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

  • #241
  • Edited 2:56pm Aug 12, 2010 1:06pm | Edited 2:56pm
A great majority of people (the 95%) wanting to become traders just throw themselves out into the open sea and hoping to learn how to swim during the process. Unfortunately, many of them drown or get eaten by sharks. I'm not going to lie, I did it when I first started but luckily I was able to survive and would not go back out there without first learning the proper way to swim.

EG
  • #242
  • Aug 12, 2010 5:38pm Aug 12, 2010 5:38pm
Why do you assume that just because FXCM states SSI is a contrarian indicator makes it true that most retail traders are on the wrong side of the market? I have reviewed many SSI reports since beginning of the year for e/u and the retail traders were on the RIGHT side of the market most of the time. Also, I reviewed the SSI report for 8/11 and here are the #'s, and what actually happened from 8/11 to 8/12:

e/u: +1.15, signals down, actual down 200p
g/u: -1.23, signals up, actual down 150p
g/j: +2.05, signals down, actual down 150p
u/j: +5.62, signals down, actual down 200p
u/ch: +1.33, signals down, actual up 50p
a/u: -1.23, signals up, actual down 100p
n/u: -1.18, signals up, actual down 100p

Of the above SSI correct 3 out of 7 times, but retail traders on right side 4 out of 7 times. Also, I have read many comments during my review by FXCM "retail traders got it right this time".

I realize this one report not scientific study, but based on my review of e/u SSI #'s, for this year, I raise the possibility that majority of retail traders not necessarily on wrong side of market, of which the assumption is that is why most of them lose. I contend that majority lose because of myriad of other factors, such exiting too soon, trade management, etc.


Quoting Davidee
One question that's often asked a lot is why do 95% of traders (or whatever the statistic is) lose? The answers usually range from anything to bad money management to cutting winners and letting losers run.

One thing I don't hear about is that most retail forex traders are on the wrong side of the market. If you look at the forex sentiment indexes published by the likes of OandA and dailyfx.com which publishes it's 'SSI' it appears that most retail for traders are almost always on the wrong side of the larger trend. Why is this? What are your...
  • #243
  • Aug 12, 2010 6:53pm Aug 12, 2010 6:53pm
This is one of the best articles I've ever read.
  • #244
  • Aug 15, 2010 6:54am Aug 15, 2010 6:54am
Quoting scottyfromau
This is one of the best articles I've ever read.
I totally agree, I have only been lurking in this thread but it has been a great read. Part of my normal weekend scan everything program. Only this time I actually read all the posts in this thread. Must have been interesting.
  • #245
  • Aug 15, 2010 7:47am Aug 15, 2010 7:47am
I believe another reason why so many FX traders are on the wrong side is because they take for granted how devastating it can be to go against the trend. A lot of traders come from the world of equities where you might be able to get away with techniques such as dollar cost averaging. Unfortunately, because of leverage, the amount of account damage per inch on a FX chart is significantly higher than on a stock chart when a trader attempts to dollar cost average a position.
  • #246
  • Aug 16, 2010 11:27am Aug 16, 2010 11:27am
Quoting Troikaone1
I believe another reason why so many FX traders are on the wrong side is because they take for granted how devastating it can be to go against the trend. A lot of traders come from the world of equities where you might be able to get away with techniques such as dollar cost averaging. Unfortunately, because of leverage, the amount of account damage per inch on a FX chart is significantly higher than on a stock chart when a trader attempts to dollar cost average a position.
Great point, I think that also trends in FX pairs do tend to be faster and go on longer than in equities.
  • #247
  • Aug 16, 2010 8:08pm Aug 16, 2010 8:08pm
the reason is trading is in nature a gambling business, i start doublt if an ordinary person really can make money consistantly. just look at the commercial section, a guy called Jacko took investor's money and disappeared, this man was one of the "best traders" on FF, i guess. think about this, if this man really a successful trader, how come he wanted to do this? there must be something wrong, and I prefer to thinking even majority of those self claimed successful traders are still in the 95% category. I just want to laugh seeing so many people claimed themselves as "successful traders" here .......
  • #248
  • Aug 16, 2010 10:46pm Aug 16, 2010 10:46pm
Because some of us takes things for granted , in trading there's a lot of work to be done.Especially in reading the chart like other good traders read it.
I used to be that bone-head type...and thought that trading is easy.After a while i realize that if i want to be successful in trading, i must do my homework.Just my 2cents....good luck and green pips for everybody....
  • #249
  • Aug 16, 2010 10:54pm Aug 16, 2010 10:54pm
Quoting jeurre
this man was one of the "best traders" on FF, ....
(cough)
Time hides Nothing
  • #250
  • Aug 17, 2010 2:01am Aug 17, 2010 2:01am
Quoting jeurre
....a guy called Jacko took investor's money and disappeared, this man was one of the "best traders" on FF, i guess...
lol, going by the number of people who thought the same as you and were gullible enough to pay him money I think we've found one of the reasons why the majority fail!
  • #251
  • Aug 17, 2010 2:35am Aug 17, 2010 2:35am
Quoting pipmutt
lol, going by the number of people who thought the same as you and were gullible enough to pay him money I think we've found one of the reasons why the majority fail!
Hey pipmutt, when will you refund me my account ? You promised me 100% per year guaranteed but I have yet to see my money. It's kinda weird though, because you made me wire the money to a special haitian account, that seemed unusual but you told me it was because you were helping a charity. Forget the 100% and please give me my money back
  • #252
  • Aug 17, 2010 2:50am Aug 17, 2010 2:50am
Quoting pipmutt
lol, going by the number of people who thought the same as you and were gullible enough to pay him money I think we've found one of the reasons why the majority fail!
no way, no one could take any penny from my pocket, now we got jacko II
  • #253
  • Aug 17, 2010 2:59am Aug 17, 2010 2:59am
Quoting Intensity
Hey pipmutt, when will you refund me my account ? You promised me 100% per year guaranteed but I have yet to see my money. It's kinda weird though, because you made me wire the money to a special haitian account, that seemed unusual but you told me it was because you were helping a charity. Forget the 100% and please give me my money back
Yeah the markets are a bit choppy at the moment, it's to do with the Quantitative Easing and big market chilling problems in the US, complicated stuff you wouldn't understand, and then an employee diverted some funds but I'm sorting that one out, then I was on a short break, then I had problems with my email and internet......hey but it's all good, I guarantee it, I'll even pay you out of my own money!

Don't call us, we're busy, we'll call you when we're ready.

("hey honey, pack them bags quick, I think the Feds are on their way round!")
  • #254
  • Aug 17, 2010 4:21am Aug 17, 2010 4:21am
Quoting pipmutt
Yeah the markets are a bit choppy at the moment, it's to do with the Quantitative Easing and big market chilling problems in the US, complicated stuff you wouldn't understand, and then an employee diverted some funds but I'm sorting that one out, then I was on a short break, then I had problems with my email and internet......hey but it's all good, I guarantee it, I'll even pay you out of my own money!

Don't call us, we're busy, we'll call you when we're ready.

("hey...
QE is a b!tch but am I glad that you're going to pay my money. Thanks for the kind message, I'm so relieved ! I knew you wouldn't betray my trust and I think I am going to wire you another $100K because you are such a decent man and must be a fantastic trader !
I wish you wealth
  • #255
  • Aug 17, 2010 5:11am Aug 17, 2010 5:11am
Quoting Intensity

I think I am going to wire you another $100K because you are such a decent man and must be a fantastic trader !
Oh I am, I am.

I'm not taking on any more investors but I like you so I'll make an exception and let you invest in my "no-risk-guaranteed-returns-or-I-will-pay-you-out-of-my-own-pocket" investment plan, you're very lucky to get such a fantastic once in a lifetime opportunity!

Quoting Intensity

I wish you wealth
With your help I feel sure this will be achieved.

Any chance you could send that other hundred grand in cash to my anonymous mail drop address, in used bills please. Nothing dodgy, it's a tax thing so I can donate more money to my favorite charity. As soon as I receive it I will pay your last month's profits, the fund is doing great, stick with me and you'll be in a financial position that you never dreamed was possible!

Thanks!



("dammit bitch, pack faster, they're onto me!!")
  • #256
  • Aug 17, 2010 7:04am Aug 17, 2010 7:04am
Dear Most Precious Sir,

I want we to ask you, if you new customer accepts.

Thank you and High health to your excellency

PS. What is a 'dammit bitch?
  • #257
  • Aug 17, 2010 7:05am Aug 17, 2010 7:05am
Most retail traders are on the wrong side of the market (in my belief) not because they 'get it wrong' or even have the wrong indis on their charts.
They get spanked because of timing.
They buy after a period of buying or sell after a period of selling ("Look! Its TRENDING"). They will do this over and over because (again my opinion) they have no idea who is on the other side of their position and cannot tell by looking at a chart where the professional, institutional buyers and sellers are or how the pros are entering the market...

G.
  • #258
  • Aug 17, 2010 7:16am Aug 17, 2010 7:16am
I think the major reason why a lot of people are unsuccessful in forex trading is simple and it is so common that we often miss out on it, it's the same reason majority of people who start small businesses never survive for more than the first or max the second year, the same reason why people rather live in structured lives working for other people rather than be their own boss.

Join the dotted lines and you have your answer, remember if you have been searching and not finding, maybe you have been searching the wrong place!
  • #259
  • Aug 17, 2010 8:11am Aug 17, 2010 8:11am
I think this thread topic should be refined to say "Why are most inexperienced retail traders on the wrong side of the market?" The fact that the OTC FX market is relatively new compared to other markets; there has been a tremendous influx of new traders. 95% of them will lose tremendously and give the FX industry a bad reputation. I honestly believe that once you gain a significant amount of experience (at least 3 years), you will go from the 95% crowd to the 5% crowd.
  • #260
  • Aug 17, 2010 11:17am Aug 17, 2010 11:17am
Welcome to the world of FX, aka. The Slaughterhouse...
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