Do all traders ultimately fail ?

[Pat494]

This is a hard question to answer but there have been spectacular blow ups in the past. The markets usually catch even the market gurus on their pet systems. I thought Jack Schwager's Market Wizards written 24 years ago might offer some insight. Here is a short biopsy of Michael Marcus.

Career[edit]
Marcus began his trading career in 1972, when he bought plywood futures with his life savings of $700. In the summer of 1972 President Richard Nixon froze prices of some commodities, but the futures contracts rallied sharply, increasing Marcus' stake from $700 into $12,000. In 1973 he turned $24,000 into $64,000.[citation needed] He also used Freight derivatives.

Marcus learned money management from Ed Seykota, whom he met while working as an analyst.[2] He was a founding trader of Commodities Corporation, where he was chief currency trader and hired and taught Bruce Kovner as a trader.[2][3] Marcus blamed the ending of his first marriage on his having to check the markets every two hours throughout the night.[4] Marcus eventually became an EVP at Commodities Corporation. Marcus has recently invested in small-company stock through his holding company Canmarc Trading Co and later made private-placement investments in small OTC Bulletin Board listed companies like Prospector Consolidated Resources[5] and Encore Clean Energy Inc[5] and Pink Sheets Touchstone Resources.

ViRexx Medical Corp, a company focused on immunotherapy treatments for certain cancers, chronic hepatitis B and C, and embolotherapy treatments for tumors, announced Marcus's election to its Board of Directors at its Annual General Meeting held May 25, 2006.

Marcus was featured by Thomas A Bass, in the book The Predictors: How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street.[6] Marcus was described as a chartist who "keeps an eye on market penetration and resistance."

 

[lexcorp]

''Over a long enough timeline, the survival rate for everyone drops to zero''

 

[hyunski]

I think as long as you exercise mechanical risk management, this is not a problem. Larry Hite stressed this in the same book. The stories I've read on traders who fail are those that involve 1. An opportunity of a lifetime 2. They were wrong about it.

One Korean trader committed suicide after writing a long note. He traded stocks and options for 30+ years and had a very successful trade record, and formerly worked at an institutional desk. But he was addicted to trading and was so confident after 30+ years of successful trading that when the Korean stock index assumed a pattern he was familiar with, he took out debt and fully leveraged his call option position. The next day, Lehman announced bankruptcy and he lost everything.

He explained how derivatives are the "instruments of demons" because the lure of high leverage is very addictive. He could not resist it despite knowing he had to. Then he hung himself in a forest. I think it really comes down to if you can build a risk management system and if you can follow it.

It's something like this. Let's say you have a $1K account on online poker. You get a full house and there's a pot of $4K on the table. Feeling pretty confident, you go all-in. Unfortunately the other guy has a royal flush. If you had capped your maximum bet size to 20% of your total account (which is what I adhere to) you will most likely not be ruined.

Another method I use is the "positive trend equity curve". Let's say I started with a $1K account and made it up to $1.2K. At any point at that time, I will only put a max bet of $200. If I started with a $1K account and made it up to $2K, I will only put a max bet of the smaller of 20% of $2K or $1K. This way I am defending my equity curve and preventing it from going to an overall loss state, which can deeply affect my psychology.

Another way to avoid ruin is to keep your average wins small and do short-term trades only. If you go for super theme stocks that return 1,000%, you will not be able to keep your head. But if you aim for 2-4% profits, you pace yourself and keep your greed in check. This gives you a "work for money" mentality instead of a gambling mentality.

 

[Sigma-D]

Get real. 1 in 10,000 end up making money from trading. 0.01% of those that start out.

Which, strangely enough, is about in the same ballpark for any professional endeavour.

 

[lloydbee]

Get real. 1 in 10,000 end up making money from trading. 0.01% of those that start out.

How can anyone guestimate such a ratio.... maybe the same person can that says you can only consistently get 5% per month from the markets!

The trader failing % topic is as BS and dull as watching a chart on a closed market.

 

[neil]

How can anyone guestimate such a ratio.... maybe the same person can that says you can only consistently get 5% per month from the markets!

The trader failing % topic is as BS and dull as watching a chart on a closed market.

prove it !

 

[lloydbee]

prove it !

I can do that... It was pretty boring last Thursday when I got up to trade and took 30mins to figure out the market had closed early due the pre 4th holiday :cheesy:

 

[Forexmospherian]

Get real. 1 in 10,000 end up making money from trading. 0.01% of those that start out.

Which, strangely enough, is about in the same ballpark for any professional endeavour.

WRONG - percentage rate of 0 01% - even 1% would be saying a 99% failure rate

1% OF 10K is 100 ( Thanks Tar for pointing out my mistake )

If you have been told that only 0.1% of traders end up making money from trading - that is 1 in 1000 traders

Personally think that is wrong as is same % in any professional endeavour.

For me its more like 2-3% who make it - but maybe under 1% who reach great levels

When brokers market their stats saying its 25 -35% of all traders who are consistency making money - that of course is flawed - as it not all the same traders every quarter or month

For UK gambling purposes - ( ie spreadbetting staying tax free) you must have a 80 /85% failure rate for it to meets the rules - similar to fruit machines etc etc

Think about it 1 in 100 is rare - but 1 in 10,000 is so rare meaning if there are say 300000 +members who have been in this forum - only 30 ever made it

Regards


F

PS - I wish you would not ban me replying to some of your threads - you do come out with some good stuff

My guess is you are the old Purple Brain ?

 

[tar]

WRONG

0 .01% OF 10K is 100

If you have been told that only 0 01% of traders end up making money from trading - that is 1 in 1000 traders

Personally think that is wrong as is same % in any professional endeavour.

For me its more like 2-3% who make it - but maybe under 1% who reach great levels

When brokers market their stats saying its 25 -35% of all traders who are consistency making money - that of course is flawed - as it not all the same traders every quarter or month

For UK gambling purposes - ( ie spreadbetting staying tax free) you must have a 80 /85% failure rate for it to meets the rules - similar to fruit machines etc etc

Think about it 1 in 100 is rare - but 1 in 10,000 is so rare meaning if there are say 300000 +members who have been in this forum - only 30 ever made it

Regards


F

PS - I wish you would not ban me replying to some of your threads - you do come out with some good stuff

My guess is you are the old Purple Brain ?

Your math is wrong

0.01% of 10k = 1

0.1% of 10K = 10

1% of 10K = 100

 

[Forexmospherian]

Your math is wrong

0.01% of 10k = 1

0.1% of 10K = 10

1% of 10K = 100

Hi Tar

You are correct - well spotted - Friday afternoon my excuse - It's the 0 01% I am really disagreeing with - 1% getting there is certainly on - but 0.1% is just too low a success number - and then 0.01% ie just 1 out of 10k is just totally wrong - ie a 99.99 failure rate on all traders - no way

I will correct but acknowledge error in calculations

Cheers

F

 

[Mr. Charts]

Wow, Forexmospherian !
46 posts per day average !
What would you do without t2w?

 

[mike.]

If you've had a loosing week have you failed ? blown your account a few times then refunded it, have you failed ?

In my opinion, you have only failed once you give up.

 

[Forexmospherian]

Wow, Forexmospherian !
46 posts per day average !
What would you do without t2w?

I would be bored between trading lol

This last few days must have bumped it up - I have been busy

Slack days - say under 12 trades - only need 35 comments or so a day

Busy days - ie 18+ trades and questions to answer and charts to post - easy 75 posts

Average post 30 seconds to 3 or 4 mins - so even then maybe only 2 or 3 hrs of my 10 -12 hr trading window

Day trading is so boring - but typing keeps me focused -

 

[Pat494]

If you've had a loosing week have you failed ? blown your account a few times then refunded it, have you failed ?

In my opinion, you have only failed once you give up.

One could argue that someone who is obviously failing should give up before they lose their house etc.

 

[lloydbee]

If you've had a loosing week have you failed ? blown your account a few times then refunded it, have you failed ?

In my opinion, you have only failed once you give up.

I agree 100%, after all losing trades or periods are all part of trading and a blown account or several are the learning curve, or the stripes so to speak.

 

[mike.]

One could argue that someone who is obviously failing should give up before they lose their house etc.

But saying that, they have not failed until the time they give up, up to that point they are losers. It would be still possible to turn things around and become a successful trader.