90% of traders are losers

[t-bone]

HI,

I am interested in learning more about trading, however before i do i'd just like ask what probably seems a stupid question but are all those theorists that say markets can't be predicted and this is why 90% of traders are losers on to something? I could play roulette which is totally random and get better odds than that.
Are markets manipulated and random? I'd like to think this isn't the case but with so many people failing in what should be purely a case of reading supply and demand one has to wonder, is it a myth that it is pure supply and demand controlling prices, what about stop hunting?

Or have i got it wrong and the reason most newbies fail down to lack of knowledge and poor money management?

Also which market/futures contracts are less open to external influences and therefore safer to trade? I suspect the more liquid contracts?

Thanks for helping a doubting newbie out

 

[Directional]

the reasons many traders lose are the same as why most gamblers lose. The casino has a proven edge, and winning traders have their own proven "edge".

Lack of a defined trading edge, a clear set of trading rules, effective money management and discipline to avoid succumbing to the "greed and fear" psychology that every trader suffers from are probably amongst the main reasons why so many would seem to lose at both gambling and trading.

 

[hagadol]

Remember that the roulette wheel has no memory, though the market does.

 

[$spreader]

Also most traders keep adding to bad positions multiplying losses but take quick profits when a trade runs on side.Definitely not a system to base a career on.

 

[t-bone]

thanks for the replies so far, is it fair to say that market makers move their prices consistently in accordance with buying and selling pressure? i supose its the scenario of good news never makes the headlines, but it can often be seen on forums such as these traders complaining the price spiked on low volume, or stops were run, and other general stories giving the impression market makers are bookies out to take your money, when in actual fact they should just be an organised body fairly quoting a price in line with order flow.
Are these horror stories the expception rather than the norm?

Thanks

 

[Directional]

remember that being a market maker is a somewhat contrarian approach, because in order to "make the market" a marketmaker is providing liquidity through resting limit orders - and is taking the other side of peoples trades... so when lots of people are hitting his offers, he's gonna be the wrong way round for a directional trade - lots of buyers, market maker is going to be short. he doesnt want price to spike up, so it wont necessarily be the MM who makes price spikes.

 

[Col_Stiffler]

It's generally accepted, I think(!!), that trading is a very difficult process to master successfully. I suspect that 90% of people fail in any task/venture that fits that description, for various reasons. Although I'm not yet as successful as I eventually hope to be, my own trading is improving all the time. If you have the ability and willingness to learn, don't let a statistic like that put you off.

 

[Racer]

Where money is involved, you will get greed and fear.
Poor money management is often a reason why traders lose.
To put it in a gambling context,
For example, say you have 5 young racehorses, 1 is showing great potential and is worth a bit more than you paid for it, 2 have injured themselves and need treatment.
You are struggling for cash to pay the bills and treatment fees so have to sell one to pay the bills.
Which one will you sell?

 

[ukhero]

You ask too many key questions that would take a week to reply in depth.

In a nut-shell, markets can be predicted, people do it all the time. The profitable question is how.

Homework is a key factor in deterring a markets direction along with accumulated knowledge, conviction in regards to a decision, money management and, not least of all, an understanding of human behaviour.

I think it best that you open a paper account with one of the many Spread Betting companies on the Internet. Do your financial home work, make a few predictions. See if you have that cutting edge that eludes 90% of the gamblers.

And it has to be said, a roulette wheel it is not. You need plenty of balls to play this game!

Happy trading

UK

 

[Chorlton]

HI,

I am interested in learning more about trading, however before i do i'd just like ask what probably seems a stupid question but are all those theorists that say markets can't be predicted and this is why 90% of traders are losers on to something? I could play roulette which is totally random and get better odds than that.
Are markets manipulated and random? I'd like to think this isn't the case but with so many people failing in what should be purely a case of reading supply and demand one has to wonder, is it a myth that it is pure supply and demand controlling prices, what about stop hunting?

Or have i got it wrong and the reason most newbies fail down to lack of knowledge and poor money management?

Also which market/futures contracts are less open to external influences and therefore safer to trade? I suspect the more liquid contracts?

Thanks for helping a doubting newbie out

Hi t-bone,

I thought I'd share some personal experiences with you......

I'm also fairly new to trading having only been involved in it for about 12-15mths. During that time I have read many books and now understand a number of important but basic principles such as having stops, risk:reward ratios, TA, etc, etc. btw: This site & equally importantly the members on here are outstanding when it comes to sharing knowledge & experiences!!!

However, even with all this new learning, I have made numerous simple trading mistakes which in hindsight are so basic that I should have known better!!!!

Things like (in no specific order):

1) Entering trades based purely on fantastic news!! Basically, I got emotional, could see some "easy" money and jumped in without any plan. No idea of where to exit to take profits or where to place my stop.

2) Watching a stock (penny share) rise by 40% in one day, and getting greedy and holding & consequently watching it (over the course of 2 weeks) drift back down to BELOW the original level. Why didn't I sell after the first day?? In a word... Greed. Why didn't I sell during the next 2 weeks? Simply because I "believed" it would continue to rise. Why? Because everyone on a forum felt it would go north further, and I wanted it to!!! How stupid!!!!

3) Adding to a losing trade (by averaging down). For example: Buy at say 50p, price drops to 40p so instead of letting a stop loss kick in, I instead bought MORE at a "bargain" price, only then to watch it slide further south.

There's plenty of other things which I have done in this first year. Consequently, I've lost a lot of money!!

The point I'm trying to make is even if you have a very good understanding of the markets & how they work and have even paper-traded successfully, the one thing that you can't prepare for is the "emotional" side. In my opinion, in the last year, I have learnt an awful lot not only about trading & the markets but also what kind of person I am.

I am sure my story is not too dissimilar to others who started trading though.

Therefore,some basic advice is thus:

1) Prepare & FOLLOW a trading plan - this will ensure that the majority of emotion (and trust me there will be loads) is minimised.

... and remember if you don't have a plan (especially if you're a newbie) then you're not trading - you're gambling!!

2) Never average down. If you are a position where you think you need to, then you haven't placed an appropriate stop loss!!

3) Read books, forums, whatever, for help, knowledge & advice BUT NEVER rely on someone's else opinion to get in or out of a trade. If you're not sure of what to do, don't enter it, and if you're already in, get out - immediately!!! Hope is not a good trading strategy.


Hope this helps,

CCH

PS. But have fun.....

 

[Stockjunkie]

Let's confine the chat to SB mm's .

Both sides of the coin are true : yes , they are out to take your money any which way they can and no they cannot do that willynilly and quoting anything up to 20 different markets they have their weaknesses that can be exploited . That is if you beling that elite class who have the talent .

I am aware of all their shananigans and despite them pulling all sorts of poo on me , I still beat them and handily too.

So called price spikes on low volumes are the excuse of a weak trader . Hell , that can happen all the time , even on the direct markets , no reason why not , seen it many times .

Sometimes the SBs may quote too wide , not within touch and stop you out . You should query the that call , no harm in trying though strictly speaking they are entitled to do that .

 

[t-bone]

Thanks again for the replies.
Its nice to know most of the losses in the market are due to errors of judgement and/or psychology, this i stand a chance of overcoming, false pricing i cant.

I like to know that when i lose money its becasue i was the wrong side of the market, not because the bigger players in the industry can put a bias on the market and create an artificial move.
For example a resistance level gets taken out and runs up 20 points before turning around and retracing to 10 points below the resistance level in a matter of minutes, you could argue market prices were deliberately tipped over the resistance level to trigger the buy stops even though the buying pressure to take out this level wasn't really there.
or/
these fake outs are actually due to there being enough demand to trip the buy stops but not enough demand to keep the prices above this level

i know the end result is the same but one of the scenarios is due to supply and demand, the other due to bigger players exploiting the ability to see where your orders are. I'd like to think moves like this happen because of the latter, but if they happen because prices are deliberatley moved to trip these orders i would say the markets are very unfair and therefore unpredictable. That would be like a car salesman offering a car (worth £15,000) for £30,000 one day just so he can sell it for £15,000 the next day and say "wow what a disount we are offering today" creating interest with artificial prices. This is illegal, i am trying to work out if this manipulation happens in the financial markets and if so surely it shouldn't be allowed?

 

[Stockjunkie]

No not really , it's a free market ' big ' players like anyone else can do what they like if they want buy just to break the resistance only for the price to retrace again then they have only managed to push the price up momentarily - they would have lost money , can't get enough suckers to go with them .

If that happens to take out your stop , well that's just the way it is . Happens a lot .

 

[frugi]

The markets aren't there for your benefit and if you are going to participate in this "relentless war for profit" you must expect the professionals to use any available method that helps them take your money. Running stops is just one of several "tricks". Testing supply and demand and then reversing if there isn't any, another. It's not unfair or illegal, just how it works. Markets aren't random and a certain class of participant is regularly manipulated, although it must be said they often do everything they can to help.

 

[t-bone]

yes i suppose its understandable for the bigger players to buy to take out stops, that is fine because they have assumed risk by buying, i can't complain about that, what isn't fair is if market makers show prices higher than what they are valued at when nobody has bought for the sole purpose of making the market "seem" like it has traded through a resistance, wouldn't you agree?

 

[Chorlton]

I totally agree with Frugi's post !!!!

From what I've learnt in the last 15mths, MM's do have the capability to artificially move SP's, whether it is to push the SP down to stop out certain trades or to rise it temporarily, only then to drop it back with the intention of trapping new investors at higher levels.

These tactics do happen. I have read some articles on how they do it and have seen it first hand whilst watching certain stocks. Large SP increase or Gap Ups on very low volume followed by a retracement once new investors have bought in at the higher prices.

At the end of the day, the MM's can see at any one time what Buy & Sell orders they have on their books and can "artificially" move the SP accordingly. However, going against the trend for any length of time is a dangerous and costly thing for them to do.

But Personally, I quite like them doing this. If you can spot the signs in advance such as those that I've already mentioned, then you can get in early & hopefully predict where the SP will go short-term.

I have found that accurately understanding price & volume, helps with this.


Chorlton

 

[wwatson1]

The markets aren't there for your benefit and if you are going to participate in this "relentless war for profit" you must expect the professionals to use any available method that helps them take your money. Running stops is just one of several "tricks". Testing supply and demand and then reversing if there isn't any, another. It's not unfair or illegal, just how it works. Markets aren't random and a certain class of participant is regularly manipulated, although it must be said they often do everything they can to help.

I second that!

 

[badtrader]

90% of traders are losers

Well do the opposite.

 

[Halzeigler99]

I have been a trader for 20 years and although do not rely on it for my main income, I trade successfully in that I make consistant profits. The one thing I learnt all those years ago (the hard way!) is not to PREDICT the market but to REACT to it. I do not agree with traders or pundits who put an order in the market for tomorrow to buy a currency say at a certain level with a 25 or 50 pip stop behind it. How can you possibly know today what the market will do tomorrow? No wonder the majority lose if that is how they trade!
I would far rather react to some new and influential piece of news which usually transcribes itself into trading with the daily prevailing trend. (Look at the colour of the daily candle to establish that!)
Many pages of traders comments have been written on the subject of entry and exit levels. To me your ENTRY point is absolutely crucial. I spend most of my time and effort on getting the entry point right. Ah, I hear you say, but how do you do that? Study the charts my friends, analyse where you got it right and where and why you got it wrong. Think through the sequence of events on winning and loss making trades (make notes they will help you) and suddenly you will see the right pattern emerge that tells you when to trade.
Memorise that pattern until it is imprinted in your mind like a templete. Then and ONLY then trade when you recognise that pattern and the sequence of events that created it.
Finally, run a tight stop from your entry point to cut out loss making trades quickly. Oh I know (its been said a million times before) but maybe you should try it sometime...run your profits (with a trailing stop) and cut loss making trades out quickly. They really are the golden rules to making money on the markets.
When you look forward to trading rather than loathing it (because you think you will lose) then you know you have cracked it!

 

[jezza888]

I have been a trader for 20 years and although do not rely on it for my main income, I trade successfully in that I make consistant profits. The one thing I learnt all those years ago (the hard way!) is not to PREDICT the market but to REACT to it. I do not agree with traders or pundits who put an order in the market for tomorrow to buy a currency say at a certain level with a 25 or 50 pip stop behind it. How can you possibly know today what the market will do tomorrow? No wonder the majority lose if that is how they trade!
I would far rather react to some new and influential piece of news which usually transcribes itself into trading with the daily prevailing trend. (Look at the colour of the daily candle to establish that!)
Many pages of traders comments have been written on the subject of entry and exit levels. To me your ENTRY point is absolutely crucial. I spend most of my time and effort on getting the entry point right. Ah, I hear you say, but how do you do that? Study the charts my friends, analyse where you got it right and where and why you got it wrong. Think through the sequence of events on winning and loss making trades (make notes they will help you) and suddenly you will see the right pattern emerge that tells you when to trade.
Memorise that pattern until it is imprinted in your mind like a templete. Then and ONLY then trade when you recognise that pattern and the sequence of events that created it.
Finally, run a tight stop from your entry point to cut out loss making trades quickly. Oh I know (its been said a million times before) but maybe you should try it sometime...run your profits (with a trailing stop) and cut loss making trades out quickly. They really are the golden rules to making money on the markets.
When you look forward to trading rather than loathing it (because you think you will lose) then you know you have cracked it!

And I'll second all of that! I learnt the hard way too!