The Real Reason Most Traders Lose- The Real Odds of Winning at Trading:

[mrsoul]

The real reason most traders lose is because it is extremely difficult to find

It is true that most lose the game.

Here is my two cents on why:


Greed

Short time frames-Everyone wants to over trade as some get rich quick scheme

In short time frames, the cost of your trade is too great a percentage to your win potential. 3 pips spread on a five pip win etc.

For all but those with inside info or rigged data feeds, scalping for profit is a myth

Most do not understand at all what makes the market move, and shouldn't really be trading

Most trade with bucket shops, and their money never really sees the market

No patience to wait for real trading opportunities, such as those defined by Fibs, True S & R, and Impulse/retracement waves.

Most traders change strategies and or parameters of their strategies without letting them play through at least 20 trades to test their validity.

The real reason most traders lose is because it is EXTREMELY difficult to find something that works better than 50% of the time!

 

[Mister7]

50% Wins

winning 50% of the time is not that difficult, and that's all you need to do to be sucessful. If you win more when you win, and less when you lose, but maintain 50% trade accuracy your equity will increase.

 

[elitejets]

The real reason most traders lose is because it is EXTREMELY difficult to find something that works better than 50% of the time!

It doesn't have to work better than 50% of the time, BUT your winners do have to pay for your losers and some+
Its really that simple ...

 

[mrsoul]

Great Points:

It is true that most lose the game.

Here is my two cents on why:


Greed

Short time frames-Everyone wants to over trade as some get rich quick scheme

In short time frames, the cost of your trade is too great a percentage to your win potential. 3 pips spread on a five pip win etc.

For all but those with inside info or rigged data feeds, scalping for profit is a myth

Most do not understand at all what makes the market move, and shouldn't really be trading

Most trade with bucket shops, and their money never really sees the market

No patience to wait for real trading opportunities, such as those defined by Fibs, True S & R, and Impulse/retracement waves.

Most traders change strategies and or parameters of their strategies without letting them play through at least 20 trades to test their validity.

You are 100% correct when you say that the spread destroys the odds in scalping!

Also, I revised my original post and now have concluded that the odds of winning on a trade, where the stop and the limit are the same distance, are 50% minus the spread on a percentage basis.

The problem with trading is that it is extremely difficult to find a trade that is profitable 55% of the time, or more, year in and year out.

Has anyone found something that is profitable 55% of the time or more, year in year out?

I am not interested in what you have found- just if a better than 55% trade exists.

 

[mrsoul]

Interesting Question:

winning 50% of the time is not that difficult, and that's all you need to do to be sucessful. If you win more when you win, and less when you lose, but maintain 50% trade accuracy your equity will increase.

You know Mr.7, I used to believe what you said that all you need is a 50% situation where your winners are greater than your losers. However, I have rethougt this and now I conclude that statistically it doesn't work.

Here is why:

Let's say that you buy at 137.00. You place a stop at 136.75 an a limit at 137.50.

I believe, and I could be wrong, that if you do this trade 100,000 times that you will break even and lose the spread points.

The reason for this is because, statistically, the odds of winning on a 50 point limit are twice as difficult as losing on a 25 point stop.

Therefore, placing a trade where your limit is twice your stop loss will only break you even.

It is a myth that you can tilt the odds in your favor by trying to make your profit greater than your loss.

The only ting that will make you money in thelong run is finding a trade that is profitable 55% of the time, or more, year in, year out.

Is my logic wrong?

 

[mrsoul]

An interesting question:

It doesn't have to work better than 50% of the time, BUT your winners do have to pay for your losers and some+
Its really that simple ...

Elitejets, I used to believe what you just said- that all you need is a 50% situation where your profits are greater than your losses.

However, I rethought this and I now believe that this is a myth.

Here is why:

Let's say you buy a euro/dollar at 132.00

You place a stop at 131.75 and a limit at 132.50

You are going for 2 to 1, profit to loss.

After thinking about this, I concluded that the odds of hitting a 50 pip profit are, statisticaly, twice as difficult as losing a 25 pip stop.

If you did this trade 100,000 times, statistically, you would break even and lose the spread points.

Therefore, it is just a myth that you can make money by trying to take bigger profits than what you lose.

The only way to make money is to have something that works better than 55% ofthe time, year in- year out.

Am I wrong?

 

[elitejets]

Elitejets, I used to believe what you just said- that all you need is a 50% situation where your profits are greater than your losses.


You are going for 2 to 1, profit to loss.

After thinking about this, I concluded that the odds of hitting a 50 pip profit are, statisticaly, twice as difficult as losing a 25 pip stop.

If you did this trade 100,000 times, statistically, you would break even and lose the spread points.

Therefore, it is just a myth that you can make money by trying to take bigger profits than what you lose.

The only way to make money is to have something that works better than 55% ofthe time, year in- year out.

Am I wrong?

Well I can only speak personally but for me to take a trade where the reward was only twice my risk then it would have to be really perfect setup for me and even then I probably would not take it ... I usually aim for much bigger R:R
That way it would not matter if you were right only 30% of the time.
I'm often wrong, but my winners are paying for my losers so far.

 

[elitejets]

Elitejets, I used to believe what you just said- that all you need is a 50% situation where your profits are greater than your losses.
However, I rethought this and I now believe that this is a myth.
Here is why:
Let's say you buy a euro/dollar at 132.00
You place a stop at 131.75 and a limit at 132.50
You are going for 2 to 1, profit to loss.
After thinking about this, I concluded that the odds of hitting a 50 pip profit are, statisticaly, twice as difficult as losing a 25 pip stop.
If you did this trade 100,000 times, statistically, you would break even and lose the spread points.
Therefore, it is just a myth that you can make money by trying to take bigger profits than what you lose.
The only way to make money is to have something that works better than 55% ofthe time, year in- year out.
Am I wrong?

Do you always bank your winning trades at your first profit target? Don't you ever see them keep going after that?
Why not try banking half at target one and trailing your stop on the rest?

 

[Bloodhound]

Another thing to think about is adding to positions. This isn't something I am doing yet with real money but am paper-trading it whilst I get used to the concept.

If one had gone long EURUSD on 22/4/09 at 12930 using 2% of capital and added to the position following the retest on 23/4/08 at 12998 (1% of capital) and then again on 24/4/09 at 13135 (1% of capital) current unrealised return would be 33% against an initial risk of 2%.

This strategy would allow for considerably more losers than winners....

More and more I feel trading is about trade management than entries.

Win / loss ratios are only important if the R/R is poor.

 

[mrsoul]

Do you always bank your winning trades at your first profit target? Don't you ever see them keep going after that?
Why not try banking half at target one and trailing your stop on the rest?

I thought and thought, long and hard, about where to take a profit.
At first there appeared no easy answer.
There still appars no easy answer.

I'm experimenting with a 2/1, profit to loss ratio.

If I can get the 2/1, I take the profit because this was hard enough.

Personally, I hate to see winners come back- this is why my personality is not comfortable going for more than 2/1.

However, with that all said- I still believe that the only factor that will make you money, year in year out, is finding a trade that works more than 55% of the time.

I really do not believe that you tilt the odds in your favor by trying for high profit to loss ratios.

Once again, the reason for this is because, statistically, the odds of winning 10 pips are twce as hard as losing 5 pips. So, if you did that trade 1,000,000 times you would break even- an lose the spread points.

Best of Luck

 

[elitejets]

The real reason most traders lose is because it is EXTREMELY difficult to find something that works better than 50% of the time!

The only method I know like that is the J16 method on Forexfactory
The method requires huge patience and waiting for the perfect A+ setups which if you do, I think has a 90% success rate. If you take the B setups it is obviously less.
Whilst I like the method for discipline and patience I don't like it because the R:R is often skewed and the risk is very often way higher than the reward.
I also like to limit my risk to 1% and they use more. If you did not increase risk then you would need a very big account to make money. It is profitable though because of the 90% hit rate.

 

[elitejets]

I thought and thought, long and hard, about where to take a profit.
At first there appeared no easy answer.
There still appars no easy answer.

Please learn about support and resistance.
If you don't have an idea of where your trade is going to go why would you take it?

 

[elitejets]

Try this thread here, by Trader_Dante
http://www.trade2win.com/boards/first-steps/26947-making-money-trading.html
The trades are more than 50% right and you will have a clue where it is going.

 

[Bloodhound]

Please learn about support and resistance.
If you don't have an idea of where your trade is going to go why would you take it?

If you're unsure on support and resistance I strongly recommend this thread - http://www.trade2win.com/boards/forex-discussion/54114-trading-price-wasp-stylee.html

It ranks equal with this thread http://www.trade2win.com/boards/first-steps/26947-making-money-trading.html as the 2 most valuable trading resources on the web IMO.

 

[Bloodhound]

Try this thread here, by Trader_Dante
http://www.trade2win.com/boards/first-steps/26947-making-money-trading.html
The trades are more than 50% right and you will have a clue where it is going.

Stop copying me!!!!

 

[elitejets]

Stop copying me!!!!

Haha Rob ... we just agree thats all!
I have to second that. The wasp thread is really really good for support and resistance
http://www.trade2win.com/boards/forex-discussion/54114-trading-price-wasp-stylee.html

 

[HaloTrader]

MrSoul; According to my trading journal; I win money on a trade 40% of the time and 60% losses, excluding breakevens. Yet on average according to my journal i make 4.3% capital gain per week.

... Now admittedly that low percentage of wins is down to my personal bad trading, over the last 2 months were i have gained more experience, i win 66% of all my trades. This is through my trading methodology not a system.

However i know of a system which gives better results than 55%, more like 70%/

 

[oiltanker]

in that mark douglas vid he talks about people with strats with only a 10% success rate making money.

one seminar i went to the trader said some make their money on 1 or 2 big trades a year and the rest small losses.

so win rate isn't the reason to dump a strat. perhaps profit rate would make a better measure.

 

[Rossini]

Mental stops are for losers.
If you cannot find a good place to put a stop loss then its a bad trade.
Mental stops create a clause in your head that says 'I may hold this if its a loser, just on gut instinct'
Emotions during trading = Loss of capital

Whats the point in a mental stop if you can have a proper one???? It allows you to keep a loser. NICE

Quite wrong. Just because you do not have the discipline to cut losers does not mean I dont.

 

[neltonbenke]

: Thumbsup : [quote = Rossini ; 743084 ] Completamente Errado . Só PORQUE VOCÊ TEM Não uma disciplina necessaria n CORTAR OS perdedores Não Significa Que Não eu . [/ Quote]

Primeiro motivo da Perda É Que o comerciante Não SABE Exatamente Quanto Ele Quer , Não Onde SABE QUANDO e onde Sair , TP Para tanto quanto para Stop.
Dá então o próprio Mercado e te DEPOIS te toma . É Necessário ANTES DE ENTRAR NUMA Operação saber Até Onde ir PoDE e encerrar uma Operação e AO tempo Mesmo admitir Que SUA ESTÁ análise errada ..... pronto , resolvido ... abraços a todos! !