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5 Reasons Why Traders Lose

  • #101
  • Dec 23, 2013 2:26pm Dec 23, 2013 2:26pm
Quoting jmtini
If you're experiencing more losses then wins then your system/strategy needs changing!
Have you made a mistake here? do you really believe this?
tradewith60
  • #102
  • Dec 23, 2013 2:41pm Dec 23, 2013 2:41pm
solution IS problem
this is weird
With a good book and quality paper you can fine wipe your ass.
  • #103
  • Dec 23, 2013 4:06pm Dec 23, 2013 4:06pm
Quoting 60minuteman
again most lose because their win rates average out at 50% and there wins are usually smaller or equal to their losses, thats not my opinion thats retail broker data.
no this statement is simply not correct, fact is that most retail traders lose their accounts because they keep adding into losing positions thinking it will turn until they hit margin call and not because they have a win rate of 50%.
consistency wins
  • #104
  • Dec 23, 2013 5:00pm Dec 23, 2013 5:00pm
Quoting hanover
{quote} Good links, many thanks for sharing. But IMO trading is much more about strategy than mindset. Self-belief and discipline count for nothing if your entries and exits are merely random guesses. You can take mindset out of the equation by simply running an EA, so why isn't every EA profitable? Because it's underlying strategy lacks an edge.
Hi Hanover,

I used to think exactly the same way you do, and not long ago. Edge (Method) + adequate MM = profitable trading. Mindset would be only a minor factor, if a factor at all, in explaining profitability. However, I've come to the realization that reality may be a bit more complex than that. Imho there is a major flaw in the reasoning supporting this view as it assumes everyone shares a common mindset (set of psychological traits: diligence, patience, discipline, intelligence, etc) sufficient to recognize/work out an edge, or to apply proper MM, and ultimately to be profitable. That is not necessarily the case. We are human after all. For example, there are diligent and lazy people. A diligent person may be able to work out an edge, whereas a lazy one is very unlikely to. My point here is that mindset should be properly treated as a variable rather than a constant, and should come before Edge or MM. This of course is all very philosophical... Anyway, my current view is that without having the proper Mindset to begin with, people are very unlikely to, either find a sound Edge, or to apply adequate MM, hence no profitability.

Cheers and a Merry Christmas,
vox
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #105
  • Dec 23, 2013 5:14pm Dec 23, 2013 5:14pm
Quoting iTrader
{quote} no this statement is simply not correct, fact is that most retail traders lose their accounts because they keep adding into losing positions thinking it will turn until they hit margin call and not because they have a win rate of 50%.
Sorry you are wrong, broker data says otherwise, it's published and available for anyone to read

Based on data from 12 million trades, traders are correct more than 50% of the time but there losers average larger than their winners

Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they won on winning trades losing money overall.

The track record for the volatile GBP/JPY pair was even worse. Traders were right an impressive 66% of the time in GBP/JPY – that’s twice as many successful trades as unsuccessful ones. However, traders overall lost money in GBP/JPY because they made an average of only 52 pips on winning trades, while losing more than twice that – an average 122 pips – on losing trades.
tradewith60
  • #106
  • Dec 23, 2013 5:30pm Dec 23, 2013 5:30pm
Quoting vox dei
{quote} Hi Hanover, I used to think exactly the same way you do, and not long ago. ........

Vox,

Sure, it depends on whether one defines "mindset" as the ability to devise a profitable strategy; or the patience, discipline, self-belief etc needed to consistently execute it. Or possibly both.

As a developer of automated systems, I find it easy to distinguish between the strategy (devised by the developer) and the execution (performed by the EA). In this case, these are clearly two different disciplines; however, for some discretionary traders, the two may mix somewhat, into a blur.

Merry Xmas to you also, and a prosperous 2014.
David
  • #107
  • Dec 23, 2013 5:46pm Dec 23, 2013 5:46pm
Quoting hanover
{quote} Vox, Sure, it depends on whether one defines "mindset" as the ability to devise a profitable strategy; or the patience, discipline, self-belief etc needed to consistently execute it. Or possibly both. As a developer of automated systems, I find it easy to distinguish between the strategy (devised by the developer) and the execution (performed by the EA). In this case, these are clearly two different disciplines; however, for some discretionary traders, the two may mix somewhat, into a blur. Merry Xmas to you also, and a prosperous 2014....

Mindset for me is a human thing that has more to do with design, and less to do with execution. EAs are good for execution as you've pointed out.


Thanks David. Merry Christmas and a happy 2014 year to you and to mim2005.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #108
  • Dec 24, 2013 3:34am Dec 24, 2013 3:34am
Quoting 60minuteman
{quote} Sorry you are wrong, broker data says otherwise, it's published and available for anyone to read Based on data from 12 million trades, traders are correct more than 50% of the time but there losers average larger than their winners Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they...
fully agree... RR can make huge difference compared to win rate
  • #109
  • Dec 24, 2013 3:55am Dec 24, 2013 3:55am
Quoting 60minuteman
{quote} Sorry you are wrong, broker data says otherwise, it's published and available for anyone to read Based on data from 12 million trades, traders are correct more than 50% of the time but there losers average larger than their winners Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they...
Interesting, but not difficult to understand. Once your SL were wiped off few times, you tend to take smaller TP.
The loser for sure is more than the winnner, it should about (127+spread)/(65-pread).
The figures above can be miss leading, due to they are not weighted. Do you have the weighted figure?
Face both Win and Lose bravely
  • #110
  • Edited 4:19am Dec 24, 2013 4:07am | Edited 4:19am
In stead of set SL, I use hedge to keep the trade on and wait for better opportunity to un hedge and fight back to BE or make profit.
Face both Win and Lose bravely
  • #111
  • Dec 24, 2013 4:18am Dec 24, 2013 4:18am
I'm fairly sure that in the broker example showing averages of 127 pip losses and 65 pips gains people were not calculating a reasonable RR and certainly not letting their profits run fully.

The reason for this may be that many people will use SL's, but then also use 'manual stops' if they get uncomfortable about the loss before it hits the SL, but for the majority of trades, they will let it slide until the SL get's hit. Or worst case, adjust the SL 'just a little bit' to give the trade a bit more room and still get hit, thus increasing the average loss. So, this is a 'full trade' result.

On the other hand, when trades go into profit, there may be a mental TP or a physical TP at 1x, 2x or more. I would bet that a much larger number of winning trades were taken off far earlier than needed (manual TP), due to the desire to capture the profit. Therefore, only becoming a 'partial trade' result, due to not letting the trade get to a calculated level of profit. So, only some trades were allowed to get to a reasonable 2x or 3x level (or more)...which would then offset the number and sizes of losses they had taken (or would be taking) in a given period.


What I found interesting, is that I did a quick calculation and found that the average traders would have gotten to BE (or a very small profit) if they'd gone to 85 pips. So just 30% (20 pips) more for those winning trades, which isn't much more to achieve, but given that it looks like traders were working around a .5x RR (1:0.5), they may have just been greedy/short-sighted about those profits, rather than allowing their winning trade to work it's way into a statistically profitable one.
  • #112
  • Dec 24, 2013 4:19am Dec 24, 2013 4:19am
Quoting Cowboy11
{quote} Interesting, but not difficult to understand. Once your SL were wiped off few times, you tend to take smaller TP. The loser for sure is more than the winnner, it should about (127+spread)/(65-pread). The figures above can be miss leading, due to they are not weighted. Do you have the weighted figure?
Hi Cowboy, no I don't have weighted, but the point I was making was that actual data says, most traders have a moderate win rate and a poor or negative RR Ratio.

So..... all most losing traders need to do is quantify how many of their trades go to 5R,10R,25R etc etc, if enough they have solved their problem, hold all trades for the big wins and relax on the beach...simples
tradewith60
  • #113
  • Dec 24, 2013 4:23am Dec 24, 2013 4:23am
Quoting Nefser
I'm fairly sure that in the broker example showing averages of 127 pip losses and 65 pips gains people were not calculating a reasonable RR and certainly not letting their profits run fully. The reason for this may be that many people will use SL's, but then also use 'manual stops' if they get uncomfortable about the loss before it hits the SL, but for the majority of trades, they will let it slide until the SL get's hit. Or worst case, adjust the SL 'just a little bit' to give the trade a bit more room and still get hit, thus increasing the average...
Good valid point, even the 1/1 guys will more often than not take profit a few pips early, on such tight margins it will erode profit over time.

Does it not amaze you that hardly anyone has a RR target of say 10, 15,30/1? why do you think everyone likes 1/1 or 2/1... do you think thats probabilities? profit or fear? making those decisions.... How many do you think base their strategies truly on profit? very very few I would say based on FF threads I read
tradewith60
  • #114
  • Dec 24, 2013 6:06am Dec 24, 2013 6:06am
What is RR??? Anyone can help?
Face both Win and Lose bravely
  • #115
  • Dec 24, 2013 8:22am Dec 24, 2013 8:22am
Quoting Cowboy11
What is RR??? Anyone can help?
RR is the ratio of the return (TP) to the risk (SL). Hence if, for example, your TP is 60 pips away from your entry, and your SL is 20 pips away from your entry, the RR is 60/20 = 3 (or 3:1, or 3/1, depending on how you choose to express it).

If you don't use a TP, then your (average) RR can still be calculated as your average win size divided by your average loss size. Hence if your average win is 60 pips, and average loss is 20 pips, then your RR is 3. You could use dollar figures instead of pips, if you prefer, e.g. average win = $200, average loss = $100, then the RR would be 2.

At least that's the way that I understand it.
  • #116
  • Dec 24, 2013 10:41am Dec 24, 2013 10:41am
Thanks a lot, my brother Hanover.
Let me figure out whether it make any sense in term of actual operation.
Face both Win and Lose bravely
  • #117
  • Dec 24, 2013 1:38pm Dec 24, 2013 1:38pm
Quoting 60minuteman
{quote} Have you made a mistake here? do you really believe this?

Yes I actually do. I think it's a mental thing but one needs to see a consistent winning ratio - you know you're on the right track even if one may be closing out the trade/s way too early.


I might shock a few people here but something I learned from someone else really makes sense. What person would start a business venture without having a business plan? With any new business venture you have to work out your profit/loss ratio to make sure you are going to succeed - you certainly wouldn't get a loan from a bank unless you did!

And yet we have 1000's of would-be business tycoons starting out in the toughest business environment there is - forex trading - without any plan of action at all - no wonder the vast majority fail miserably!

Of course again you need to have demo traded (for some time) a good trading strategy first, one that delivers (IMHO) a win rate of around 2 out of 3 trades (66%). Once one has that in place one then Knows that 1 in every 3 trades is a loser. You know that 5 out of every 15 are going to be losers so you plan accordingly - even if the first 3 trades are losers you don't change your strategy or your TP/SL. So then you can work out your business plan for the week - say 15 trades - 5 losers and 10 winners - if you decide 2 to 1 RR -20 pip SL and 40 pip TP - you simply stick to the plan!

TIGHT DISCIPLINE - that's where so many fail - THEY GAMBLE - stick closely to the rules of your strategy- REALLY VITAL!!
  • #118
  • Dec 24, 2013 2:04pm Dec 24, 2013 2:04pm
Quoting jmtini
{quote} Yes I actually do. I think it's a mental thing but one needs to see a consistent winning ratio - you know you're on the right track even if one may be closing out the trade/s way too early. I might shock a few people here but something I learned from someone else really makes sense. What person would start a business venture without having a business plan? With any new business venture you have to work out your profit/loss ratio to make sure you are going to succeed - you certainly wouldn't get a loan from a bank unless you did! And yet...
So 300 pips profit a week with 20% win rate doesn't appeal?
tradewith60
  • #119
  • Dec 24, 2013 6:32pm Dec 24, 2013 6:32pm
Quoting 60minuteman
{quote} So 300 pips profit a week with 20% win rate doesn't appeal?
No, gamers, gamblers, beginners,... talk in pips per week. Traders, businessmen, professionals,... talk in percents per year.
consistency wins
  • #120
  • Dec 24, 2013 6:52pm Dec 24, 2013 6:52pm
Quoting iTrader
{quote} No, gamers, gamblers, beginners,... talk in pips per week. Traders, businessmen, professionals,... talk in percents per year.
repeating something you read somewhere else doesn't make you anything, does make you sound like a muppet though
tradewith60
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