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

I believe the cartoon points to the notion that to a large extent you have to have some degree of talent to play the markets. You can't BS your way thru trading, you can't brown nose your way to success like you might on a job. If you suck at trading, it will show up in your P&L. You have to be talented at the art of trading or talented at stealing ideas from someone who knows how to trade.

On the face of it that's probably true, but I think there are 'hidden' values in forums like these.....

They go some way to helping us understand how other market participants think and some way to explaining the alleged 95/5% stats. Imagine if instead of 95% rehashed dross and unintelligible nonsense there were 95% intelligent sharp posts, wouldn't that make successful trading an even more daunting prospect? I think it's quite reassuring to know that the vast majority of content and the thinking behind it is far from intelligent and sharp, a lot of these people are a classic representation of the average retail trader!

Another benefit might be seeing the way not to do things, a kind of fly-on-the-wall view of what we ourselves might be doing, it sometimes takes seeing someone else doing something stupid for us to realize just how stupid it actually is!

Apart from that there are the occasional gems of trading wisdom and some thought-provoking content, it can often be the most seemingly insignificant comment that leads to us finding a significant piece of the jigsaw puzzle.

....and then there's always the entertainment value on a quiet trading day, some of the stuff people post is priceless!

Ha ha, good one...

Hmm interesting, when you say talent, it invokes the idea of some kind of intangible, inherent, natural ability. I prefer "skill," skill can be learned through experience, I guess we're getting into the whole "nature vs. nurture" thing here.

To gain skill in trading does take a lot of experience, however the required time to become consistent will vary from person to person.

I'm currently on vacation and trying my best not to load my trading terminal. Was watching the Stocktwits feed and FF Market charts when I realized something about how a lot of traders, trade.

I notice many traders are "swing" traders who do no take the "trend" into consideration. It seems traders jump on anything that moves, from trends to retraces. No one seems to have any ground rules for entries nor exits.

The mistake those traders made was, not taking into consideration of market "pull backs". Most seem to have missed the trend move. I noticed that instead of waiting for a pull back and jumping in on the trend continuation, most if not all jumped in to trade the pull back. I could not understand, why are they trading the actually pull back? That got me thinking about some of the most basic rules of trading and how they are not followed.

Anyway, those who traded the pull back were unsuccessful. Most were expecting price to move 50+ pips bullish but that never happen. Instead, price pulled back 20 pips and continued SHORT for another 100 pips. Every last trader who traded the pull back reported, LOSS on that trade.

Heres a chart of the trade I'm referring to:


From 1.44 to 1.43, price dropped 100 pips short. Those traders entered on that pull back just below 1.43 level. The trend then continues short for another 100 pips. The "XX" are showing the areas of my entry's. I gained 100 pips off that move, while on vacation.

I truly believe that the talent comes in when you talk about pattern recognition, for instance. There are some people who are just plain better at it than others. Some traders can spot certain reversal patterns effortlessly, while others struggle with it. The art of trading is being able to sort thru the subtle differences that can occur in any given pattern; because every pattern has slight variations. Not everybody has the skill to rotate images in their heads. I believe that some of these skills are transferable though. I liken it to the so called "Turtles" experiment. None of those novice traders had the skill level to come up with those trading rules. Richard Dennis was the architect of the rules based on his excellent skill level, the turtles simply followed the rules that he had established like trained monkeys.

Your missing the point here troikaone - Patterns are just a product - such a misleading word and the very reason IMO technical traders fail.

Pattern recognition is not technical analysis in my opinion. Technical analysis IMO is when a trader uses some tool that is a derivative of price to make a trading decision such as MACD or RSI. A chartist is focused on price action when it comes to pattern recognition. Do you see the difference?

I do and I disagree - TA to me is anything that involves patterns indicators or anything other than fundermentals.

lol.....we will have to disagree on that point CindyXXXX....I do respect your opinion though. In my years of trading I have found repeatable patterns that make hundreds of pips for me over and over. The patterns are unorthodox and you will not find them in any textbook. All this crap about head and shoulders, MACD blah, blah, blah and other standard TA talk just doesn't work. But as I always say....there is a "Ribbon of intelligence" throughout the market that is repeated over and over again and unfortunately it is not obvious unless you dissect the charts and turn them upside down and around.

No worries Troikaone I respect your opinion also

I agree, I've spent hours sometimes trying to show someone some of the patterns I look at and they really can't see them! I suppose it's like those ink blots shrinks use, everyone sees something different.

Semantics. Merriam-Webster's definition of technical (in this context) is "relating to or caused by the functioning of the market as a discrete mechanism not influenced by macroeconomic factors"

That's a bold statement! Most things 'work' to some degree, what you mean is they don't work for you. Surely that's a deficiency on your part more than the tool's fault.

I give it 48 hours, maybe less!

I was not born a forex trader, I got to know about it and I started learning it. And am still learning.
From my personal mistakes in the past and from the little I have seen generally.

Most retail traders do not read chart,
Retail traders should study charts ,study it and know the prices . you can only acknowledge you are a very good trader when someone mentions the price of a pair you are trading and you can see your longterm timeframe chart in your mindseyes. Very good traders know some key area of support and resistance by heart...imean key areas do not quote me wrong.The chart is the warfront and if you do not study it you will be taken unawares.
The chart itself is the greatest indicator on its own even without other indicators on the Navigator .

2. Goal setting . When you set very short term goals ,it is highly possible you will always be found on the wrong side of the market ,because you are in hurry, you want to meet up in a month or in 2weeks . and you will also be in a hurry to close positions going against you because you cannot wait. But when you set long term goals like aleast 3months , you give yourself a spacing to properly wait for prices to set up for you before your entry and exit.

3. Most retail traders believe that market will always rise during London and fall during Us sessions or vise -vasa and that the tokyo maitains a steady range

4. If the system that informs your entry and exit is faulty,you will always be on the faulty side.

5. Most retail traders believe that some pairs will always correlate with eachother or with a commodity .But this is not so all the time. I have had cases where I saw GBPUSD going up and EURGBP going up too. But noramlly these pairs will have negative correlation that's inversely proportional. I have seen gold go up and NZDUSD down I have seen USDCAD up and Oil up
I have seen GBPUSD going up and EURUSD going down. So if your mind as a retail trader is fixed on this then you are bound to be on the wrong side. Then if you do not have an idea of correlation trading I will advice you try to do so .it is very important sometimes It is the reason why the market doesnt obey the news

6. Most traders jump in too fast during High impact multi-events. As for me I wait for atleast an hour to pass before I do anything.

7. Most traders do not understand market timing and sessions

8. LASTLY most traders do not have the faith and the patience that a wrong trade can sometimes reverse to give them profit

Couldn't have said it better. Price has a memory, I've lost money because I just couldn't afford to wait for it to return for reasons of undercapitalization. And more than once. I've picked tops and bottoms (the wrong way) for precisely that reason, fear of a margin call. There is a reason demo accounts always start with large amounts. I mean, do banks really get scared that the yen falls or strengthen and sell their holdings?
Went short my country's currency (which is highly correlated to the dollar) at the precise bottom (2.86) and sold my shorts for fear of a margin call at the exact top (3.61) a few months ago. Guess where it is now? Yep, 2.89 against the dollar. I had a large floating loss, guess where I would have been now with price back to my entry point? This is what does traders in.

Why do traders prematurely exit a trade that could have given them so much profit with a little profit ,no profit or so much loss?

There are certain views that are wrong,analogically in real life they are wrong too and even when we know this we try to blind ourselves to it in the world of trading. What are these views So many people think life will be easy ,they think all will always be well, Just go to college and back ,start a business ,get married and retire . They do not give room for competition ,they do not give room for trials and temptation and they will not give room for delayed gratification. It does not work that way.

When you ask me that why do so many traders exit so early from a trade with little or no profit frm a trade that if they have been patient would have given them some decent amount of dollars .I will say apart from fear and and impatience which a easily detected as one of the psychological factors ,there is another one: it is WRONG VIEW.
So many traders see the market trend as one thin or thick contuinuos line or a continious zizzag line. and when the market fails to move the way their brain is programmed anxiety ,fear and impatience creeps in.

The truth is, yes, for simplistic view and target purpose you can see an uptrend as a thin continous line up or a downtrend as a thin continious line down but always have in your mind that there will be pullbacks and market correction, they are just inevitable ,they must be there so if you have entered a buy entry in one of the markets lows be patient do not say because the trend you are seeing does not conform to the image in your minds eye ,then that the trend is changing it could be a pullback or a possible correction of the underlying trend. some also see the market as a continuos zigzag line,please do not qoute me wrong ,this does not have anything to do with the zigzag indicator,I have not in anyway condemned it,am just pin-pointing the kind of turn of mind that has been wired on so many traders.

Funnily you will hear a trader saying ;"it will just go 1,2,3. or xyz" . I have not said wave count doesnt work .What am saying is that market does not just move like that, even if its going to go 1,2,3 or abc or xyz or k l m ,pardon me, depending on how you count and name your own ......also allow for pullbacks and corrections in your view or(short term ranging)

During my days of naiviety when I was trying to pick tops and bottoms . If I perceived an uptrend is losing steam and bears are likely to come I enter a sell before I know it the trend continues in the previous direction again and I will keep seeing an increasing negative on my open position with that fear I will hurriedly accept the loss. My problem was that of VIEW . But now I understand that most times market reversals from a markets recent montly highs or lows may be coming with a pattern. It could be any pattern some of these pattern may take hours or even days ,and there will be lots of sideways movement atimes. So trading blindly without also watching out for the pattern in formation may also inform your premature exit informed by fear or impatience.

This is the same view we sometimes have in life , 1,2,3 go to college , 1,2,3 get a job or establish a business,1,2,3 get married , 1,2,3 have children just like that. It does not work that way. No room for dissappointments , no room for delayed gratification ,no room for experimentation and research. Life must always be good on the surface.We can abandon a friend in difficulty because life must be a straightline up.We can Keep a selfless project in abeyance to siut our short term pleasurable preferences just with this same mindset .The worst of it all,we can even leave a difficult course at the brink of sucess. When things do not follow our script we start blaming GOD. It is the same way of viewing the market as a thin contunious zigzag line .The pullbacks and corrections are part of life.

Practically how does this really affect the way we trade the market. We are called intelligent if when we are able to make associations between two or more events in our brain. If a trader places a buy order say on GBPUSD on 11th March around 8am EST at 1.6003 knowing that their is a strong resistance around 1.5965 region .when the buy order starts making profit he does not close the trade hurriedly because he understands that there may be a possible pullback . Also check 17th march 3am EST if a buy order is entered and it started making profit and is left till the next day will not hurridly close it since he understands there could be possible pull backs which does not actually mean total reversal of the overall trend. There are lots of examples to site. Now whats informs that premature phobic exit is that the trader errorneosly perceives a pull back as a possible reversal since he has already impressioned his mind that an up trend must come like a thin continiuos line up. Its a mind thing

In conclusion we exit a trade that could have given us more profit with a loss or little profit because we could not continue to establish the association between our entry and its destination as we are psychologically distracted by pullbacks and corrections which exhaust us while we wait .And that moment of exhaustion can lead to a spur of the moment decision of premature exit. The exhaustion comes in because we have already subconciously imprinted a thin continious line movement which is not wrong in itself anyway but fades away as market reality downs on us. From my little experience I think we can solve this problem by seeing CHART AS CHART CAN BE and start seeing those possible serration way up and down.

No good work is done in a hurry .

Remain blessed and Remember God in the days of your youth

Isn't it simple guys? Just find out what the right side is and get on it....

Yes....I find that the TDI is excellent for detecting pullbacks - just see the screenshot below where the TDI can be used not for Entry but for Pullback setups when it goes into the "extremes". Great visual guide imho

.... because they DO NOT use Technical and Fundamentals together. They use one or the other ?!

Absolutely spot on ..
When you rely on charts only... just remember .. every sunken ship has a chart room.