Dangers of Listening to Others in Trading

[safvan]

Just an interesting topic I wanted to launch out. All traders and investors who are actually making money in the markets have suffered the consequences of acting upon judgement and views of so called analysts, gurus, 40 year investment veterans blah blah instead of thinking on their own however if you come to think about it, this business can become very boring if you completely shut yourself off from the outside noise.

Trading should be effortless in terms of working on your OWN rules but still some how we like to be influenced one way or the other by third party dramas.

How can we still maintain the same entertainment levels in this business while completely detaching ourselves from others? I mean even this forum is meant to serve the same purpose (post your views on others!) -- we want our voices to be heard or hear from others in the game...

I feel every trader in the market is a competitor just like you own a hot dog stand and any other stand in the area is a threat! we need traders to make mistakes so that we can earn off them!

Anyways discuss..discuss...let the postings begin!

 

[Splitlink]

Just an interesting topic I wanted to launch out. All traders and investors who are actually making money in the markets have suffered the consequences of acting upon judgement and views of so called analysts, gurus, 40 year investment veterans blah blah instead of thinking on their own however if you come to think about it, this business can become very boring if you completely shut yourself off from the outside noise.

Trading should be effortless in terms of working on your OWN rules but still some how we like to be influenced one way or the other by third party dramas.

How can we still maintain the same entertainment levels in this business while completely detaching ourselves from others? I mean even this forum is meant to serve the same purpose (post your views on others!) -- we want our voices to be heard or hear from others in the game...

I feel every trader in the market is a competitor just like you own a hot dog stand and any other stand in the area is a threat! we need traders to make mistakes so that we can earn off them!

Anyways discuss..discuss...let the postings begin!

You are so right. We come on here for company and to express our views, hoping to convince others that our way has merit.

When we get bored with a thread that goes on for too long. jokes, leg-pulling and insults come in, as we get tired of the original subject.

If only we could see each others trades in real life--all of them--I'm sure that we would not be so keen to follow the advice of others.

 

[tomorton]

I love this site and skip very quickly over the off-subject posts - these vary between jolly banter and hurtful vindictiveness - but all of it, though possibly annoying, is harmless to your trading.

What is really dangerous are the generalisms that alleged traders purport as absolute rules. The most dangerous truism is the performance parameters many people say they abide by and any trading system must have - typically they say something like 2% risk per trade, a 1:3 risk:reward, and an 80% win rate.

Probably you'll agree with me that these figures sound level-headed, possibly quite modest.

But just calculate your return in a year if you trade once per day (say 250 trades in the year), and start with a £5,000 account. If all your trades are equal sized, you will be risking only £100 per trade to gain £300, and 80% of your trades will be winners. What will your net gain be at the end of the year, assuming you never increase the size of each trade position?

£55,000. But who ever multiplied their account 10 times in 1 year? So now we know they are talking rubbish. But why is this dangerous?

The danger is that new (and experienced) traders think this formula is realistically achievable and continue to take increasing risks and tinker with systems endlessly until they approach the divine 2:3:80 parameters, which cannot be sustained. In the strugle for an unreachable summit they are bound to fail. And that's the reason 95% of traders fail - it's because when they have found what they were really looking for, they fail to recognise it and continue the search into the death zone.

 

[new_trader]

I love this site and skip very quickly over the off-subject posts - these vary between jolly banter and hurtful vindictiveness - but all of it, though possibly annoying, is harmless to your trading.

It may be harmless if you are a purely mechanical trader but it can have an influence if you are a discretionary trader, like I am. Reading another persons opinion can subconsciously affect your own judgement.

 

[Splitlink]

I love this site and skip very quickly over the off-subject posts - these vary between jolly banter and hurtful vindictiveness - but all of it, though possibly annoying, is harmless to your trading.

What is really dangerous are the generalisms that alleged traders purport as absolute rules. The most dangerous truism is the performance parameters many people say they abide by and any trading system must have - typically they say something like 2% risk per trade, a 1:3 risk:reward, and an 80% win rate.

Probably you'll agree with me that these figures sound level-headed, possibly quite modest.

But just calculate your return in a year if you trade once per day (say 250 trades in the year), and start with a £5,000 account. If all your trades are equal sized, you will be risking only £100 per trade to gain £300, and 80% of your trades will be winners. What will your net gain be at the end of the year, assuming you never increase the size of each trade position?

£55,000. But who ever multiplied their account 10 times in 1 year? So now we know they are talking rubbish. But why is this dangerous?

The danger is that new (and experienced) traders think this formula is realistically achievable and continue to take increasing risks and tinker with systems endlessly until they approach the divine 2:3:80 parameters, which cannot be sustained. In the strugle for an unreachable summit they are bound to fail. And that's the reason 95% of traders fail - it's because when they have found what they were really looking for, they fail to recognise it and continue the search into the death zone.

The banter is harmless, but the insults are not. Insults, added to a poster's poor trading ability--- which he knows only too well, even if he will not admit it on site--- is bad for the ego.

You won't find me on threads like yours and other serious posters because I do not want to interrupt a chain of thought. I used to ( occasionally, but I try not to, now) pick holes in others ideas but that is very easy to do. Having a good alternative is quite another matter. I'm happy to do my own thing but do not think that it has enough merit for others to follow.

You may have noticed that I get annoyed when a poster is badgered into silence. This happens quite often and those that do so are, really, not so hot themselves!

For a new poster, OP has hit an important subject and, probably, a sore point for many.

 

[tomorton]

It may be harmless if you are a purely mechanical trader but it can have an influence if you are a discretionary trader, like I am. Reading another persons opinion can subconsciously affect your own judgement.

That's a good reason why I distrust my own judgement to trade discretionarily. It's subjective, and therefore very hard to look back over charts a year old and ask yourself objectively, what I would have done, and why, and what I should have done instead. By the same token, it's very hard to improve and enhance a system that defies objective definition. It looks like black magic when I see it done, which doesn't mean I don't admire the skills, just that I can't see how I could develop them.

 

[tomorton]

Good post safvan - I have to think that every trader should have their own defined system with clear and objective rules. Their success should be defined by how well they follow their own rules and whether they can improve them by just 1% this month. Other traders' perspectives can be invaluable when you're very focused on a particular problem, and resolving that leaves a gaping weakness in your risk management systems that someone else could point out in a second.

But if you start listening without a firm base or system in place first, you'll be building on sand - dangerous.

 

[safvan]

I think unless you are successful or reasonably successful at trading we should not frequent forums or media that distorts or distracts us. I started an online business in a competitive industry a few years back and I do not think I started frequenting its related forums or media 2 to 3 years down the road. Its only when I started slowing down and wanted to look for answers is when I started hopping around other people.

This is again my opinion not that it counts but I tend to see more successful people in their respective fields frequent less on online boards, chat rooms, print or electronic media. My theory is that if you are doing well you do not other people's opinions or thoughts (even it can make it better for you)....

Thats probably the reason why many people that look for others for help do not really make it big time in their respective fields. Yes education in the field is the key but in the end its your own method on how you approach it really counts.

Best traders in the world are mostly unknown to most of us and would continue to remain that way..

 

[safvan]

and time is a huge factor also. You can become an expert at a job you hate but you do it anyway if you have been doing it for 5 plus years every day 5 days a week. It just comes to you.

Imagine time playing its game in something that you actually do love to do. Given enough time anyone can become decent in any field EVEN if he or she puts in an average effort provided you keep doing it again and again..

 

[Splitlink]

and time is a huge factor also. You can become an expert at a job you hate but you do it anyway if you have been doing it for 5 plus years every day 5 days a week. It just comes to you.

Imagine time playing its game in something that you actually do love to do. Given enough time anyone can become decent in any field EVEN if he or she puts in an average effort provided you keep doing it again and again..

Capital is, of course, the factor with trading. One cannot afford to be a losing trader for too long. The other side is that trading can become a big waste of time, with mediocre profits. I would put myself in that category. If I was not retired, I would not be able to do what I do here.

To be frank, I believe that a lot of posters do their thing from work. I would try to get rid of anyone I caught doing that in my time, but I'm sure that it goes on .

 

[Shakone]

Good thread.

I think you should try to be clear to yourself what you want from being on T2W (or anything really). That might just be for joking around, having someone to discuss trading related things with, or really wanting to learn how to trade/hone your own approach.

If it is the first two, I think that's fine, no harm, and trading is a lonely game at times. If it is to learn how to trade, then I think the website can be good up to a point, but that point is not the point where you become profitable in my opinion. And yes I agree with others that it can be harmful, particularly the negative posts saying daytrading is a losers game, nobody can trade off 5 min charts, long term trading is too unpredictable, trend trading is dead, technical analysis is a waste of time, tight stops are crap, large stops are crap, fundamental analysis is nonsense, the markets are all random so nobody can profit, intraday is noise etc etc.

Some of these things are true for some traders, but don't need to be true for you. If you find others are putting these limits on you, then step away from the website.

I don't entirely agree with tomorton's post about the 1:3 risk:reward 80% win probability. Those numbers look spectacular to me. But I don't think this is harmful. As Shankly said, aim for the sky and you'll reach the ceiling. Aim for the ceiling, and you'll stay on the floor.

 

[safvan]

Good thread.

I think you should try to be clear to yourself what you want from being on T2W (or anything really). That might just be for joking around, having someone to discuss trading related things with, or really wanting to learn how to trade/hone your own approach.

If it is the first two, I think that's fine, no harm, and trading is a lonely game at times. If it is to learn how to trade, then I think the website can be good up to a point, but that point is not the point where you become profitable in my opinion. And yes I agree with others that it can be harmful, particularly the negative posts saying daytrading is a losers game, nobody can trade off 5 min charts, long term trading is too unpredictable, trend trading is dead, technical analysis is a waste of time, tight stops are crap, large stops are crap, fundamental analysis is nonsense, the markets are all random so nobody can profit, intraday is noise etc etc.

Some of these things are true for some traders, but don't need to be true for you. If you find others are putting these limits on you, then step away from the website.

I don't entirely agree with tomorton's post about the 1:3 risk:reward 80% win probability. Those numbers look spectacular to me. But I don't think this is harmful. As Shankly said, aim for the sky and you'll reach the ceiling. Aim for the ceiling, and you'll stay on the floor.

Excellent response.

I wanted to add something to the last bit just to enhance it. Even if you cap your losses to 2% per trade thats your loss capped not your profits. You could follow the same rule with 50% to 60% win and still make a profit as long as the wins are greater than 2%.

And it comes down to experience and practice and experience and practice and experience and practice. Thats pretty much it.

 

[Ari.Gorian]

THIS IS REALLY DANGEROUS TO DEPEND ON OTHER'S SUGGESTIONS!LIKE UR POST!

 

[Ari.Gorian]

u r correct in some ways.......trading is not really an easy matter......that's why all can't get attached with it!

 

[Ari.Gorian]

u r correct in some ways.......trading is not really an easy matter......that's why all can't get attached with it!

 

[TradeTraka]

I feel every trader in the market is a competitor just like you own a hot dog stand and any other stand in the area is a threat! we need traders to make mistakes so that we can earn off them!

Obviously in the larger perspective this is true, there have to be losers if there are going to be winners in Trading. However, I'm not sure that many traders consider fellow traders as competition necessarily. Most of the traders I know are genuinely happy to help other traders, and enjoy passing on the lessons they have learnt.

However, you do have a valid point that it is very important to remain vigilant, when you don't know the person providing the advice. This forum is massive and statistically there are bound to be a few bad eggs!

 

[coopster]

This site helped me to learn how others think and that i am potentially on the right track. Did i listen to anyone and just copy them - NO.

Did i take what they said, go away, do my own research and decide for myself if the information was valid or useful to me - YES.

That is the difference i think. This site is full of all sorts of personalities, good info, waffle and everything in between. It should be fun to read but also serve a purpose to guide newcomers in the right direction whilst providing a vent for the more experienced.

Sadly the pedlars of all that goes with trading are also allowed to post on this site. Annoying but ultimatelly vital to keep this site free for all.