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

  • #201
  • Aug 2, 2010 12:08pm Aug 2, 2010 12:08pm
Quoting spekitox
Funny you should say that because this is what I was thinking to myself this morning. The pound shooted up, above daily and weekly highs, and people are pushing to short it.
I read an excellent article about roulette, but can't find it right now. It said, when red comes up 10 times in a row, people are pushing to bet on black. After 20, they literally go crazy and put everything on black. And the dealer said, 25 in a row is not a big deal, happens often.
I don't know, I'm not into casinos...
There is a piece of advice I found on forexlive: [i][i]"An...
About a week or so ago the pound closed above it's highs from the first quarter of the year. Donchian 20/55 day systems aren't so good these days but when a market closes above 100 day highs and more and says there it's a sign of a major trend. So I looked at the long/short ratio. The shorts piled on! Ratio reached around 70/30 on OandA's books, way over 2:1 then bang it rallies another 200 pips or so, nodoubt taking out all their stops and possibly blowing a lot of retail accounts too if they double up with excessive leverage after being stopped out the first time.

THIS IS WAY MORE THAN NOT KNOWING HOW TO TRADE, THIS IS BEING ABLE TO, AS A GROUP, GET IT WRONG PRETTY CONSISTANTLY. SIMPLY NOT HAVING A CLUE IS JUST 50/50, NO WHERE NEAR AS BAD AS WHAT JUST HAPPENED TO THE RETAIL TRADERS.
  • #202
  • Aug 2, 2010 12:40pm Aug 2, 2010 12:40pm
At the beginning of a trend, retail bets both way. Some are long, some are short. As the trend develops, the traders in the money, because they don't ride their winners, close theirs positions for a small profit. The traders which are on the wrong side, don't cut their losses and keep on hoping. This pattern repeats itself at each point in the trend. The winners quit early while the losers cling to theirs positions.

As an end result, in aggregate retail is usually on the wrong side of the market.
  • #203
  • Aug 3, 2010 12:25am Aug 3, 2010 12:25am
Quoting Adal
At the beginning of a trend, retail bets both way. Some are long, some are short. As the trend develops, the traders in the money, because they don't ride their winners, close theirs positions for a small profit. The traders which are on the wrong side, don't cut their losses and keep on hoping. This pattern repeats itself at each point in the trend. The winners quit early while the losers cling to theirs positions.

As an end result, in aggregate retail is usually on the wrong side of the market.
Good point, I never really thought of it that way!
  • #204
  • Aug 3, 2010 1:30am Aug 3, 2010 1:30am
Quoting kingfisher
All it boils to one simple reason-

The failed traders have not trained 'neurons and synapses' inside their brain.

Trading like any other profession is a synaptic strategy'.

Nature has given everyone a mini supercomputer- Brain. When you learn and memorise things, your brain undergoes changes to organise and reorganise itself.
Quoting pipmutt
I wish I understood what you just said!
People brains are already fcked, a fcked brain can never be successful, people are forced to win and they will be the everlasting losers, on the other side its a tough work to transfor that mini supercomputer- Brain, that's why there are continuous blown-up accounts,

Its not at all about trading, strategies blah blah, its all about psychology that most traders fail or few win in the market or anywhere...

Einstein has said it

"We can't solve problems by using the same kind of thinking we used when we created them."

"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

sure we all been fcked, put an smile on your lips now for knowing that
hello
  • #205
  • Aug 3, 2010 1:32am Aug 3, 2010 1:32am
Hello philosophers,

to my humble opinion to is like the two psychologists Kahnemann and Tversky found ot in the 1970s:
If you are winning, you are too careful.
If you are about to loose, you become risky.

Why?

Imagine this 2 hypothetical experiment:

First one (winning situation):
I offer you 2 possibilities to choose, a game with a big winning possibility or a secure small win:

You may choose from a secure win of 1000$ or a game where U can win 5000$ by drawing 1 of 5 closed envelopes. So 1 envelope contains the win 5000$, the others are empty.

How would you decide? Do you choose a secure win of 1000 $ or the game with the chance to win 5000$
Second Experiment (loosing situation):
Now you must choose between a loosing game or a secure loss:

Choose from this game: 5 envelopes as above: One contains 5000$, the other 4 envelopes are empty. You have to give away one envelope (imagine it is a game).
or choose the secure loss of 1000$

Do you prefer the game or the sure loss?

As you probably realized the 2 experiments have the same expectancy value (5000$ times probability of one fifth equal 1000$)
So the difference between the 2 experiments is whether you win or loose.

Interesting would be a poll now
How would you decide in the first and the second test (honestly)?

Have fun!
  • #206
  • Aug 3, 2010 2:25am Aug 3, 2010 2:25am
Quoting spekitox
....
There is a piece of advice I found on forexlive: "An object in motion tends to remain in motion"
it's not simply a 'piece of advice'.
it's actually a LAW.
law of inertia or law of momentum
or Newton's First law of motion
  • #207
  • Aug 3, 2010 2:35am Aug 3, 2010 2:35am
Yes, that's it. To put it simple, can we say in forex it means "don't pee against the wind" ?

Quoting supremeChaos
it's not simply a 'piece of advice'.
it's actually a LAW.
law of inertia or law of momentum
or Newton's First law of motion
forget about tomorrow, just steal away into the night
  • #208
  • Aug 3, 2010 6:15am Aug 3, 2010 6:15am
don't pee against the wind?
yes, u could say so
  • #209
  • Aug 3, 2010 6:53am Aug 3, 2010 6:53am
Lack of information, and belief in gut instinct, not facts.
Need a Profitable Trading System? --> PM me.
  • #210
  • Edited 8:41am Aug 3, 2010 7:58am | Edited 8:41am
Traders don't like to take the Simple trades !!! LOL

How many traders have the Patience for this little Simple breakout Trade !!
i say few..
Attached Image (click to enlarge)
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  • #211
  • Aug 3, 2010 11:21am Aug 3, 2010 11:21am
Quote
Quote:
Originally Posted by kingfisher
All it boils to one simple reason-

The failed traders have not trained 'neurons and synapses' inside their brain.

Trading like any other profession is a synaptic strategy'.

Nature has given everyone a mini supercomputer- Brain. When you learn and memorise things, your brain undergoes changes to organise and reorganise itself.
I wish I understood what you just said!

Mate, i will let you know in very simple language, the secret of life/success/ millionaire traders-

If we wish to become civil engineer, doctor, accountant, teacher etc we undergo 5-6 years of theoretical training (high school, graduation, PG etc) followed by practical training of 1-2 years before we become certified.

Even After certification, the expertise comes after practicing for 3-4 years.

When we learn and memorize our subjects, the brain undergo a change. The neurons and synapses strengthen itself through learning and memorization.

As Mark Douglas said in trading in zone, why are some traders very successful? The answer is simple- Successful traders think differently.

That different thinking comes from neurons and synapses which have been strengthened in the successful traders mind through repeated learning and memorization process.

I am not saying one should do rote learning of each trading day..no...but yes saving and revising every trading day for a couple of times is one of the steps to start in the right direction.

We loose because we short the market when it is long and long the market when it is short. Successful traders think differently and needless to say, they get their direction of trade right most of the times.

Trading like any other profession is a 'synaptic game'. How one neurons and synapses in the brain has been strengthened through understanding, learning, revising and memorising the trades.
  • #212
  • Aug 3, 2010 11:38am Aug 3, 2010 11:38am
Quoting kingfisher
Mate, i will let you know in very simple language, the secret of life/success/ millionaire traders
Right, so pretty much what Leon said, they don't know how to trade.


Quoting kingfisher
We loose because we short the market when it is long and long the market when it is short. Successful traders think differently and needless to say, they get their direction of trade right most of the times.
Common misconception, even with a good strategy the majority would probably still lose.
  • #213
  • Aug 3, 2010 12:09pm Aug 3, 2010 12:09pm
Is it just me, or has anyone else noticed, "the right side" of the market can also change in a very short time? So a rosy long in the morning can end up as a big short in the afternoon. Is it a wonder it's hard to figure "the right side"?
forget about tomorrow, just steal away into the night
  • #214
  • Aug 3, 2010 12:30pm Aug 3, 2010 12:30pm
Quote
Is it just me, or has anyone else noticed, "the right side" of the market can also change in a very short time? So a rosy long in the morning can end up as a big short in the afternoon. Is it a wonder it's hard to figure "the right side"?

Rightly said. But that happens frequently.

So if something happens frequently, it means there is a pattern.

So, now it means trading is a 'pattern recognition numbers game'.

Now, if trading is a 'pattern recognition numbers game', how should we go about it?

Understanding, learning, revision, remembering- all in all complete brain trading for atleast a year for 10 hours a day before putting first live trade (after successful demo)

Billion dollar question-

How many retail traders in world save the charts/data and revise their trading day? The answer will be majority of them dont do it.

Each trading day is like a simulation and should be analysed for atleast an hour from all angles.
  • #215
  • Aug 3, 2010 12:36pm Aug 3, 2010 12:36pm
Quote
Quote
Common misconception, even with a good strategy the majority would probably still lose

I agree. But after getting the 'edge', then one needs to get trained regarding entry, partial profit booking, exit, SL, MM etc.

Trading in Zone by Mark Douglas can change the life of any struggling trader who has got the 'edge' but is not able to put a winning trade.

I love Mark Douglas. He has changed my trading career for good.
  • #216
  • Aug 3, 2010 1:40pm Aug 3, 2010 1:40pm
Quoting kingfisher

I love Mark Douglas. He has changed my trading career for good.
Ha, mine too!

After 4 years of struggling I felt I was so nearly there but just couldn't seem to put it all together and make any consistent money.

The questionnaire at the beginning and end was a real surprise, I never believed one book could make so much difference, it puts trading into perspective.

Excellent book!
  • #217
  • Aug 3, 2010 3:07pm Aug 3, 2010 3:07pm
Very well said. I prefer to look back after a week or two, when I have some time. When the dust has settled, you can look back coolheaded. I always realize trading is soo easy. In hindsight

Quoting kingfisher
Each trading day is like a simulation and should be analysed for atleast an hour from all angles.
forget about tomorrow, just steal away into the night
  • #218
  • Aug 3, 2010 4:36pm Aug 3, 2010 4:36pm
In a trending market the novices try to pick up pips on a retrace cause they think price will always come back, then the EGO thing keeps them in this losing position. All the losing positions accumulates with a reflection in the SSI. When they realize they can't keep a position any longer it usually is to late and the brokers SMILE. The market can move much longer than you can stay solvent with leverage. Money management is the only solution.
It is what it is deal with it.
  • #219
  • Aug 4, 2010 5:08am Aug 4, 2010 5:08am
Quoting spekitox
I read an excellent article about roulette, but can't find it right now. It said, when red comes up 10 times in a row, people are pushing to bet on black. After 20, they literally go crazy and put everything on black. And the dealer said, 25 in a row is not a big deal, happens often.
I was thinking, this is one of the strongest pieces of evidence to suggest it's all down to the traders themselves and not the big boys out to 'get them'.
  • #220
  • Aug 4, 2010 5:59am Aug 4, 2010 5:59am
I don't see the analogy.

Red comes 20 times in a row. All players bet next on black. So what?
Red has 50% chances, black has 50% percent (we exclude 0, 00 or acts of God). Either all win or all lose.

In forex there are moments when there is a big chance that the price will go higher. The uninformed traders will go short because they don't understand what's happening. The money will change pokets, from a lot of losers to a small group of winners.
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