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Why you suck at trading

  • #21
  • Jun 23, 2012 8:40am Jun 23, 2012 8:40am
on a more personal note, but no less important... you must be very, very, very honest with yourself, even self aware, to a degree in this industry that simply cannot be compared to any other industry I know of.

in nearly every other walk of life, a person can have some dysfunction, or insecurities, or fears...etc... and can usually mask them or rationalize them or otherwise get along fine without actually acknowledging or addressing these shortcomings.

A professional retail trader simply does not have that luxury.

i'm not saying traders are fully functional, fearless, folks without shortcomings... wow. that would be... eh, no words to even describe that level of arrogance.

what I am saying is that if a fear or bias or dysfunction or attitude that you have is one that CAN manifest itself in your career... it WILL do so in this one.

and the only way around it, is to at very least see it for what it is, and accept it.

Then, one must either build around it, or work it out, or have a specific plan to avoid it.

otherwise... your just gonna suck at trading.

you at LEAST need to do this with yourself...however, most successfull traders I know do it with at least one other person as well.

kinda like a 12 step program. if your going to make it work, you must first see it for what it is...and it's much more successful if you can do this with a "sponsor". thats why 12 steps have sponsers, and thats why traders have mentors or a supportive outlet of some sort (even like this forum)

wanna see what real self honesty looks like? ehhh...was afraid you might. but in the interest of supporting traders to not suck, here is my other thread on this website, and a good example of my own personal struggles, victories, failures, setbacks, breakthroughs, etc.

http://www.forexfactory.com/showthread.php?t=364409#49

I'll say this. sometimes, posting in my trading journal thread is difficult for me. i mean, having ones failures on public display, and then having to explain them, and admit to them, and feeling how others may view that... it's uncomfortable, to say the least. and I am a person who wants a degree of privacy, and anonymity. I've never been the "life of the party" type... i prefer to not interact with the neighbors, or go to social events, etc.

but, i'm willing to do this type of very public, very personal expose' because I deeply want to become a better trader myself.

Just because one can make a decent income, doesn't mean that they are necessarily anywhere close to acheiving their trading dreams.

by no means does everyone need to make such a public display of their trading journey.

but, I believe that everyone needs to be very honest with themselves, and learn more about themselves, and increase their level of self awareness with regards to emtional states, motivations for certain behaviors they have in their trading, as well as reasons they repeat mistakes more than once.

if you can't do this, raise your hand, and say "ya, i'm wrong. and whats more, this isn't the first time, and i feel like a fool for still making this mistake, but, there you have it." then your not going to be very able to fix that issue.

and, until you do.... you will continue to suck at trading
  • #22
  • Jun 23, 2012 8:42am Jun 23, 2012 8:42am
Good stuff. Trading has many layers of complexity and new traders should understand this or at least understand "Why is this so damn hard?"

Keep It Simple? I've never really like this mantra, because I think it gives new traders a false sense of what trading is. They flock to this mentality because they interpret 'simple' as 'easy'. Everyone wants trading to be easy, right? It isn't, and I think you've given a pretty good summary of points as to why that may be the case, or how complex the underpinnings of it actually are.

This is quite a lot of info to take in, but its good info. My advice to new traders, instead of 'Keep it Simple', would be 'Start Simple, but always look to unravel the complexity'. Most of that unraveling will happen in your mind.
  • #23
  • Jun 23, 2012 8:46am Jun 23, 2012 8:46am
Quoting forextraderx
Robert, thanks for the post! I kinda thought this thread might be misunderstood a bit....as it can totally be seen that way, and i don't clarify.

Lemme start with the second part... Dude, i make my living "scalping" and day trading. my average profit targets are 40 pips or less, and i'd say 1/3 of my trades last less than 1 hour.

and maybe 5-10% of my trades are working off of 5 min, 1 min, or even tick charts.

It's not that it can't be done. it absolutely can be, and I know this first hand!

But, nevertheless, I find WAAY too many people...
All right, thanks again for your quick reply. I agree that an "obsession" with indicators should obviously be avoided. Like you mentioned, knowledge about micro structure and raw pure S/R should come first.

However, the other view is the principle about market participants making decisions based on "x" variable. If ADR reached its limit while at the same time we are in overbought/sold zone + price is at a big clustered d/w/m zone then sure we just improved possible outcome by a bunch.

Don't stare blindly on indicators but use them wisely. The trick is to implement as much positive outcome variables as possible while still keeping your system simple to trade with in my opinion. You already stated that one is doing this when combining fundamental with TA. Adding the same confluence within TA will even bigger your chances in my opinion.
  • #24
  • Jun 23, 2012 8:50am Jun 23, 2012 8:50am
Quoting PrymeTyme
Good Points ! but where is the most important one?

ie. Discipline/psychology in executing your trade , plan etc... ..

as if u are inconsecuent in executing your plan or trade or both.. your mind will all get fucked up .. and u are on TILT .. making mistake after mistake.. no mather how good you can read the market and spot entrys...


it is a hard task.. to sit on your hands.. and watch how a setup unflods wich just slightly isnt the way you want it to see... and that happens for days..

so you would rather jump in and be in a trade u shouldnt...
right on man. Ya wanna know something...? thats my weakest point too.

i get it well enough to make over 50% ROI per year, which is good enough for me to make a living with my roll.... and in fact have had some months early on when I made over 200% in one month...

but, by all calculations, i should be doing like, 300%+ per year on a BAD year...and quite possibly could hit 1000%+ in a year (which is about 20% ROI per month, compounded).

so... what gives right? ya... same thing your working on.

i made a post above with a link to that part of my own self work.

you might find it helpful to you...

i find there are many reasons for not being able to stick with a particular rule in ones plan...

it's important you either find out exactly why this is the case...by finding out your motivations for doing so in the first place, and then finding a better way to release those psychological needs (either in your own trading, or even outside of it)

or, find a different way to make it work for you...that doesn't require you to "follow a rule"

i find the best rules in my own plan work by onlly re-enforcing for myself somethign that I already feel bad about doing.

if a rule in my plan is effective, but yet restricts me from doing something that I have a deep psychological need to experience...

then that rule is going to get broken over and over...and then i beat myself up over that, and it becomes a negative cycle.

so i find a way to make it work for me.

to see a full case study of this, go to the last page or two in my personal thread (link above).... and read how i've recently addressed the issue of "taking too many trades" in a day.

you might find my process helpful. or at very least, you can have fun laughing at a guy while he's down

X
  • #25
  • Jun 23, 2012 8:51am Jun 23, 2012 8:51am
Quoting forextraderx

had they just not fixated on some form of day trading, but instead, focused on just "trading"... they may have been much better, or at least, been better much more quickly in their career aspirations.
I agree with the sentiment in the sentence above, but probably not in it's intended meaning.

I'm not sure the answer/solution/fix to the topic question 'why you suck at trading' lies in improving market analysis, which is the route the thread seems to be taking.

Maybe I've misunderstood the topic, maybe it's 'why you suck at analysing the market and predicting direction', which to my mind is a totally different subject.

My 2c....guess I'll need change, right?
  • #26
  • Jun 23, 2012 8:52am Jun 23, 2012 8:52am
Absolutely the best thread on FF that I've ever seen, it is probable that somebody may really understand why he/she sucks at trading, by reading your posts.
I would add, we use computers with the total world network (Internet) and great softwares, that let us able to get almost any (apart from the insider ones) informations about the market on any given moment, BUT for one reason we (we all was or are suckers in this game) decide to ignore the majority of such powerful and insightful informations, such powerful, and still such informations are systematically ignored or not looked at, and we end up basing or trading decisions on a little part of them, obviously decreasing drastically the chances of success.
We systematically decide by our own will to expose our capital at big risks, in other words we decide to be suckers.
How can this happen? We all are pretty sure that what we want is make money, as most money as possible and as fast as possible, isn't it?
Yes. It is correct, and is exactly why we end up deciding to suck (LOL).
Let me explain:
Everything happen in the underground of our conscious mind, if we are not aware of it we have no control over it, that's why is important for you to know (and be aware of) it. So, our desire to make money (that dangerously become stronger and stronger as we make profits) create the desire to trade, as trading is the way we make money.
Our desire (NEED, in the worst pathological cases) to trade force us to find a "setup", we want to enter in a trade, fast, time is money, and time go fast!
The market is not currently offering any perfect opportunity, looking the various time frames one looks bearish one looks bullish, enter in the market now is like play the roulette, anything can happen. But our desire is to make money, remember? Much money, and fast! Staying flat don't bring us profit, so let's look all the markets, let's choose the best one, let's choose the best setup, and pull that trigger!
If you decide that going long is the less riskious and most correct thing to do, all such informations that are against your decision start to dissipate in a matter of seconds, they are soon filtered by your mind.
And it is at that point that you decide (unconsciously?) to ignore a big amount of informations offered by the market, and here we are going to suck (if not in this trade, in the next one, with a nice bigger leverage (remember the more money you make, the more the desire become big)).
Desires are good, a very powerful tool, but you must learn to control such power, is a little like a nuclear reaction, unlimited amount of energy, but if not controlled wisely become pure destruction.
  • #27
  • Jun 23, 2012 8:59am Jun 23, 2012 8:59am
Quoting Aldente
Good stuff. Trading has many layers of complexity and new traders should understand this or at least understand "Why is this so damn hard?"

Keep It Simple? I've never really like this mantra, because I think it gives new traders a false sense of what trading is. They flock to this mentality because they interpret 'simple' as 'easy'. Everyone wants trading to be easy, right? It isn't, and I think you've given a pretty good summary of points as to why that may be the case, or how complex the underpinnings of it actually are.

This is quite...
dude, you just said what i've been feeling about rookie traders for years.

it usually comes out though something like "if you want simple, go work at mcdonalds you lazy idiot."

but your absoultely right. that's the better, more accurate truth. very well put indeed.

X
  • #28
  • Jun 23, 2012 9:07am Jun 23, 2012 9:07am
Quoting pipmutt
I agree with the sentiment in the sentence above, but probably not in it's intended meaning.

I'm not sure the answer/solution/fix to the topic question 'why you suck at trading' lies in improving market analysis, which is the route the thread seems to be taking.

Maybe I've misunderstood the topic, maybe it's 'why you suck at analysing the market and predicting direction', which to my mind is a totally different subject.

My 2c....guess I'll need change, right?

Ahhh.... wow. no Pipmutt... I know it's going that way so far, and that's mostly because it's easier for me to cut to the neuace of market mechanics, than it is the neuance of market psych!

and...if you have some really keen insights into this, that really can add something above and beyond the typical "well, you need to know your self, and have a plan that works for you" cliche.

it's incredibly true... but too general for anyone who doesn't have it already to learn really anyting from it. it's like saying "well, if you want to have a good marriage, you need to be considerate of your partner and know how to choose your battles"

that's 100% correct. and also about 1.3% useful.

i'm gonna get to these things myself as well if no one beats me to it.... but the truth is, i'll have to sleep today, and eat, and then do trading prep tomorrow, and then trade, and also probably nod at the wife and family, as well as maybe shower and go outside...etc...

and if i just drilled right through the list, this thread would be 200 pages (pages, not posts) long, i'd have carpal tunnel, and my wife would divorce me and take the family with her.

and, it would be 2013.

I kinda see this as a long term project to really make progress in terms of bringing to light on this forum some very insightful, very helpful, revealing posts about all things trading and what it takes to actually do this for a living.

I know how to do this to a degree in terms of market mechanics... but psych will take me some real thought, and i likely will fall short in providing similar such inroads myself. but, feel free to give it your own best shot, and i hope others do as well. maybe, something really will be able to come out that gets to a more deeper, accessable truth in terms of master the mental game of trading...

X
  • #29
  • Jun 23, 2012 9:17am Jun 23, 2012 9:17am
Quoting forextraderx

i'm gonna get to these things myself as well if no one beats me to it....

I kinda see this as a long term project to really make progress in terms of bringing to light on this forum some very insightful, very helpful, revealing posts about all things trading and what it takes to actually do this for a living.
Ok cool, I was just making an observation is all, it should be an interesting and popular thread in that case.

By the way, a nice easy-to-read as well as entertaining writing style!
  • #30
  • Jun 23, 2012 9:28am Jun 23, 2012 9:28am
Quoting Robertk
All right, thanks again for your quick reply. I agree that an "obsession" with indicators should obviously be avoided. Like you mentioned, knowledge about micro structure and raw pure S/R should come first.

However, the other view is the principle about market participants making decisions based on "x" variable. If ADR reached its limit while at the same time we are in overbought/sold zone + price is at a big clustered d/w/m zone then sure we just improved possible outcome by a bunch.

Don't stare blindly on indicators but use them wisely....
I agree with everything you've said here. i'm sure someone (you, me, someone else) will make a well constructed post on "not using confluence is a good way to suck at trading" post

and you are correct, a 200 day MA, a S2 daily pivot, a previous monthly high, and previous weekly low, and a parabolic move into that price point that also corresponds with a 72% fib retracement? oh ya...where do i send the check? can I get two of those?

confluence is key.

however, having a stocastic, macd, and RSI all start to turn up from being oversold on your 1hr chart is NOT confluence.

that's like buckling your seat belt 3 times, and saying you have a "confluence" of safety features in your car...3 in fact, because you clicked the buckle 3 times "to make sure it was fastened"

an air bag, crumple zones, AND a seatbelt is confluence of safety features

3 clicks of a seatbelt is not.
  • #31
  • Jun 23, 2012 9:31am Jun 23, 2012 9:31am
Quoting pipmutt
Ok cool, I was just making an observation is all, it should be an interesting and popular thread in that case.

By the way, a nice easy-to-read as well as entertaining writing style!
thanks! ya know, your the 4th person i think who's pointed that out to me as i've started posting here, the whole "good writing style"

maybe i totally f'ing blew it. Here I felt my calling was to be a trader.... little did I know i'd have made a lot more as a writer.

oh well. can't win 'em all.

X
  • #32
  • Jun 23, 2012 9:45am Jun 23, 2012 9:45am
Quoting tunera
Absolutely the best thread on FF that I've ever seen, it is probable that somebody may really understand why he/she sucks at trading, by reading your posts.
I would add, we use computers with the total world network (Internet) and great softwares, that let us able to get almost any (apart from the insider ones) informations about the market on any given moment, BUT for one reason we (we all was or are suckers in this game) decide to ignore the majority of such powerful and insightful informations, such powerful, and still such informations are systematically...
Thanks tunera... not sure about best, i've seen some really really good ones (not many, but a few)... at least I can say it'll probably be one of the most offensive threads on FF eh?

and ya... struggling to stay fully informed, and fully objective, and being able to place the proper priority on the various types of data that we are absorbing can be a major challenge, particularly when there are psych pressures under foot...

however, I don't necessarily feel the more I make, the more I want. I tend to go the other way... 1 great week, and I get more fearful.

it has other results... that left unchecked can be just as problematic.

to take a broader interpretation of your point... if someone is prone to become over excited about a particular trade "opportunity" that they see, to the degree it actually blocks their ability to also see it objectively and with the potential hazards that are present... this can cause serious problems in the long run.

ya. and on this i know it also first hand. these days, I try to make a mental list of both pro's AND cons for a trade.

I usually start with a level.

and then, immediately list all the reasons it WON'T work.

once i'm pretty good on that... i look and say "how would i feel being the guy on the other side of the trade... would i want to be short here? or long here?"

if i still feel that I would be nervous as hell if i was short, but really happy to be long, i'll then go through and list the other reasons i would like to get long.

then, i like to write out exactly how I will deal with the opportunity if price gets there (see above post on planning out each trade before hand)...so there is no guesswork, and no chance that my mind can get "too excited" and make an unnecessarily impulsive action.

i still fail at this of course from time to time..and i dont' do it for every trade...but every trade I do it for helps me better find the higher probability trades, as well as give me more confidence to hold the trade, rather than close it early... and this peace of mind alone is well worth the process, as it allows me to stay more clear minded for THE NEXT trade.

or, simply put, doing this helps me not suck at trading.

X
  • #33
  • Jun 23, 2012 10:07am Jun 23, 2012 10:07am
another awesome thread! thank you for sharing your approach!

and I would state that many just don't do research on probabilities with regards to price patterns and don't study economic and political history and how it has affected the markets.
  • #34
  • Jun 23, 2012 10:16am Jun 23, 2012 10:16am
I'm gonna go ahead and basically post a quote from a live newsfeed I get every single day:

AUD/USD down, under pressure, weighed by concerns over imapct of eurozone crisis on Australia and funding markets. Keating proposed using the $1.4trillion super savings to reduce needs for banks to borrow offshore. AUD/USD at 1.0056-59, off lows of 1.0029 hit, vs yest 1.0199 high. Offers at 1.0100-10, interest to sell for break of Parity, given global concerns and lower commodities. Real money, sovereign bids 1.0000-10, stops below. EUR/AUD back down at 1.2480-90 on EUR concerns, eye break of 1.2450/1.2400 again.

I honestly smile to myself when I see people saying things on the website here like "dude, you never know who's doing what! the big boys just make you lose, and run you stops, and there's just no way to ever know!"

it's pretty darn funny actually. on that day... june 21st, which includes the london an NY sessions on the 22nd, I received over 80 of these notifications on about 10 different markets over the course of the day.

notice where it says "SOVEREIGN BIDS 1.0000 -10" <----- see this? it means some NATION is buying up the AUD at that price against the USD.

do u think they might have a big order there? or a small order there?

i'll say this, they probably arn't placing that order via a "mini" account on their MT4 platform.

this headline came about about 4.5 hours before london open on the 22nd... which happened to reach a low of that day of 1.0008

Yea. so, I knew 4.5 hours ahead of time who was buying, and where they were buying, within a 10 pip range... and it turned out to me some country, along with some actual interest of "real money".

and look what happened 4.5 hours later on the london open of the june 23rd session?

See. you DON'T have this information, and I do.

that's ANOTHER REASON why you suck at trading.

"but, wait, the trend was down, so i sold it... arn't i supposed to follow the trend?!?!?"

no. your actually supposed to access the best information at all times and use your experience and understanding of the market to chooose which information takes first priority, and then build a trade around that in order to exploit it in the most effective, low risk way possible.

but, you just couldn't imagine how such information could be gotten without being the mistress of some world leader, and if you COULD get it...you would think it alone is strong enough to build a trading system around.

your wrong on both counts, and this is another reason why you suck at trading.
  • #35
  • Jun 23, 2012 10:42am Jun 23, 2012 10:42am
Quoting forextraderx

maybe i totally f'ing blew it.
Give it time!

Anyway it looks like I'm in the wrong thread, all this 'best way to analyse the market' is a real rehash snoozefest and unnecessarily overcomplicating what is in essence a relatively simple process.

By the way major players will only tell you what they want you to know.....

C'ya....
  • #36
  • Jun 23, 2012 11:25am Jun 23, 2012 11:25am
Quoting pipmutt
Give it time!

Anyway it looks like I'm in the wrong thread, all this 'best way to analyse the market' is a real rehash snoozefest and unnecessarily overcomplicating what is in essence a relatively simple process.

By the way major players will only tell you what they want you to know.....

C'ya....
sorry to bore ya pip. but as I said, the psych stuff probably won't be coming up for a little while. if you really are interested, check out my other thread, read post one, then skip to page 2... and you'll see a real life case study of how one trader personally struggles with and resolves some psych issues that come up.

and your statement about major players implies that this was information that was essentially coming from them as a source. I personally disagree with this assertation. As a seperate but related point, I'm not naieve enough to believe that such misdirection does not occur with relative frequently... but i'm also not cynical enough to believe that anything that is printed that may help is in fact misdirection.

the trick of course is to determine what can be found "mostly reliable" and what can be found "not reliable"

and I best determine this with a 3 step simple test to determine if somethign is valid and useful information that can make me money. "does the market indeed react as such information would imply it would react if the information is in fact correct?"

if yes then i move to the 2nd part of this simple critiera:

"if i were to check every type of this information as it is released, and check the same thing, would i have a result that implies it is more correct than random chance?"

if yes, the final part of this criteria is:

"can I actually use this on a consistent basis to improve my trading, either by avoiding losses, or gaining access to more opportunities for a profit that are not otherwise as clear to me? (or apparent at all?)"

if yes...then i put that into the "this is an edge" catagory.

To the best of my knowledge based on a good deal of experience and research (testing the ability for such flow releases to produce market turns in excess of 20 pips for literally close to one thousand such notifications over a period of many months is well above a 50/50 proposition) illustrates that regardless of the source, it does indeed provide information that can be used to either make money, reduce risk, or avoid taking a trade that is more likely to lose, and is significantly more accurate than a coin flip.

and lastly, I know some are able to trade full time with a relatively simply approach to the markets.

I'm not one of them. maybe i'm slower than most. if your doing this for a living with essentially a simple approach, kudos!

as I stated before, this thread is for those that are struggling, and are not at the point where they have a full grasp of the various "mechanical concepts" in the market that most really good traders I know have a pretty good understanding of.

if someone has this already, but is still struggling, this thread, at this point, will not serve them. it may do so in the future, but as of now, it won't.

if you personally have anything to add along the psych lines that is insightful above and beyond the typical cliche's... please, post them up. again, didn't really start this to be a monolog.

X
  • #37
  • Jun 23, 2012 12:48pm Jun 23, 2012 12:48pm
Quoting forextraderx

sorry to bore ya pip.
Sorry I just read my post again and it sounded a bit rude! Don't get me wrong, even if the thread helps just one person (and it's likely to help a lot more than one) it's definitely worthwhile and kudos to you for having the time and patience!


Quoting forextraderx

the psych stuff probably won't be coming up for a little while.
It wasn't so much the psychology I was on about (although that's obviously important), it's the actual concept of 'trading'.


Quoting forextraderx

and your statement about major players implies that this was information that was essentially coming from them as a source. I personally disagree with this assertation. As a seperate but related point, I'm not naieve enough to believe that such misdirection does not occur with relative frequently... but i'm also not cynical enough to believe that anything that is printed that may help is in fact misdirection.
I agree, some of it can be extremely useful but it can also be extremely misleading. Central banks jawbone, and some of their rhetoric can be ambiguous to say the least, and not always as effective as one might expect! At the end of the day the market decides and although CB's may independently or collectively try to defend certain price levels it can be like trying to stop a tsunami with a windbreak! BOJ's line-in-the-sand is a classic example, the market went with it for a while and then basically said bollox, lol.


Quoting forextraderx

the trick of course is to determine what can be found "mostly reliable" and what can be found "not reliable"
I think it's extremely difficult to apply set criteria or rely on previous market reaction as most of these things change depending on context. A good example is interest rate expectations, it's implications and impact, economic conditions at that time, and what the market in it's wisdom has already priced in.



Quoting forextraderx

and lastly, I know some are able to trade full time with a relatively simply approach to the markets.
Simple analysis because personally I think predicting direction accurately rarely separates the consistently profitable from the consistently unprofitable. My theory is that most people think predicting direction is what trading is all about when in actual fact trading is about, well, trading.

I don't want to plagiarise the whole book so I'll just make reference to Mark Douglas's Trading in the Zone. From memory there's not one TA/FA/PA analysis strategy in that book yet it gives all the guidance one could need to achieve consistent profitability. Putting it into practice is of course another story!

Anyway good luck with the thread, I'm sure there are plenty of people who will find it helpful and benefit from it so kudos to you.

As always, good trading
  • #38
  • Jun 23, 2012 7:23pm Jun 23, 2012 7:23pm
Quoting Custos
another awesome thread! thank you for sharing your approach!

and I would state that many just don't do research on probabilities with regards to price patterns and don't study economic and political history and how it has affected the markets.
haha... ya, totally. Funny you should bring this up... was recently re-reading the market wizards chapter on jim rogers (i've read it 100+ times, still get something out of that book), and how he mentions his historical knowledge of markets helped him put it all together to be the billionaire he is today.

was recently reading an academic but accessable article on the euro zone crisis, and how it is likely to progress. little to most folks recognize, but a currency union breakup isn't new. it's happend 60+ times in the last 100 years. Neither are sovereign defaults...

in fact, once a default or devaluation occurs, that country is much better poised for an incredibly rapid recovery.

truth is, should greece leave the EU, they would actually likely pull out of this depression they are in within 6-18 months, and within 3 years, be better off than they were 5 years ago.

germany on the other hand, suffers the most from a currency zone breakup and/or sovereign default. In fact, I wrote up an article the other day on what I believe is "the no brainer trade of the summer" = short the german bond market.

here's a link to that if your interested:

http://currencytraderx.wordpress.com...of-the-summer/


oh, and here's that article i've been reading from:

http://www.scribd.com/fullscreen/819...3qltzkyklsibr9

I HIGHLY recommend it for anyone looking to get a long view understanding of how things will play out over the next 1-5 years.

and...for those of you who don't do this type of analysis, who don't seek to learn how the markets have responded to historical events, and why there really isn't anything "new" about what moves the markets... this is possibly part of why you suck at trading.

X
  • #39
  • Jun 23, 2012 8:00pm Jun 23, 2012 8:00pm
i'm paraprasing a quote from Jim Rogers there in the title, co-founder of the quantum fund (along with george soros), and all around incredibly successful trader.

Look. lets be real about this. maybe you've been going about trading in all the wrong way. Maybe chart analysis and candlesticks tend to frustrate you... maybe liquidity, trend, volume, newsfeeds, moving averages, fibs, trendlines, SR levels etc, just seem more speculative than you can really feel comfortable trading with.

That's fine... maybe technical analysis isn't your strong suit. and if your not day trading, it doesn't have to be for you to make millions upon millions in a decade (or maybe less...)

Then find an approach that DOES work. Where to start? i'd read market wizards (the original one).

you'll get a good idea of how some of the greatest traders make their decisions, and how they view the markets.

To keep on point here... I happen to really take to Jim Rogers and his style of trading. What exactly does he do to make money in the markets? Well, here's a short list as I know it.

1. he is a pure fundamental/sentimental guy. no technicals that I know of. Oh he may look at a chart, but from what I understand, doesn't know beans about candlesticks, trendline breaks, etc. He likes to look at charts from a macro, historical perspective, to help him determine relative over valued or undervalued prices of markets, and particularly, to gauge "hysteria and panics" - times when market participants have lost their noggin, and nothing makes sense anymore. if it's a panic, he looks to buy, and in hysteria he looks to sell. This resonates with me.

2. he's contrarian. he's always looking to see the whole world feel one way, and then looks to see if he shouldn't consider going the other. it works, because if all the willing sellers or buyers have already played their hand, then there really will be very few left to continue to power the current trend of the market. He knows this, and he hunts for this.

3. he doesn't trade much. 3-6 times a year. Because he refuses to pull the trigger on anything unless the trade basically can't lose in any possible way.

4. He holds his trades for months, years even. he's looking to trade economic cycles, new underlying developments of entire economies. Not a 35 pip downswing from a pinbar candle in an uptrend. in this way, he gains the advantage of having fundamentals support his trades, as well as all "trend players" be they looking at 1 hr charts, or monthly charts.

5. He has been one of the greatest ever because he is open to trading anything and everything. Therefore, it's easy to find the 2-6 trades a year that can't lose, if you follow 500 + markets around the world. (not as difficult as it sounds actually. remember, he's not checking charts once a day. he's watching global events develop, and seeing how markets are responding in turn)

6. he has conviction in holding his trades...because his trades just make good sense. case in point.... click the link to my blog above, and you can read the german bund short trade. it's really about as no brainer as it gets. shorting the german bond market, right now, is IMO as easy as picking up a bag of money in the corner. And I don't need to watch a chart, or learn a new way of viewing the market, or figure anything out.
All I need is an interest in world events, and some good ol' fashioned logic.

a person could have taken this trade, anytime in the first 2 weeks of june, and basically had nothing to lose. think about it. german 10 year bonds down to a yield of 1.2%...and therefore, the german bond market at an absolute historical record high.

but wait... if anyone can't pay their debts in europe, it will hurt germany who holds some of those bonds.

germany has a strong economy in many ways because it exports goods and services to the now flailing southern euro nations.

and if the euro zone decides to QE, or reduce rates, or do ANY FORM of stimulus... this will hurt german bond values.

if they DON'T conduct some form of stimulus, economies may sink further, and it won't help sentiment worth a darn... which will ALSO hurt german bond values.

you see? this is a no lose trade. no matter what happens, and I mean ANYTHING... the german bond market will suffer.

and yet, it's at all time historical record highs??

no. this is retarded. short it. hold it. check back next month. in profit? check back the following month. do this once a month.... until you have a month that gives back a good deal of profits.

Then, see if the underlying situation has changed, or has sentiment changed. no? move up a stop, and hold your ground. yes? take your insanely large profits, and buy your ferrari.

This type of logical process can show you opportunity in markets you've never thought were possible, if all you know is candlesticks and 1hr charts and moving averages.

Learn what a bag of money in the corner looks like, and get off your butt and pick it up.

Every day, a trader who sucks makes a choice to not try something completely new, to not rethink his or her entire approach, to not learn how to find just the stupidly obvious easy ass money trades.

Thats why Jim Rogers doesn't suck, and you do.

good traders find a way, ANY way, to recognize the stunningly easy money trades and take them when they are there.

if you don't do this, it is possibly another reason you suck at trading.
  • #40
  • Edited 11:47pm Jun 23, 2012 9:14pm | Edited 11:47pm
This is kind of a no brainer as well as far as i'm concerned...but it seems at least half, if not most, of the retail trading community screw this one up.

Look. if your day trading, it's very difficult to get a consistent 60%+ win rate, with a 1:1 or better reward:risk ratio.

most would be happy with a 55% win ratio, particularly if they are scalping and have 10+ entries per day.

so, lets take 55%.... and see how this plays out.

And, lets say your going for short term trades, like, 20-30 pips, and of course your stops are also 20-30 pips. Lets just go with 25 pip stop, and 25 pip profit, just to keep it easy. Now, lets assume your trading the EUR/USD, and get about a 2.5 pip spread on that bad boy during most of the time. Sometimes it's 3 pips, others its 2...but lets just say 2.5 pips on average.

Now, lets say you take 100 trades. 55 winners, 45 losers.

that's a net win of 10 trades. cool. So, if you take 20 scalping trades a day with 25 pip stops and targets, each risking 1% of your capital, you will averge about a 10% profit per week. And that's fantastic... except...it's wrong. and here is why:

Remember, every single loser you had cost you 25 pips. that's 45 losers X 25 pips = 1000 pips. But, we didn't add spread to that.

So, each loser actually cost you 27.5 pips! so...45 losers X 27.5 pips = 1237.5 pips lost.

And... the winners work out like this: 55 winners X 22.5 pips = 1237.5

So... you actually end up making nothing!

So, wait... if you didn't have a spread to pay, you could take 20 trades a day, with 1:1 Risk:Reward ratio, shooting for 25 pips, and risking 1% per trade, and you could make 10% per week!

10% a week, every week, would turn $1,000 into over $120,000 in 1 year... and it would be over 1 million dollars in less than 18 months!

But, if you average a 2.5 pip spread... suddenly, your 1K to 1 mil in 18 months just became 1K to 1K in 1 million years.

So, wait... then who makes your million dollars in 18 months" ahhh... lol. that'd be your broker Mr. Sucky!

And you wonder how he can afford to "match 100% of your deposit, for up to $XXX dollars!"

it's cuz if your good, he's gonna shaft you for a million bucks! and if your not good, your just gonna lose it all anyway.

Of course, if you have a higher win rate, or go for bigger targets, or have much better risk:reward ratios, then you can minimize this effect.

But, it's harder to get those bigger targets, or improve your win rate, or get a much better risk reward ratio. It just is. making more money is always harder than making less money.

And even so... your always paying the house a huge amount.

Say you go for 50 pip targets...now, you only have a 5% "comission" coming out of your ass with every trade you take.

so beating 50/50 won't cut it. that'll just make your broker rich.

So, what's the solution?

first, don't go for "no spread" or "fixed 1 pip spread" broker. If you can't figure out why.... lol... well. if you can't figure out why on your own, then your probably always going to suck at trading.

of course, you can open up a more institutional account, and get spread on the EU of about 0.5 pips, other majors less than 1 pip, and crosses maybe 1-2.5 pips. But that usually takes 10K or more. What? don't have 10K? well... and you say you want to trade for a living...right?

or, you can open a futures account, but your gonna need a minimum of 10K to have any chance to keep it above water. but, you can effectively get 0.4 - 0.5 pip spreads on any of the majors or comdolls, on limit orders, and only about 1.5 pips on your market orders.

Or, you can really comb the web, this website, and others, and try to find a broker who offers the best deal, and try them out.

Oh, and stay away from anything that requries you to use MT4. there's the now infamous "FU" plug in that allows brokers to manipulate your trades as they want. you tube it...not gonna get into that here.

The bottom line is.... if you can't tell a good broker from a bad broker... and a good deal from a bad deal... how can you expect NOT to suck at finding good deals from bad deals in the capital markets?!?

business is business is business.

if you are bad at objectively determining value in one area, you probably are bad in the others too.

and in that case, you just might always suck.... and possibly have problems with money in general. but good luck to ya, and i'm sure your broker greatly appreciates sucky people like you.
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