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Most traders fail because of no discipline!

  • #61
  • Jan 22, 2017 2:11am Jan 22, 2017 2:11am
Quoting executivefx
{quote} The secret in forex trading is simple first you must understand that all strategies will fail at some point,so my suggestion is that you set a target of where you want to grow your money upto and when you hit your target withdraw all the money and then repeat the process all over again.This way you will improve your chances of beating the 0 trade expectancy.
It is a valid approach, the trader will only have to spent time finding the right trading strategy that gives more winning trades than losing trades so that he can implement your suggestion but again finding the right methodology is already a big task plus the fact that traders do make psychological blunders along the way so it will make more harder for an aspiring trader to come out with a winning approach and this is the biggest battle that traders will face, it is easier to say hey I will grow my account to 10% and withdraw the profits, but how about next month will the trader maintain such results? So it all come back to the point where discipline and a profitable strategy is necessity that includes proper risk control.
  • #62
  • Jan 22, 2017 2:38am Jan 22, 2017 2:38am
Quoting Sajid
{quote} You absolutely nailed it my brother. Trading is discipline. 200% agree.
Nonsense... I will give you a mechanical, loosing system (most of them are) and you can run it as disciplined as possible... right to big ZERO.

It think it was said on this forum somewhere sometime, but I will repeat: TRADING IS A) UNDERSTANDING CONTEXT + B) APPLYING CORRECT STRATEGY FOR THE CONTEXT + C) EXECUTING THIS STRATEGY FLAWLESSLY + D) RINSE AND REPEAT WHEN CONTEXT CHANGES

You see, trading cannot be discipline only, you first have to make something to apply discipline to. And no you cannot agree 200%
  • #63
  • Edited 2:58am Jan 22, 2017 2:48am | Edited 2:58am
As far as my experience is concern their is a mathematical advantage that traders can exploit if only they can focus on the logical side of things and not on the psychological aspect. First an aspiring trader should implant in his mind that trading is a winners minus losers game so if he loses 5 or more consecutive loses its okay as long that you have battle tested strategy and you believe in your system so whatever happens you will stick to it, but this is not happening to most traders because their psychology just cannot accept the beating they get from the market and so they abandon or divert from such strategy even if its a proven winning strategy. Ill give an example:

Strategy A - A proven method that gives an average of 60% winning trades for a period a month, so for example this strategy is having 50 trades a month and RR is 1:1, SL and TP is 50pips, so you will have 20 losing trades and 30 winning trades, right? computing it 20 X 50 = 1000pips loss and 30 x 50 = 1500 pips gains, so you net a 500 pips or a little less because of slippage and other factors, but the point here is if only traders look their trading in the right perspective then perhaps the results could have been better, but the thing here is when traders suffers 10 consecutive loss out of the 20 losing trades mentioned I doubt if that trader will still continue to trade using such strategy, honestly it is a very frustrating experience for a trader to suffers 10 consecutive loses but he could have made 500 pips at the end of the month should he just stick to his strategy.

Psychologically human nature hates losing but in trading we got to learn to embraced losing trades its part of becoming a profitable trader. Hope it helps!
  • #64
  • Jan 22, 2017 2:52am Jan 22, 2017 2:52am
Quoting hanover
{quote} Which suggests to me that, while recurring broadbrush phenomena (e.g. accumulation, distribution, profit taking, trapped traders, stop hunts, bull/bear traps, supply/demand imbalances, etc) occur -- most of which is obvious enough in hindsight(!) -- they don't produce mathematically definable chart patterns that are consistent enough for a mechanical system to nail down, and anticipate in real time. Or, more simply, mechanical systems lack the intelligence to recognize and exploit whatever non-randomness exists in price movement.
Quoting alphaomega
{quote} There is a reason why quant funds like "Renaissance Technologies" hire real rocket scientist, mathematicians, statisticians, and astronomers. AND keep everything they do in secret.
The reason why retail algos dont work or only work for a short period of time is because they are using the wrong or insufficient inputs.
They are all based off lagging indicators and none incorporate models which value the asset.

Institutional models value the assets and the algos are programmed to buy or sell when price deviates enough from its value. The algos will either alert the trader that there is a deviation and the trader will then open a chart and look for an area of liquidity to deal or the algo could be programmed to take the trade itself.

This goes back to my previous posts about the main issue with retail traders is that they do not know how to value the asset they are dealing in. They only look at price action and lagging indicators for clues which only tell part of the story. Institutional traders will often specifically setup price action to trap traders into thinking the market is going to go long so they can get size into the market to go short.
Boxing clever since 76.
  • #65
  • Jan 22, 2017 2:56am Jan 22, 2017 2:56am
Quoting kpclick
{quote} Nonsense... I will give you a mechanical, loosing system (most of them are) and you can run it as disciplined as possible... right to big ZERO. It think it was said on this forum somewhere sometime, but I will repeat: TRADING IS A) UNDERSTANDING CONTEXT + B) APPLYING CORRECT STRATEGY FOR THE CONTEXT + C) EXECUTING THIS STRATEGY FLAWLESSLY + D) RINSE AND REPEAT WHEN CONTEXT CHANGES You see, trading cannot be discipline only, you first have to make something to apply discipline to. And no you cannot agree 200%
I agree, discipline alone in trading cannot make us profitable, there are lots of mechanical system all over different sites and forums but non of these are really proven to be profitable in the long run say 1 or more years, it will be much better that traders will develop their own winning methodology and implement it with discipline then that will make traders become profitable.
  • #66
  • Jan 22, 2017 3:05am Jan 22, 2017 3:05am
Quoting copi88
{quote} {quote} The reason why retail algos dont work or only work for a short period of time is because they are using the wrong or insufficient inputs. They are all based off lagging indicators and none incorporate models which value the asset. Institutional models value the assets and the algos are programmed to buy or sell when price deviates enough from its value. The algos will either alert the trader that there is a deviation and the trader will then open a chart and look for an area of liquidity to deal or the algo could be programmed to...
Good point Sir, but the thing is most retail traders trade that way, we dont have the capacity and resources like institutional traders have but it does not mean that we cant win in this battle, its a matter of having the right perspective in the traders part for him to create a winning formula.
  • #67
  • Jan 22, 2017 3:19am Jan 22, 2017 3:19am
Quoting techboy46
{quote} Good point Sir, but the thing is most retail traders trade that way, we dont have the capacity and resources like institutional traders have but it does not mean that we cant win in this battle, its a matter of having the right perspective in the traders part for him to create a winning formula.
Absolutely, retails traders can succeed. Didnt say the couldnt. Just much harder when you dont know what the wholesale price levels are and if you are dealing from value or not. Thats why retail traders are called retails traders as they buy at retail price levels which naturally is more expensive than the wholesale price level and therefore dont make the same sort of profits as the wholesaler. Retailers margins are smaller as they have to potentially endure greater levels of drawdown for due to the inferior risk to reward price levels they deal in.

There are ways to simulate the models institutional traders use....
Boxing clever since 76.
  • #68
  • Jan 22, 2017 3:19am Jan 22, 2017 3:19am
Quoting techboy46
Ill give an example: Strategy A - A proven method that gives an average of 60% winning trades for a period a month, so for example this strategy is having 50 trades a month and RR is 1:1, SL and TP is 50pips, so you will have 20 losing trades and 30 winning trades, right?
You are assuming your strategy worked well in a past month you tested (forward or back tested, whatever) and it will work next month. I will give you an example when it will not work: your testing month was August, relatively low volatility, then you try to apply the same strategy in September when everybody comes back from holidays, last quote of the year and suddenly your strategy will make loosing pretty fast. But you continue running, till you have a big draw down (if you lucky) and realize it time to stop and prepare an new strategy. The loop continues...

You might argue, that you tested over period of 1 year, so you know how it behaves. I will give you next example why it would not work: compare usdjpy 2015 vs 2016. Your strategy developed and tested over 2015 data, most likely would loose terribly if you continued running it in 2016. Which brings you back to a big draw down (if you are lucky).

Do those example explain why mechanical system executed with 100% discipline will fail?

You might have couple mechanical systems (algos or discretionary systems, whatever), suited for different market environments, but which one to use depends on understanding the CONTEXT...

And that is a big problem for retail trader, who are market takers (opposite to market makers). Often, by the time one recognize what type of the market is the current price, market is just about to change, trapping or scaring poor bastards. Otherwise it would be kindergarten to make money, so does GS
  • #69
  • Jan 22, 2017 3:23am Jan 22, 2017 3:23am
  •  hak444
  • | Joined Aug 2016 | Status: knowing is not enough,we must apply | 41 Posts
Lol....Another reason why traders fail is because their mind gets messed up with all the different ideas that are being presented here right now.
1. Use discretionary trading system
2. Use mechanical system (based on technical indicators)
etc. etc.
What i say to each his own....as long as u can make money consistency using any system whether its technical, fundamental, discretionary what ever, its fine. But don't start to propagate it (in such a way that its the only way your going to make money) just because its working for you, unless the other guy trades on the same pairs your trading and trades on the same time frame and even uses the same broker(especially for scalpers), only then u can expect the exact same result.
I have been testing a technical indicator + some price action based strategy manually using fixed stops and gradually taking profits and letting a trade run with trailing stop.... on Gold. For past 5 years i am getting great results, including brokers cost (which i think u mean "spread", if not then i apologize).
I wish i could go back even more but i can only back test it to 2012 and some part of 2011.
Reason why i gave u my example is because m using both technical indicators and price action(pattern) approach, but i am rigid in my rules. When ever i get a signal m going in. I am least bothered about other aspects(fundamental, stop hunting etc) , if it goes wrong my stop will get me out. And i prefer to get out quick of a bad trade.
Through back testing manually, watching almost more than 5 years of price action u can get a feel for that pair(whatever u trade). u will know it like the back of ur hand. And by doing this i have seen that some of the biggest moves begin with a very weak setup and some really strong patterns just reverse.
Just to summarize this...
what is working for me may not work for others but that doesn't mean that my edge or someone's else edge will not work after 2-3 years just because some other traders are not using it.... Its like saying that the market in 2-3 years time will not move up or down or its movement will b in 4th or X no. of dimension.
Just do this if your following a fixed mechanical system, monitor your edge's performance from time to time.
As i posted earlier
Mark Douglas said....we have to be rigid in our rules and flexible in our expectations. To me this sound logical and i follow it religiously.
If some one thinks by cheery picking trades he can have more success then i hope it works for him as well.
Peace.
I can accept failure but i can't accept not trying. (Michael Jordan)
  • #70
  • Jan 22, 2017 3:26am Jan 22, 2017 3:26am
Quoting alphaomega
{quote} Yep! I have done extensive algo testing and simulations in the past ( a few years ago) just to prove it for myself. And the results confirm what the academics say. Over 99% of all mechanical systems with rigid repeatable rules tend to produce trade expectancy = 0 (before cost) Only a few systems produce very small deviations (positive or negative). In most cases the deviation is Insufficient to cover the transaction cost. It doesn't matter what the system is. You can come up with any combination of indicators, patterns..rules......whatever......the...
fundamental analysis combined with technical analysis always win in the long run but it takes an experienced trader to know how to perfectly combine the two.fundamental analysis is the fuel and technical analysis is the vehicle if you want to travel you must work with both.
100% KENYAN.
  • #71
  • Jan 22, 2017 3:31am Jan 22, 2017 3:31am
Quoting hak444
on Gold. For past 5 years i am getting great results,..... Through back testing manually, watching almost more than 5 years of price action u can get a feel for that pair(whatever u trade).
And that hard earn feel, paid by long screen hours, might just go out of window, due to a) Trump becoming US president b) financiers agenda to abolish cash c) other known yet shifts in global economy and politics...
  • #72
  • Jan 22, 2017 3:38am Jan 22, 2017 3:38am
Quoting kpclick
{quote} You are assuming your strategy worked well in a past month you tested (forward or back tested, whatever) and it will work next month. I will give you an example when it will not work: your testing month was August, relatively low volatility, then you try to apply the same strategy in September when everybody comes back from holidays, last quote of the year and suddenly your strategy will make loosing pretty fast. But you continue running, till you have a big draw down (if you lucky) and realize it time to stop and prepare an new strategy....
Good point, but a trader can always play on the law of averages, he can institute 3 different good mechanical strategies say both on intraday and swing strategies, so if one is losing under certain market conditions, the other strategies might just cover up the loses on the other one, its just a matter of playing it right. The example I gave is just to emphasize the effect of indiscipline in trading not on the aspects of market conditions.
  • #73
  • Jan 22, 2017 3:42am Jan 22, 2017 3:42am
Quoting techboy46
{quote} Good point, but a trader can always play on the law of averages, he can institute 3 different good mechanical strategies say both on intraday and swing strategies, so if one is losing under certain market conditions, the other strategies might just cover up the loses on the other one, its just a matter of playing it right.
She/he could, as long as she/he keep in mind:


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  • #74
  • Jan 22, 2017 3:45am Jan 22, 2017 3:45am
Quoting techboy46
{quote} Good point, but a trader can always play on the law of averages, he can institute 3 different good mechanical strategies say both on intraday and swing strategies, so if one is losing under certain market conditions, the other strategies might just cover up the loses on the other one, its just a matter of playing it right. The example I gave is just to emphasize the effect of indiscipline in trading not on the aspects of market conditions.
The idea of running different trading strategies sounds good on paper but the hardest part is managing your emotions when things arent going for you.
100% KENYAN.
  • #75
  • Jan 22, 2017 3:49am Jan 22, 2017 3:49am
Quoting executivefx
The idea of running different trading strategies sounds good on paper but the hardest part is managing your emotions when things arent going for you.
Precisely true, but it is doable for traders with extensive exposure on this market but for beginners it is not suggested because the emotions can be just too tough to handle, it will be much better to just focus on one strategy until you master it then perhaps its time to develop different strategies.The very purpose of this thread is to emphasize self-discipline in trading so that we can manage our emotions effectively during trading.
  • #76
  • Jan 22, 2017 4:09am Jan 22, 2017 4:09am
Quoting executivefx
{quote} The idea of running different trading strategies sounds good on paper but the hardest part is managing your emotions when things arent going for you.
The good thing about trading is traders at liberty to use any strategy or methodology and can be both profitable at certain period of time and strategy that works with trader A may not work on trader B and vice-versa because they have different level of understanding of the market and belief system, but what I cannot just accept that there are traders that says 99% of mechanical system will fail or discretionary trading or my approach is better than yours. At the end of the day what matters most is the pips that counts regardless of what strategy we are using.
  • #77
  • Jan 22, 2017 4:22am Jan 22, 2017 4:22am
Quoting techboy46
{quote}... but what I cannot just accept that there are traders that say that 99% of mechanical system will fail
Let me give you an example how I do it, for 1 exemplary mechanical system:

1. I write an algo reflecting rules accurately
2. Lest assume a decision point is made on each candle close
3. I run a test in Monte Carlo system on one time frame. Lest assume 5m. There is about 400,000 5m candles in 4 years. So 400,000 decisions points. I repeat that simulation 2000 times over the same period. That is 800,000,000. That is a time frame number 1 for instrument number 1. I repeat that for next 4-8 instruments on next 2-4 time frames. Do calculation, for that particular system I have couple billions decision points executed.
4. Testing 1 exemplary mechanical system is done and I have asses performance.

And I have tested many mechanical systems. So when I say most mechanical systems over period of time will fail (I never said 99%), I base that opinion on experience of actually close to a trillion decision points I simulated my systems through.

How many mechanical systems have you actually tested and with what statistical significance?
  • #78
  • Jan 22, 2017 4:26am Jan 22, 2017 4:26am
One strategy that is profitable on a particular currency may not be profitable on another. Different markets have different behaviors. One cannot apply the same strategy for everything that moves. You cannot win a tennis match with just a good backhander and backhand every opponent. You must adapt your strategy to the market you are trading. Discipline is not enough you must adapt.

Be like Water-Bruce Lee
You came here for the truth and let me unveil it for you
  • #79
  • Jan 22, 2017 4:31am Jan 22, 2017 4:31am
Most fail cause of the same old reasons. They think forex is a get rich quick scheme that can turn a couple hundred $ into thousands in no time. Spend an hour on FF reading peoples post and its easy to see. Every new thread or strategy posted has someone trying to create or asking for an EA within the first two pages....
  • #80
  • Jan 22, 2017 4:37am Jan 22, 2017 4:37am
Quoting kpclick
{quote} And that hard earn feel, paid by long screen hours, might just go out of window, due to a) Trump becoming US president b) financiers agenda to abolish cash c) other known yet shifts in global economy and politics...
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It's nice and useful to visit topics like that!!!
I can spot the bad, sad or otherwise negative traders.
Then i ignore them!!!!!

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Techboy, hanover and ExecutiveFx deserve a medal for trying to help BTW.
Thanks.
Beware of robber banks (RB), bad advisors.
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