  • Jul 22, 2010 1:38am Jul 22, 2010 1:38am
Quoting luqmanz

IMHO, exit is the hardest part about trading.
Ain't that the truth!
  • #91
  • Jul 22, 2010 1:40am Jul 22, 2010 1:40am
Quoting Brettus
I get information from banks about retail stops being taken out......banks will know where the flow is.
Like everyone else they can only speculate as to where the flow is, they don't have the luxury of seeing the marketmakers book, it's not information that is shared. Kinda the nature of the game really!
  • #92
  • Jul 22, 2010 2:51am Jul 22, 2010 2:51am
Quoting pipmutt
Like everyone else they can only speculate as to where the flow is, they don't have the luxury of seeing the marketmakers book, it's not information that is shared. Kinda the nature of the game really!
Totally agreed...

Speculate or gamble....
  • #93
  • Jul 22, 2010 5:34pm Jul 22, 2010 5:34pm
Quoting triphop
I've got around 18 months of retail data now. Since I last wrote about it I've learnt a bit more.
If you've got it in a format I can use and you're willing to share the data with me triphop I'm willing to share the results of any tests I perform on it? I'll totally understand if you don't want to though.
  • #94
  • Jul 22, 2010 6:07pm Jul 22, 2010 6:07pm
1) Disinformation

2) Mental masturbation

3) Overcompensation

And the fact that the markets are rigged.
  • #95
  • Jul 22, 2010 6:15pm Jul 22, 2010 6:15pm
Here is a link to article related to this subject:

http://mediaserver.fxstreet.com/Repo...5da4400893.pdf
  • #96
  • Jul 22, 2010 7:08pm Jul 22, 2010 7:08pm
the whole 95% are losers thing is pretty ridiculous .... who make those statistics ??

how long i need to trade Demo or micro lots before i go live ??
i want to make sure that i won't be one of those 95% .... i'm trading micro lots and demo for 6 weeks now and i made some pips but i heard that all systems lose eventually
  • #97
  • Jul 22, 2010 10:16pm Jul 22, 2010 10:16pm
Because the market is CONSTANTLY changing and as soon as you thought you have learned everything there is to profit, the market throws a fast curve ball at you and you have to go back to square one trying to figure what went wrong.

Plus Retail traders are the outsiders who are usually not "in" on any news until it's not news anymore or any market participants' orderflows. The Forex club is still pretty much a Closed-Door Old Boy's Club and transparency is pretty much zero!! It's not like we all have a Level II trading screen in front of us.

Oh well, we will do the best we can to survive
Make your losses in demo. Earn your profits live.
  • #98
  • Jul 23, 2010 3:45am Jul 23, 2010 3:45am
I've just been looking at the open positions summary on Oanda for AUD/USD.
http://fxtradeinfocenter.oanda.com/o..._and_positions

It's currently pushing up around .90 and in a obvious uptrend on the daily.
There are a massive number of shorts opened down below .86.
Plenty opened below .84 and a bunch down at .81.
The price hasn't been below .84 for a fortnight now, so unless there are a lot of people holding really long term positions, you'd have to guess that people just can't cut loosers.

Hope wins out over reason.
  • #99
  • Jul 23, 2010 4:19am Jul 23, 2010 4:19am
Quoting Davidee
If you've got it in a format I can use and you're willing to share the data with me triphop I'm willing to share the results of any tests I perform on it? I'll totally understand if you don't want to though.
You don't get anywhere without being a bit cheeky I guess - but no chance. Not for free and not for sale. I've already analysed the data to death - so when I say that the reason that they're on the wrong side of the market is predominantly down to time and their style of trading...

Retail data has its uses but not quite in the same way as you might be thinking. If you think you've a solid gold indicator off the back of it, then you'll be sadly mistaken. Look at FXCM's SSI fund, which I think has been wound up now - based on retail sentiment it crashed and burnt. Presumably it was based on a contrarian trading technique, which of course works until it doesn't - and the latest financial crisis is an excellent area to observe how that happens.
Retail data is best used as a teaching tool to make you think about how traders think and place orders. Experiencing trading will do the same with nothing but a chart. There are no shortcuts, just different ways of getting to the same place.
  • #100
  • Jul 23, 2010 4:39am Jul 23, 2010 4:39am
Quoting hagenson
I've just been looking at the open positions summary on Oanda for AUD/USD.
http://fxtradeinfocenter.oanda.com/o..._and_positions

It's currently pushing up around .90 and in a obvious uptrend on the daily.
There are a massive number of shorts opened down below .86.
Plenty opened below .84 and a bunch down at .81.
The price hasn't been below .84 for a fortnight now, so unless there are a lot of people holding really long term positions, you'd have to guess that people just can't cut loosers.

Hope wins out over reason....
Hi hagenson,

I have started using oanda, i have been looking at these orders for a few weeks now.

However i would not place too much weight in this data. the reason being that i used to day trade uk stocks, i had level two order books. Now i was a rookie at the time but according to the knowledge that i had, when there was lots more buy orders than sell orders then price should have support, even when filltered to 6%.

but, if the overall market was heading down it was heading down! i would sit and watch the screen light up, and these buy orders would get filled by the dozen as price crashed right through the whole lot, even though there was far more buy orders than sells.

Perhaps i was reading it wrong, but i did not work very well for me.

i am looking at Oandas books and im watching how price responds to levels that seem to have orders based, we will see...
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