Why most newbie traders fail?

You put your finger right on it with your "ps:" I wrote a rather exasperated post on the LLOY thread, in "UK shares", last night. It's extremely hot in Barcelona just now and I came home a bit sticky, prickly and impatient.

It surprises me how traders will try to spot the bottom of the bank sector's slide when they should be taking advantage of the beautiful trend that we have been enjoying (i.e. short traders) over the last few weeks.

Good trading, Split
 
I think the REAL reason that 90% of newbies fail is the harsh fact that 90% of newbies should not be trading.
A Doctor/Solicitor?Plumber etc takes many months/years to train . Likewise as a Bank trader it was at least 6 months intensive work in a very busy dealing room before being allowed anywhere near a deal. It`s hard enough in the "city" environment let alone sitting at home. A couple of weeks on a demo account just doesn`t cut it. Yes -there will be exceptions but most are dreamers. :) Just one opinion.
 
I think the REAL reason that 90% of newbies fail is the harsh fact that 90% of newbies should not be trading.
A Doctor/Solicitor?Plumber etc takes many months/years to train . Likewise as a Bank trader it was at least 6 months intensive work in a very busy dealing room before being allowed anywhere near a deal. It`s hard enough in the "city" environment let alone sitting at home. A couple of weeks on a demo account just doesn`t cut it. Yes -there will be exceptions but most are dreamers. :) Just one opinion.

Yes, it's true but I think that you, as a professional trainee, must convince your bosses that you are capable of trading other people's money.

I think that there is a difference. A beginner can draw his horns in and trade modestly, within his budget, and become successful in less time. However, the management of his money is a prime factor. Once it has gone there is no more!

As you say, dreaming and spending it before you have gained it is a common failure but you have an incentive that we don't have.

If you you lose their dough, you're fired! Real Alan Sugar stuff! :D

Split
 
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I feel that there are many reasons why people fail in this business and, as in most walks of life, there is no ‘one fits all’ answer and because of this certain people may fail for one single reason or perhaps, more commonly, a combination of reasons which statistically combined leads to the increase in the probabilities of ‘risk of ruin’.

Generally these reasons might be;

1 Failure to learn to control emotion which leads to poor decision making.

2 Failure to understand fundamental and simple mathematics which they are battling against if too larger percentage of one’s trading pot is risked on individual trades.

3 Failure to recognise and then fully understand that trading, especially short term, is about probabilities and NOT PREDICTIONS.

4 Entering the market place with preconceived ideas about trading which are not only false but destructive. For example someone might say that “If I have a better computer with four screens and a lightning fast internet connection then I will be a better trader”.

5 Under capitalisation and / or external money pressure which leads a trader into a position where they feel that the market must produce ‘regular’ and ‘consistent’ profits for them. This causes emotional strain when the market doesn’t fulfil our inherent emotional demands ie regular income.

Steve.
 
there is nothing wrong with putting up 10% for the right opportunity. for me

In my view this will still depend on the success rate of your approach regardless of whether it is discretionary or mechanical.


Paul
 
Great posts here.

Another cause of failure for the 90%ers of Net-Losers-United is Holy Grailism.

The average loser comes up with a good system. Irrespective of win rate every system can and will go through strings of losses.

Whats your average loser do when faced with the inevitable, a succession of trades going against them ?

They lose faith, dump their system, and go looking for a new one.

Not everybody will agree with me on this, but I am firmly convinced that a good, robust system, a system that is aligned with how markets work, would have have worked in the day and age of Jesse Livermore just as well as today.

Reminiscences of a stock operator is what taught me trading, and that book is a hundred years old.

I do not think that markets change, simply because humans don't change, and humans are the ones that drive markets, be it discretionally or through computer models that humans wrote, it's always a human at the end of the day who influences what happens.

Markets just simply are not predictable...

Why are they not predictable ?

Because Markets are nothing else than the collective result of all their participants actions...

Actions driven by hope, fear and greed, on what will happen next.

There is no inner logic to markets, there is no system to markets, there is no secret explanation to price development...

Anything can happen at absolutely any time if somebody influential gets a brain fart and shares that with the media, or if a large enough order pushes a market in a direction opposed to what your clever analysis would have you believe should happen next...

Markets are simply constantly being pushed to and fro by the diverging interests of all their participants, all following their own agenda.

A market is nothing else than a conglomeration of huge numbers of participants all following totally different objectives...

You have hedgers, you have speculators.

You have fundamental traders, you have technical traders.

You have scalpers, daytraders, swing traders, position traders.

You have participants that see the same price levels, yet for some price is too high, for others it's too low.

Etc etc.

Every participant in markets has a different perceptive, different objectives, and different risk parameters.

That is why the notion of predictable markets that follow some inner system is nonsense, thats why the search for Holy Grail unlocking the secret to markets is a quest best left to the 90% of net losers.

The market is composed not of an inner logic or system that would be seperate from it's constituting participants, no, a market is nothing but the sum of it's constituting participants, each of whom has his own agenda, doing his own thing.

Anybody who honestly believes that markets do what technical analysis says they should do next should just watch Mr Soros buy 10 Billion Euros and see what happens to all their clever analysis.

You can generate a random chart of anything, and that chart will look exactly like a real chart of a real instrument !

Anybody who honestly believes that a chart of a real instrument will look different than it's random counterpart has just never looked at a random chart.

BUT, where academia got it wrong, is that randomness of markets absolutely does not mean you cannot profitably trade them.

Random charts have tradeable trends just like all charts do.

The real problem is that people like to believe that they are clever, and that they can, through their cleverness, analyse situations, come up with the correct answer, and solve problems.

Ego dictates that people have a real need to believe that success is their very own achievement, while lack of success is usually attributed to circumstances beyond their control.

Look, we know that trading has nothing to do with being right...

Brett Steenbarger:

"...As a rule, maximizing batting average/minimizing drawdown comes at the cost of lowering overall system profitability...."


Why do people still insist on wasting time, money and effort on solving problems that do not exist, on trying to outwit what cannot be outwitted, markets that are nothing else than the sum of all our actions ?

There is no pattern that tells you what will happen next, BUT you do not need that to make more money than you can ever spend.

Stop chasing the holy grail, stop believing that if you just keep on studying markets you will one day be able to predict what happens next, you do not need to feel that you understand price to get rich.

Markets can go up, down or sideways, that is all they do.

All you need to make a fortune is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.

Trading is nothing than a probability game.

You create your positive expectancy not through predicting markets.

You create your net profitability through your prefered combination of risk / reward ratios and win rate, through either on average letting your winners run longer than your losers with a lower win rate, or by cashing in smaller winners than losers albeit with a higher win rate.

That is all trading is, it's not about being right, it's about making money by understanding that it's just a numbers game.

Next time someone tells you they have a great new system thats gonna beat the markets just give Mr Soros a call and tell him to buy ten billion worth of EUR/USD while watching your friends pipe dream go up in smoke.

Like Exile says, trading is simple, maybe not easy, but simple.

KISS !
 
Random charts have tradeable trends just like all charts do.


do not the terms "random" and "trends" conflict
 
Mini-Mouse, this here shows what I'm on about RE random charts:

Click: Trading a Random chart

A chart based on random data generated by MS's random number generator, as in this case, looks the same like a chart of the Euro or BP, with ranges, uptrends, downtrends, support, resistance, etc, and, accordingly, with the same tradeable elements.
 
Yokiro, trader..., i agree with you. I woke up these morning thinking on how to improve my development and the first i thaugth was Yokiro´s conclussion, the second that came to my mind was Trader333 advice, so in these case i´m in a trap.
To see my trading as a bussines i shouldn´t expose far than 5% on each trade, considering a very short time frame, but since my trading account doesnt have too much money on it i only have two choices, the first one - and easier when you can do it - is to increase my trading account´s equity or the second which most of the people will have to face is, to increase a small amount account you will have to face high risk, so be very - extremelly - carefull when you get in and out of any position. As long as your trading account fund´s increases yoiu have the chance to decrease steadilly your exposure.
Most of the newbies, in these point Yokiro seem´s as a guru, doest have the expertise to completelly understand what i say in the second pharagraph, but most of what i already know is due to the advice i´ve got in these and other forums. Anyone can understand these. So before trying to make a big account my advice is be wise and remember, since we have two ears and one mouth, we should hear twice than we speak.
 
so many of you are right and so many of you still have no clue. but thats ok it takes years to get there. to become a pro trader you must become a pro loser. too many traders just dont get this but in reality you can lose 7 trades out of ten and make money. you can also start with a small account no problem, it just takes longer to get the momentum going which is ok for newbies because they need the screentime
 
Mini-Mouse, this here shows what I'm on about RE random charts:

Click: Trading a Random chart

A chart based on random data generated by MS's random number generator, as in this case, looks the same like a chart of the Euro or BP, with ranges, uptrends, downtrends, support, resistance, etc, and, accordingly, with the same tradeable elements.


Thanks for the reply and interesting video.but I am still not convinced that random sequences can be predicted
 
Ok Tropical Goblin, What We Say Is A Result Of Many Time Spent Trading, That Doesnt Makes Anyone To Be Completely True. Times Change, And Also People And Markets Do.
What Strongly Calls My Attention Is When You Say Many Of Us Are Still Having No Clue, And That Even Loosing 7 Out 10 Trades You Can Still Having The Chance To Make Money, These Has A Message, Can You Be Clear?.
If You Have Something That Can Help Anyone, Thats Wellcome Here.
Here We Share Knowlegde And Expertise, And We Try To Help Others To Succes.
You Can Consider Me Your Pupil
 
Emini-mouse Randomness Regards To Inpredictability, Thats The Most Important Consideration To Make About Markets When Trading.
 
Mini-Mouse, this here shows what I'm on about RE random charts:

Click: Trading a Random chart

A chart based on random data generated by MS's random number generator, as in this case, looks the same like a chart of the Euro or BP, with ranges, uptrends, downtrends, support, resistance, etc, and, accordingly, with the same tradeable elements.

Allowing for the possibility that the 3 random charts may have been selected from others which don't prove the authors point quite so well, I remain unconvinced. I have a random chart generator based on excel, and agree that most of the time these traditional S&R levels and trends can be seen in hindsight, however when looking at the "hard right edge" things are not so clear.

If I truly believed the markets were equally random I would stop trading today, but instead believe the human element introduces a small (tiny even) element of non-random behaviour which can be exploited if one has the skill and the patience to allow a small edge to play out its statistical advantage over time. Which is what I believe the majority of your previous post was saying, and I agree with.
 
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Makes sense, Peto.

I think I shouldn't have mentioned the random part as that's not really something that's important to me either way, I think the way you described that definitely makes sense and sounds right, but I don't really have any hard opinions on the randomness or non-randomness of markets.

My take on trading is that anything that has ranges, downtrends, uptrends, support, resistance, breakouts, breakdowns, etc. is tradeable, as per the random example in the video, or Exciles Chaff Futures, Indexes, commodities, stocks, female breast size stats through the decades, haha, to me a chart from 1900 looks like a chart from 2000, so that's really my take, as long as something has support and resistance and the odd trend or so I don't really care about what it is or what the funnymentals are, then to me it's tradeable.

(OK, having an idea about fundamentals is never wrong, as long as one remembers that markets can remain irrational far longer than your purse can survive, and that one should trade what is at the moment, not what should be. A bubble is a bubbble, but why not make money while the bubble is bubbling kind of thing.)

Re your point about hindsight in the above random charts, true, but then again all of my trading is always just a surmise based not on knowing what the individual trade will do, but on believing that I have a long term edge that in my case comes about through letting my winners run while keeping my losses small, eg if I take a breakout from a resistance point I also do not know in advance which trades will work out and which won't, all I know is that as long as whatever I'm trading is going to develop some decent trends I'll be fine.

OK, Saturday night, time for some drinks and a night out, what what.

GERMAN_BEER_GIRLS.jpg


Cheers
 
Ok Tropical Goblin, What We Say Is A Result Of Many Time Spent Trading, That Doesnt Makes Anyone To Be Completely True. Times Change, And Also People And Markets Do.
What Strongly Calls My Attention Is When You Say Many Of Us Are Still Having No Clue, And That Even Loosing 7 Out 10 Trades You Can Still Having The Chance To Make Money, These Has A Message, Can You Be Clear?.
If You Have Something That Can Help Anyone, Thats Wellcome Here.
Here We Share Knowlegde And Expertise, And We Try To Help Others To Succes.
You Can Consider Me Your Pupil

humans are hard wired in life to succeed and by definition we measure success by successful acheivements. when people try their hand at trading they try use the same measurement and inevitably become stuck in a loop of jumping from system to system tweeking this and that and eventually give up. so many newbies think they understand the basics but actually have no clue. you can lose 7 out of every 10 trades and still make money but 90% of traders cant understand this and it isnt an odd coincidence that 90% fail (the same croud). now there are a few basics a person needs to become successful.

1) a set of setups combined with rules that over time guarantees a particular outcome with a win ratio that enables the trader to make money like a casino.
2) money management
3) soldier like mental control. trading is 70% mental and 30% method. a trader needs to understand that not every move is a setup and not every setup is good. the ability to be patient for only the right setups with no ecceptions. a trader also needs to trade only when a plan is made, by this i mean has the setup filled all the requirements, does the trade qualify a good risk reward ratio, stop and targets must be known.

now as simple as these concepts are the typical trader fails to master them and from observing so many newbies i have found a common trend. firstly new traders seem to hang onto the fact that their system is the problem and they also seem to think they need to win more than they lose. this mindset is what makes 90% fail. now you probably wondering what system am i using and am i willing to share it. yes i am but the fact is there are a hundred ways to trade the market and what works for me might not for you. lets talk about systems, indicators ect. for a system to be good it needs to meet the following requirements..
1) repeatable setups
2) low risk, high reward
3) no indicators , they are rubbish and cannot compare to price action. indicator traders rely on them too much and as a result they ignore what price is telling them

thats it!!! you dont need anything else and when testing systems you must have one that can give you this. now back to the 7/10 trades, lets take a real close look and give the 20 second explenation. if your system gives you great risk/rewards ratios then all you need is 3 winners out of every 10 trades to succeed. my method is simply the andrews pitchfork and price action. price always has a frequency and andrews pitchfork catches these beautifully. i typically have setups that allow me risking no more than 20 pips with rewards of 100+ and i maintain a win/loss ratio of around 50-60% . i have attached a screenshot showing you how even a bad winloss ratio combined with compounding can make you a winner over a year. this is for a 1000 capital account with a consistent win rate of 30% and loss rate of 70%
 

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So how new am I ?
Oil is going to go up in price in the next week or two as it has for the last year on year.
I have made over 23K on It,
And lost up to now 32k,
Why dont I (as I have now a small account )put £1 with no stop loss If i had done this when i started trading 8 weeks ago oil at 125$ And each day /week adding on £1/£10/£50 I would be a very happy man
Or if i had used stop loss I would not be as rich as the above scenario but richer than i find my self now
 
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Tropical godlin how do you manage to put on a trade and then a 20 pip stop loss or do you pull out manualy at 20 pips down and does the 20 pips include your spread?
As each time I put on a trade it moves more than 20 pips before you got time to put in the stop with in 3 to 6 minutes you have moved on 50pips
May be because I only trade oil as i dont know what else to trade.
 
Tropical godlin how do you manage to put on a trade and then a 20 pip stop loss or do you pull out manualy at 20 pips down and does the 20 pips include your spread?
As each time I put on a trade it moves more than 20 pips before you got time to put in the stop with in 3 to 6 minutes you have moved on 50pips
May be because I only trade oil as i dont know what else to trade.

look at the 2 attached charts, one shows a successful trade and the other a stopped out trade. the lines from the andrews pitchfork define price range and direction and when drawn right contain price magically. if price breaks these setups and my stop is hit which is up to 20 ticks outside these support and risistance lines then the setup is invalid and i take my money and run. i do not want to be hanging about because i know from consistent success that these lines should contain the price and when they dont the trade is wrong. all my orders are setup on entry (stop,target). i trail my stop once the trade is on its way. i suggest as a new trader you dont trade oil which tends to have violent moves which can break an account without a stop. ALWAYS use a stop, if you not going to use a stop then you never going to succeed as a trader
 

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