Why do so few succeed?

[henry766]

very true , simply put , more than looks easy , people think that they ( for some reason) will be good at it. ( myself included)( well no one would start if they thought they couldn't do it and would be bad at it), but that doesn't answer the question( why do so few succeed) , i suspect the answer to that lies more in the idea of trading being a zero sum game ( as oppossed to investing), and therefore given the human condition the experienced and succsessfull few will take most of the money , and from the inexperienced and unsuccsessful many , it wouldn't surprise me if the proportions of winners to losers is fairly constant and that similer profiles exist in similer scenarios such as poker , whats more these experienced succsessfull traders not only trade bigger and win more , their careers willprobably be much longer than those who fail , further pushing the winners to losers ratio to be more extreme ie the 2 or 3 guys out of a hundred winning from the 98 or 97( as an example only) losers today will be ( by and large ) the same 2 or 3 guys winning from another different group of losers next year ( some exceptions , but few people can lose large amounts for many years ) Of course this doesn't answer the question why an individual can't make into that winning group, but does ( for the most part ) why individuals can't.

 

[fxj]

is it not more complicated than risk being 1/3 of reward as targets, recognizing trends,and extreme discipline in following your tested plan while battling avarice and fear accompanied by brain-lock and
stupidity?

 

[SOCRATES]

is it not more complicated than risk being 1/3 of reward as targets, recognizing trends,and extreme discipline in following your tested plan while battling avarice and fear accompanied by brain-lock and
stupidity?

Yes, but you are asking too much.

You are asking people to do several complicated things properly, and all at the same time.:cheesy:

 

[superfly]

Yes, but you are asking too much.

You are asking people to do several complicated things properly, and all at the same time.:cheesy:

I understand that grin.

 

[rols]

99% perspiration or obsessive compulsive?

Very apt article for wannabes including traders?

http://biz.yahoo.com/weekend/great_1.html

 

[SOCRATES]

Look at Edison. He tried 16000 times to create a lightbulb. Everybody laughed at him. They thought it was an outrageous idea.He ran out of metals and alloys to try. Then one day he tried making the filament out of tungsten.The rest is history. And so it is with individuals who persist. Unusual problems require unusual solutions.

 

[SOCRATES]

I understand that grin.

I know you do...that is why I put it there. :cheesy:

 

[jasonnoguchi]

There are quite a number of reasons why beginners fail and I learnt these both from my own early failures and the failure of some of my friends...

1. Did not follow a proven trading method : - Shooting off the hips just won't work in the markets.

2. Method followed did not suit his character : - Nothing involves more emotions than trading in the capital markets. Following a method that simply do not suit your character just won't work. An example would be that if you are a hot headed, impatient person, then you would never suit a day trading method. Understand your own psycho make up from my simple test at http://www.mastersoequity.com/MOE_FREE_REPORT.htm

3. Did not follow a sensible or realistic portfolio management strategy : - Nothing breaks your trading career more than losing when you are trading a lot of money and then winning when you are trading just a small amount of money.

4. Makes any of the 4 Deadly beginner mistakes. Read about this at http://www.mastersoequity.com/articles7.htm

 

[AsifA]

I dont agree with this gladiator analogy. This suggests a one on one scenario where an individual is almost guaranteed to be wiped out especially as the opponent is the market and or the professionals. Trading for the individual is more akin to guerrilla warfare, than anything else. You strike at the time you think is right, and pull out as quickly as you went in before the market turns against you. Anyone committing themselves to a position and then hanging around to admire the scenery is bound to lose.

 

[Passion]

maybe this is it?

I believe they don't understand...

 

[AsifA]

I believe they don't understand...

Lots of complex rational forwarded by one and all about trading failure. Psychology, emotion blah blah blah which is a "nice little earner" for some. Trading is really quite simple, based on the assertion that those participating have an average IQ. If you are going to do any job, you need the tools. Turning up for work with one screwdriver or one scalpel just wont work. You have to have the tools for the job and use the specific tools for the trading condition that prevails in the time frame you operate in. Use the wrong tool you wont get the job done, or worse you will mess it up, which will cost you !Too many contributions have been from chinese fortune cookies on this matter. Minimise risk by using the right tools. I dont expect a surgeon to turn up to work with a swiss army knife !

 

[Jack o'Clubs]

Lots of complex rational forwarded by one and all about trading failure. Psychology, emotion blah blah blah which is a "nice little earner" for some. Trading is really quite simple, based on the assertion that those participating have an average IQ. If you are going to do any job, you need the tools. Turning up for work with one screwdriver or one scalpel just wont work. You have to have the tools for the job and use the specific tools for the trading condition that prevails in the time frame you operate in. Use the wrong tool you wont get the job done, or worse you will mess it up, which will cost you !Too many contributions have been from chinese fortune cookies on this matter. Minimise risk by using the right tools. I dont expect a surgeon to turn up to work with a swiss army knife !

I agree with most of that, especially the bit about the whole psychology side of things being hugely overdone as a key to success.

However, I'm not sure about your premise that you're trading alongside a talent pool with 'average IQ'. Given that most of the volumes are institutional, and that these guys, whether they're IB's, hedge funds or whatever, have some pretty impressive people on board, as well as all the other advantages of trading for an institution (information sources, etc.), the typical 'T2W trader' (if there is such a thing) is in many ways already at a disadvantage. For me a key to success would be understanding how the 'system' (ie the market system) works to make sure that you take the few advantages you have of being a small fish in a big pond. For example, I've found it interesting in recent threads that some people seem to be throwing some quite big money around with spreadbetting firms, without really understanding how they work, and that they're not the same as a brokerage.

 

[AsifA]

I agree with most of that, especially the bit about the whole psychology side of things being hugely overdone as a key to success.

However, I'm not sure about your premise that you're trading alongside a talent pool with 'average IQ'. Given that most of the volumes are institutional, and that these guys, whether they're IB's, hedge funds or whatever, have some pretty impressive people on board, as well as all the other advantages of trading for an institution (information sources, etc.), the typical 'T2W trader' (if there is such a thing) is in many ways already at a disadvantage. For me a key to success would be understanding how the 'system' (ie the market system) works to make sure that you take the few advantages you have of being a small fish in a big pond. For example, I've found it interesting in recent threads that some people seem to be throwing some quite big money around with spreadbetting firms, without really understanding how they work, and that they're not the same as a brokerage.

And these are the people that contribute to the (alleged) high percentage of failure rate that prevails in spread betting participants. If you are a gambler by nature then this is not the business for you. If you dont have your wits about you, this is not the business for you. If you have an IQ of 200+ you wont have any advantsge on Mr average IQ. Its simple. acquire the tools, acquire the experience. You let the big boys do what they want in the market and you follow suit. None of this crystal ball nonsense which some have allegedly acquired and can predict market movement. I mean if they are so good at predicting why dont they just predict the 6 lucky numbers every week with the lottery ?

 

[Jack o'Clubs]

No, that's fair enough - it's a combination of IQ and experience that the typical T2W trader is up against. There's a good analogy in Chick Goslin's Trading Day by Day book:

If trading is a 'game', then it's the biggest money-game in the world. But unlike big-money sports games, anyone can play in the trading 'major league' from day one. There are no junior leagues to work up through where you're playing against other inexperienced traders. From day one, you're in the bear pit being allowed to compete against the absolute best professional traders in the world. The only entry criteria in having some spare cash.

Now imagine you were allowed to go up against Tiger Woods, Federer, Schumacher, who-ever. Not only that but you'd only just taken up the relevant sport a year or two ago. Would you seriously think you could make a living going head-to-head against these guys? Of course not, but whenever you trade, in effect that is exactly what you're doing. When you go short an oil contract, you are trading against a group of people which include the most informed, knowledgeable, experienced and talented oil traders in the world.

Now obviously, all we 'amateur' traders consider ourselves to be above average intelligence, otherwise we wouldn't consider wading in. Since all individual traders are of above average intelligence, and the other players are pros, then within the trading 'gene pool', we start out at average at best.

Not my argument, I'm quoting/paraphrasing Goslin, but I find it hits a particular resonance with me and find it useful to remind myself of this whenever I sit down to work...

 

[dbphoenix]

Now imagine you were allowed to go up against Tiger Woods, Federer, Schumacher, who-ever. Not only that but you'd only just taken up the relevant sport a year or two ago. Would you seriously think you could make a living going head-to-head against these guys? Of course not, but whenever you trade, in effect that is exactly what you're doing. When you go short an oil contract, you are trading against a group of people which include the most informed, knowledgeable, experienced and talented oil traders in the world.

Goslin, however, makes the same error that so many "expert" traders do. It isn't necessary to "go up against" the best. It is necessary only to study them, understand them, and bet on them. Or hitchhike with them, if you will. And when their game begins to deteriorate, fall back, off to the side, and look for the next winner.

"Trading against . . . the most informed, knowledgeable, experienced and talented . . . traders" is simply ignorant, if not the worst form of egotism. Trading with them, on the other hand, pays the rent.

Db

 

[Jack o'Clubs]

Goslin, however, makes the same error that so many "expert" traders do. It isn't necessary to "go up against" the best. It is necessary only to study them, understand them, and bet on them. Or hitchhike with them, if you will. And when their game begins to deteriorate, fall back, off to the side, and look for the next winner.

"Trading against . . . the most informed, knowledgeable, experienced and talented . . . traders" is simply ignorant, if not the worst form of egotism. Trading with them, on the other hand, pays the rent.

Db

No, that's not an error he makes. The whole point of his book is exactly the one you make: understand what they're doing and hitch-hike (as you put it) with them, and jump off onto the next one at the opportune moment.

 

[dbphoenix]

No, that's not an error he makes. The whole point of his book is exactly the one you make: understand what they're doing and hitch-hike (as you put it) with them, and jump off onto the next one at the opportune moment.

I haven't read his book, but you alluded to "his" analogy regarding these figures and going head-to-head with them. If he didn't say any of this after all, then just delete my reference to him.

Db

 

[Jack o'Clubs]

Yup, he makes the analogy because he's highlighting the folly of thinking you've got 'an edge' and going toe-to-toe with these guys. The book then covers the 'better way' which is in-line with your thinking.

 

[AsifA]

I'm confused as to why you consider yourself trading AGAINST the professionals as opposed to WITH ? And therein lies the problem with most traders. Its my gueriila warfare analogy rearing its ugly head. If the bulls and bears are battling it out, you join, hit and run whichever side is winning. It is as simple as that. You cant battle against the market movers. They look at their books and positions move the market in one direction or another. Your not privvy to that information. Your not privvy to market sentiment .Who in their right mind would try to second guess and put money on. Your going to lose money, for sure.

 

[dbphoenix]

I'm confused as to why you consider yourself trading AGAINST the professionals as opposed to WITH ? And therein lies the problem with most traders. Its my gueriila warfare analogy rearing its ugly head. If the bulls and bears are battling it out, you join, hit and run whichever side is winning. It is as simple as that. You cant battle against the market movers. They look at their books and positions move the market in one direction or another. Your not privvy to that information. Your not privvy to market sentiment .Who in their right mind would try to second guess and put money on. Your going to lose money, for sure.

If you're referring to me, I suggested the exact opposite.