No? There's a wealth of information there, if you know where to look!
No? There's a wealth of information there, if you know where to look!
Henry.
Not all money on the markets is intended as investment, not in the sense that it has to flow back to the paticipant(s) who put it there, with profit. Besides, retail money in the game of zero sum doesn't add up to a fly around a buffalos asre.
gamma
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Firstly I said to ensure a profit of the product not trading fx read the post
and second you accuse me of editing my post
look at the time of my edit 5:28
and your post 5:32
My post was edited long before you even read it
and as a matter of fact my post was edited for spelling I have slight dyslexia and do not see my mistakes until later
gamma
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However I would also like to say that I have always wanted to have a debate on this subject.
I was informed about the information in my above post by another trader and the term he did use was "adverse currency movements" but it was a long time ago and I am getting old thank you henry766 for pointing that out. Not being an economist I can only use layman's terms but I think I get the point over
And as Paul has also pointed out not all money in the market is for investment.How many more facets are there that we don't know about?
I believe a lot of traders think its a zero sum game when its not and we need people with the knowledge to educate us here
I was informed about the information in my above post by another trader and the term he did use was "adverse currency movements" but it was a long time ago and I am getting old thank you henry766 for pointing that out. Not being an economist I can only use layman's terms but I think I get the point over
And as Paul has also pointed out not all money in the market is for investment.How many more facets are there that we don't know about?
I believe a lot of traders think its a zero sum game when its not and we need people with the knowledge to educate us here
anandsancheti
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i read all the posts so far, and this for sure is an interesting tug of war.
Only thing i dont understand is how does religion get into trading and why something like that be used here, its disgusting.
Anyways, what i think about why a lot of traders fail is:
1. they overleverage, thus dont understand risk.
2. they suffer a drawdown, and in futures markets, when one suffers the drawdown someone on the other side is making huge profits.
thus you need to be on the right side of drawdowns.
now if we take it as a zero sum game and new people replacing those who went bust, then the pot is only getting bigger as new money comes in thus survival is all you need to have, which is what most traders fail to do.
thus if you follow those 2 rules you will be doing good.
another stat that i have is most traders who fail, fail with in the first 2 years of their career.
Only thing i dont understand is how does religion get into trading and why something like that be used here, its disgusting.
Anyways, what i think about why a lot of traders fail is:
1. they overleverage, thus dont understand risk.
2. they suffer a drawdown, and in futures markets, when one suffers the drawdown someone on the other side is making huge profits.
thus you need to be on the right side of drawdowns.
now if we take it as a zero sum game and new people replacing those who went bust, then the pot is only getting bigger as new money comes in thus survival is all you need to have, which is what most traders fail to do.
thus if you follow those 2 rules you will be doing good.
another stat that i have is most traders who fail, fail with in the first 2 years of their career.
Bladerunner
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The Axiom of the Small Edge
Found it one day following the BSD magical mystery tour bus, thanks markus
I think this goes a long way to explaining it, or at least explains why many what may appear to be reasonably good traders end up not really making it in the end.
The Axiom of the Small Edge:
A trader's long run edge is smaller than he thinks; it is much more akin to a card-counting blackjack player's edge of 1% due to variance, ever-changing cycles, and fear-induced losses.
The Postulate of Trading the Small Edge:
Given The Axiom of the Small Edge, what really matters in money management is that a trader always be prepared, always be able to hold a position with a positive edge that goes against him, and always be able to take the next trade:
Imagine
The worst trading day you've ever had. The seconds ticking by, the disaster scenarios playing vividly out.
Imagine
The blackjack player. His edge is 1% or 2 hands/100.
Imagine
The pressure.
Imagine
The public speaker. Stammering, nervous, unpracticed and unprepared.
Imagine
The blackjack player, the public speaker and the trader as one.
Imagine
Once per month being unprepared: 12 hands Once per quarter succumbing to the pressure: 4 hands Once per quarter not taking the next trade, not betting the correct size: 4 hands
Imagine
The blackjack player giving up 20 hands to the house:
His edge is now -18%
Imagine
The blackjack player and the trader as one.
"His edge is now -18%."
The Axiom of the Small Edge and The Postulate of Trading the Small Edge say that what really matters in money management is that a trader always be prepared, always be able to hold a position with a positive edge that goes against him, and always be able to take the next trade.
That kind of pressure adds up and results can go down the pan even more ~ Food for thought anyway pehaps
Andy
Found it one day following the BSD magical mystery tour bus, thanks markus
I think this goes a long way to explaining it, or at least explains why many what may appear to be reasonably good traders end up not really making it in the end.
The Axiom of the Small Edge:
A trader's long run edge is smaller than he thinks; it is much more akin to a card-counting blackjack player's edge of 1% due to variance, ever-changing cycles, and fear-induced losses.
The Postulate of Trading the Small Edge:
Given The Axiom of the Small Edge, what really matters in money management is that a trader always be prepared, always be able to hold a position with a positive edge that goes against him, and always be able to take the next trade:
Imagine
The worst trading day you've ever had. The seconds ticking by, the disaster scenarios playing vividly out.
Imagine
The blackjack player. His edge is 1% or 2 hands/100.
Imagine
The pressure.
Imagine
The public speaker. Stammering, nervous, unpracticed and unprepared.
Imagine
The blackjack player, the public speaker and the trader as one.
Imagine
Once per month being unprepared: 12 hands Once per quarter succumbing to the pressure: 4 hands Once per quarter not taking the next trade, not betting the correct size: 4 hands
Imagine
The blackjack player giving up 20 hands to the house:
His edge is now -18%
Imagine
The blackjack player and the trader as one.
"His edge is now -18%."
The Axiom of the Small Edge and The Postulate of Trading the Small Edge say that what really matters in money management is that a trader always be prepared, always be able to hold a position with a positive edge that goes against him, and always be able to take the next trade.
That kind of pressure adds up and results can go down the pan even more ~ Food for thought anyway pehaps
Andy
peto
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Hi Paul
Doesn't that apply only to buy-and-holders, or any one who sells their stocks without any real intention of ever getting back in?
A trader who sells 1000 RIMM or GOOG short to another trader must buy back in eventually and any profit will be balanced by a corresponding loss by the other trader(s). Over a set period (say a day) a pool of day-traders regularly trading RIMM might individually be making and losing substantial sums (less commissions) but as a group their total equity will remain the same if RIMM's share price closes unchanged at the end of that day.
A stock like this might be trading 5% of its issued shares every day, and that churning must represent substantially zero sum transactions?
Just interested in your view really, the 'zero sum' concept as it applies to shares has often made me scratch my head.
Pete
Read This...
A New Trader's Journey to Success
by James Okada Lee
Stage One: The Clueless Trader
This is the first stage when you enter trading. You may have picked up a book on technical analysis somewhere, heard of a day trader making millions, or got lucky in an earlier stock investment. After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive.
I don't mean to shatter anybody's dream but those who succeed in trading are the minority! Approximately 90-95% traders lose money. This is the cold hard facts. In the first stage, every trader is optimistic. You open a direct access brokerage account and the sound of Level II, ask/bid, and market makers make trading sound like hi-tech video game. In reality you have no clue. You will buy just to see the market reverse and you will short just as the market starts to rally. Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason. You are in the unconscious incompetence stage. You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know. Most traders will blow their entire account at this stage.
Stage Two: The Rookie Trader
In this stage you have lost enough money to realize what you are doing is completely wrong. In other words, you start to realize that you don't know. You will then devour every trading book available. You will study and purchase Technical Analysis of Stock Trends by Edwards and Magee believing price patterns are the Holy Grail. You will memorize every technical pattern known to man. You will read about the ADX, moving averages, Fibonacci lines, pivot points, MACD, Bollinger Bands, channels, etc... You will go through the "help" tab on your data vendor to read about every single technical indicator available. You will plot them on your charts and spend hours looking for an indicator that works. You will be extra confident now because think you have found the magical technical indicator.
Yet, you still continue to lose money everyday. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing. You realize that you are the sucker.
Stage Three: The Developing Trader
You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets. At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt for knowledge. Hunger and passion is needed to clear this stage. You will look for reference online, join mentor programs, chat rooms, and seminars. You realize the necessary elements needed to develop as a trader. You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles. You will start paper trading, develop strategies and setups, and define risk parameters for every trade. You will go on a hunt for self-understanding to master your psychological game. You will visualize every possibility on a trade before you take it. This is the true learning phase. You are trying hard to develop your edge in trading.
Stage Four: The Determined Trader
This is the stage in which you learn to specialize in certain markets and trading methods. Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it. You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader. You test your methods and they seem to work. You gain tremendous market knowledge. You reflect back on yourself and you can't help but laugh at your foolishness. Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments. You realize that the Holy Grail is not about technical indicators or price patterns. You calculate risk before profits and place strict money management on all your trades. You cut losses short and learn to scale out on your winners. You start accept losing as a natural part of the game. You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities. Your psychological makeup has changed from an amateur mindset to a professional one.
Step Five: The Consistent Trader
You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often. You have reached the conscious competence stage. You are fully aware of your strengths and weaknesses as a trader. At times you feel euphoric and at times you feel pain. But you are able to understand your own psychological makeup to control your emotional swings. You are now able to trade for a living.
Step Six: The Expert Trader
In this final stage, you completely understand the markets you are trading. Being involved in it everyday you are aware of every key price level. You understand market concept and are able to predict the direction of the markets a fairly good amount of time. You pat yourself on your back and take profits as soon as you feel euphoric. You do this because you understand euphoria is the same as emotional trading. You talk to other traders and realize the development stage they are in. People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!
Taking trades come naturally and you are able to get in and out at the precise price levels based on tape. Instead of having the markets take your stop out, you exit when you know you are wrong. You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks.
Entering the trading profession can be a tough journey for many people. Trading is one of the toughest careers that you can choose. If you enjoy the challenge, you will definitely enjoy the feeling of accomplishment. Trading is 30% mechanical and 170% psychological. 200% is required to become a successful trader. Good luck and best of trading.
A New Trader's Journey to Success
by James Okada Lee
Stage One: The Clueless Trader
This is the first stage when you enter trading. You may have picked up a book on technical analysis somewhere, heard of a day trader making millions, or got lucky in an earlier stock investment. After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive.
I don't mean to shatter anybody's dream but those who succeed in trading are the minority! Approximately 90-95% traders lose money. This is the cold hard facts. In the first stage, every trader is optimistic. You open a direct access brokerage account and the sound of Level II, ask/bid, and market makers make trading sound like hi-tech video game. In reality you have no clue. You will buy just to see the market reverse and you will short just as the market starts to rally. Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason. You are in the unconscious incompetence stage. You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know. Most traders will blow their entire account at this stage.
Stage Two: The Rookie Trader
In this stage you have lost enough money to realize what you are doing is completely wrong. In other words, you start to realize that you don't know. You will then devour every trading book available. You will study and purchase Technical Analysis of Stock Trends by Edwards and Magee believing price patterns are the Holy Grail. You will memorize every technical pattern known to man. You will read about the ADX, moving averages, Fibonacci lines, pivot points, MACD, Bollinger Bands, channels, etc... You will go through the "help" tab on your data vendor to read about every single technical indicator available. You will plot them on your charts and spend hours looking for an indicator that works. You will be extra confident now because think you have found the magical technical indicator.
Yet, you still continue to lose money everyday. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing. You realize that you are the sucker.
Stage Three: The Developing Trader
You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets. At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt for knowledge. Hunger and passion is needed to clear this stage. You will look for reference online, join mentor programs, chat rooms, and seminars. You realize the necessary elements needed to develop as a trader. You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles. You will start paper trading, develop strategies and setups, and define risk parameters for every trade. You will go on a hunt for self-understanding to master your psychological game. You will visualize every possibility on a trade before you take it. This is the true learning phase. You are trying hard to develop your edge in trading.
Stage Four: The Determined Trader
This is the stage in which you learn to specialize in certain markets and trading methods. Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it. You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader. You test your methods and they seem to work. You gain tremendous market knowledge. You reflect back on yourself and you can't help but laugh at your foolishness. Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments. You realize that the Holy Grail is not about technical indicators or price patterns. You calculate risk before profits and place strict money management on all your trades. You cut losses short and learn to scale out on your winners. You start accept losing as a natural part of the game. You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities. Your psychological makeup has changed from an amateur mindset to a professional one.
Step Five: The Consistent Trader
You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often. You have reached the conscious competence stage. You are fully aware of your strengths and weaknesses as a trader. At times you feel euphoric and at times you feel pain. But you are able to understand your own psychological makeup to control your emotional swings. You are now able to trade for a living.
Step Six: The Expert Trader
In this final stage, you completely understand the markets you are trading. Being involved in it everyday you are aware of every key price level. You understand market concept and are able to predict the direction of the markets a fairly good amount of time. You pat yourself on your back and take profits as soon as you feel euphoric. You do this because you understand euphoria is the same as emotional trading. You talk to other traders and realize the development stage they are in. People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!
Taking trades come naturally and you are able to get in and out at the precise price levels based on tape. Instead of having the markets take your stop out, you exit when you know you are wrong. You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks.
Entering the trading profession can be a tough journey for many people. Trading is one of the toughest careers that you can choose. If you enjoy the challenge, you will definitely enjoy the feeling of accomplishment. Trading is 30% mechanical and 170% psychological. 200% is required to become a successful trader. Good luck and best of trading.
Hotch
Experienced member
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Isn't it more about opportunity cost?
If somebody sells a stock, somebody else has to buy it, now from there, either the stock will go up or down.
If it goes up, then the seller has missed out the opportunity to make more, and if it goes down obviously the buyer has missed the opportunity to buy at a lower price.
I agree it's not zero sum, but i believe the general argument about us all being against each other is more to do with opportunity cost.
Probably wrong though.
If somebody sells a stock, somebody else has to buy it, now from there, either the stock will go up or down.
If it goes up, then the seller has missed out the opportunity to make more, and if it goes down obviously the buyer has missed the opportunity to buy at a lower price.
I agree it's not zero sum, but i believe the general argument about us all being against each other is more to do with opportunity cost.
Probably wrong though.
anandsancheti
Junior member
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I really like what bthomp2 has written.
but the good thing is that in 18months i am already close to reaching 4th stage and still have the same amount of money, as to when i started, that is despite two drawdowns.
rather you can say i have reached the 4th stage because i know what to trade, how to trade, entries and exits. nouses of emotions in trading and stuff.
thus i am not far off from making money consistently, thanks a lot buddy.
but the good thing is that in 18months i am already close to reaching 4th stage and still have the same amount of money, as to when i started, that is despite two drawdowns.
rather you can say i have reached the 4th stage because i know what to trade, how to trade, entries and exits. nouses of emotions in trading and stuff.
thus i am not far off from making money consistently, thanks a lot buddy.
new_trader
Legendary member
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That is a terrible description of Zero Sum. In a derivative market like Futures it is best to think of money in the same way as the conservation of energy, ie/ Energy cannot be created or destroyed it can only be changed from one form to another. In the same way, money cannot be created or destroyed; it only changes from one hand to another.
Imagine 10 participants in a game of poker each with an equal $100. The total sum of money in the game is $1000. Imagine at the end of the game, 1 person has won everybody else’s money. This means that 1 person has $1000 and 9 people have $0 but the total sum is still $1000-
Sum= 9x(+$US100)to the winner + 9x(-$100) from the losers
Sum= $0 (Zero Sum)
Now think of a poker game in which there are 10 players but nobody knows how much money each player has. Imagine 9 players only have $10 and 1 player has $100,000.Who is most likely going to win all of the money by the end of the day?
cu20052003
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Hi to ALL in this thread
The actual point is indeed NOT true!
You MUST TAKE INTO ACCOUNT every possible scenarios and REAL WORLD true volume and prices AND THE MONIES taken out of OR the losses into the market ( INCLUSIVE of the SPREAD TRADERS' BETS/ TRADE POSITIONS as well ).
Why? 'Cos some spread trade companies do not do any hedging and they do not compensate ( for shares futures - in terms of the dividends paid ) for adjustments - so that is why THEIR version of the DOW or FTSE and even other commocities prices like pork bellies are different! They just want the money! Like online gambling dens, the longer you stay with them the worse off you become 'cos the HOUSE has the EDGE over you - the gambler!
Recall that it can NEVER BE A ZERO SUM as you must know that INFLATION has hit sky high - either the FED/ CENTRAL BANK of ENGLAND raise the interest rate to hold it at bay or else the cost of electricity will basically cost a BOMB soon! As I speak, I am already spending a lot for my ONLINE activities - my web cam consumes power, my TV ( for my fundamental analysis ), my ........... etc, etc!
Not to mention the opportunity cost that should I get more out of a DAY JOB, I should quit the market completely????!!!! Of course, there are INDEED more ( 90-95% ) than those who profit out of the market! You must know that while the HUMAN BODY does nothing, IT ALSO CONSUMES ENERGY AS IT BREATHES! EVEN WHEN IT SLEEPS, IT CONSUMES A HIGH AMOUNT OF ENERGY to make repairs to the body and NOT TO MENTION the dreams ( recall the matrix? ) which when plugged into the dream world - energy is used to produce brain waves!
In this world, there is always a certain pattern and also the necessary ratio! So, sometimes, you get 90%, sometimes 91% or sometimes even 95%! Not everybody is a sure winner! Unless, you get a VERY GOOD and automated trading software ( which I am undertaking as a project now ). That will raise the percentage point by a little - just enough to push oneslef towards the 10 %!
Yours
S K
----------------------------------------------------------------------------------------------------------------------------------------
Hi there
Be one with GOD, so that HE may appoint a deliver for your Soul! -HariHaraBramKalki ( S K )
http://360.yahoo.com/cu20052003
The actual point is indeed NOT true!
You MUST TAKE INTO ACCOUNT every possible scenarios and REAL WORLD true volume and prices AND THE MONIES taken out of OR the losses into the market ( INCLUSIVE of the SPREAD TRADERS' BETS/ TRADE POSITIONS as well ).
Why? 'Cos some spread trade companies do not do any hedging and they do not compensate ( for shares futures - in terms of the dividends paid ) for adjustments - so that is why THEIR version of the DOW or FTSE and even other commocities prices like pork bellies are different! They just want the money! Like online gambling dens, the longer you stay with them the worse off you become 'cos the HOUSE has the EDGE over you - the gambler!
Recall that it can NEVER BE A ZERO SUM as you must know that INFLATION has hit sky high - either the FED/ CENTRAL BANK of ENGLAND raise the interest rate to hold it at bay or else the cost of electricity will basically cost a BOMB soon! As I speak, I am already spending a lot for my ONLINE activities - my web cam consumes power, my TV ( for my fundamental analysis ), my ........... etc, etc!
Not to mention the opportunity cost that should I get more out of a DAY JOB, I should quit the market completely????!!!! Of course, there are INDEED more ( 90-95% ) than those who profit out of the market! You must know that while the HUMAN BODY does nothing, IT ALSO CONSUMES ENERGY AS IT BREATHES! EVEN WHEN IT SLEEPS, IT CONSUMES A HIGH AMOUNT OF ENERGY to make repairs to the body and NOT TO MENTION the dreams ( recall the matrix? ) which when plugged into the dream world - energy is used to produce brain waves!
In this world, there is always a certain pattern and also the necessary ratio! So, sometimes, you get 90%, sometimes 91% or sometimes even 95%! Not everybody is a sure winner! Unless, you get a VERY GOOD and automated trading software ( which I am undertaking as a project now ). That will raise the percentage point by a little - just enough to push oneslef towards the 10 %!
Yours
S K
----------------------------------------------------------------------------------------------------------------------------------------
Hi there
Be one with GOD, so that HE may appoint a deliver for your Soul! -HariHaraBramKalki ( S K )
http://360.yahoo.com/cu20052003
Newtron Bomb
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Forgive me if this has been mentioned but Ive not read all the posts yet.
Consider a different view for a moment. Is it that 90% of traders fail or is it that 90% of accounts close due to losses? Now is it really 90% of all account or 90% of retail accounts? Stocks, futures or FX? How long do they maintain the 10% success status?
The data is a snap shot fact and an old one at that and does not take into account all the possible ways you get get involved in trading the markets.
Now lets think about a different angle totally.
If 10% of the traders that make it ie make money on their investments or initial deposits, they are at the top of their game.
In business/sport if you are at the top of your game then you are in a very small percentage of people who are succeeding at that activity.
How many CEO's, managing directors, professional sports persons do you actually know who?
In their field they are at the top of their game as there is no higher status for them to achieve it is now just a measure of success within that top etchilon that they will be measured against.
These people as a percentage of the population is a very small percentage... maybe 5-10%
Does this figure look familiar? Of course it does. So when we consider these figures in different areas of business and sports, it is actually normal for 90% not to succeed and 10% to be successful.
Conclusion; This is a scare tactic used by marketers for you to buy their products so that you are in the 10% success figure and it will all be down to their products, training or equipment. And the reality is that these often touted figures are in fact normal for any business
Consider a different view for a moment. Is it that 90% of traders fail or is it that 90% of accounts close due to losses? Now is it really 90% of all account or 90% of retail accounts? Stocks, futures or FX? How long do they maintain the 10% success status?
The data is a snap shot fact and an old one at that and does not take into account all the possible ways you get get involved in trading the markets.
Now lets think about a different angle totally.
If 10% of the traders that make it ie make money on their investments or initial deposits, they are at the top of their game.
In business/sport if you are at the top of your game then you are in a very small percentage of people who are succeeding at that activity.
How many CEO's, managing directors, professional sports persons do you actually know who?
In their field they are at the top of their game as there is no higher status for them to achieve it is now just a measure of success within that top etchilon that they will be measured against.
These people as a percentage of the population is a very small percentage... maybe 5-10%
Does this figure look familiar? Of course it does. So when we consider these figures in different areas of business and sports, it is actually normal for 90% not to succeed and 10% to be successful.
Conclusion; This is a scare tactic used by marketers for you to buy their products so that you are in the 10% success figure and it will all be down to their products, training or equipment. And the reality is that these often touted figures are in fact normal for any business
AgentZ86
Junior member
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Why 90% failure ?
I would like to try and answer this simply.
I agree with the 90% number however many may not, but the simple answer is because trading is 90% emotional and 10 percent knowledge.
In addition I would highly,highly recommend trading demo account until you can make consistent positive gains. If you can't control your emotions on a demo you won't control them in a live account either.
Also top rules of trading: Money Management,Never Trade Without A Stop Loss, and create a trading plan and trade that plan.
Many traders can and do make large gains, however without a stop loss they also make huge losses to take not only their gains, but their capital as well.
Think about money management this way, Lets look at BlackJack:
If you know Black Jack Pays 2.5 to 1, and a win or 21 pays 2 to 1, then you can calculate that if you place a 10 dollar bet, then you could only loose 2 times to 1, which is not very good odds really. or if you get blackjack a lot, then you could loose 2.5 to 1 win, which is also not very good.
So with trading you have to calculate how much you want to risk for how much you want to reward. And thats part of your trading plan, and the most important.
Many fail because they don't understand this at all.
If you have a risk/reward ratio of 1:2 then you can be wrong 50% of the time, for example:
I place one lot and risk 10 pips, and going for 20 pips not counting the spread etc.
Then lets say in 10 trades, I win5, and loose 5, then I would sort of break even not counting the spread.
However, if my probability is better then 50% lets say 40% losses and 60% wins, then I would make a profit by only being right 60% of the time, and wrong 40% of the time.
And if my probability of trades is in the 70% now your talking nice profits etc.
In fact you can make nice profits on 50% or less, if your risk reward is better lets say 1:3 or 1:4 that means you can now be wrong 66% of the time or even 75% of the time and break even or perhaps make a little profit.
Anyhow you can see how important money management is.
And you have to take into account, that if you only have a mini account with 1k in there, then you can't trade 10 lots etc, you should only risk 4%-6% on any trade, and thats max. Most would consider that to be too high, money managers typically risk 2% of their equity on any trade, others can risk more especially once you get the feel of your probability.
Anyhow I hope this helps.
And to conclude I would say that whatever the % of failure is 90% etc it's probably true, however you can't listen to the loosers about advise on trading you have to listen to the winners and find out what they are doing to make money trading etc.
It's the same with anything weather it's trading, or business or even if you got into amway business etc. You have to follow the winners not the loosers, because the loosers can't help you understand what it takes to make it work, only the ones that are involved and actually doing something with it to becomes successful can help you.
Anyhow thats all I know.
Hope this helps.
I would like to try and answer this simply.
I agree with the 90% number however many may not, but the simple answer is because trading is 90% emotional and 10 percent knowledge.
In addition I would highly,highly recommend trading demo account until you can make consistent positive gains. If you can't control your emotions on a demo you won't control them in a live account either.
Also top rules of trading: Money Management,Never Trade Without A Stop Loss, and create a trading plan and trade that plan.
Many traders can and do make large gains, however without a stop loss they also make huge losses to take not only their gains, but their capital as well.
Think about money management this way, Lets look at BlackJack:
If you know Black Jack Pays 2.5 to 1, and a win or 21 pays 2 to 1, then you can calculate that if you place a 10 dollar bet, then you could only loose 2 times to 1, which is not very good odds really. or if you get blackjack a lot, then you could loose 2.5 to 1 win, which is also not very good.
So with trading you have to calculate how much you want to risk for how much you want to reward. And thats part of your trading plan, and the most important.
Many fail because they don't understand this at all.
If you have a risk/reward ratio of 1:2 then you can be wrong 50% of the time, for example:
I place one lot and risk 10 pips, and going for 20 pips not counting the spread etc.
Then lets say in 10 trades, I win5, and loose 5, then I would sort of break even not counting the spread.
However, if my probability is better then 50% lets say 40% losses and 60% wins, then I would make a profit by only being right 60% of the time, and wrong 40% of the time.
And if my probability of trades is in the 70% now your talking nice profits etc.
In fact you can make nice profits on 50% or less, if your risk reward is better lets say 1:3 or 1:4 that means you can now be wrong 66% of the time or even 75% of the time and break even or perhaps make a little profit.
Anyhow you can see how important money management is.
And you have to take into account, that if you only have a mini account with 1k in there, then you can't trade 10 lots etc, you should only risk 4%-6% on any trade, and thats max. Most would consider that to be too high, money managers typically risk 2% of their equity on any trade, others can risk more especially once you get the feel of your probability.
Anyhow I hope this helps.
And to conclude I would say that whatever the % of failure is 90% etc it's probably true, however you can't listen to the loosers about advise on trading you have to listen to the winners and find out what they are doing to make money trading etc.
It's the same with anything weather it's trading, or business or even if you got into amway business etc. You have to follow the winners not the loosers, because the loosers can't help you understand what it takes to make it work, only the ones that are involved and actually doing something with it to becomes successful can help you.
Anyhow thats all I know.
Hope this helps.
new_trader
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No, you are wrong...Ok?
Trading the ES contract, I MUST lose $50 in order for someone to win $50. That's the way it works. How can you get around this fact? Spread doesn't come into the equation at all, neither does the cost of transaction or electricity or rent or pizza with or without anchovies.
If I make a bet with someone and win $10 then they MUST lose $10. If I then spend $5 on web cam electricity then sure, I only have $5 left, but that doesn't alter the fact I won $10 and the other person lost $10.
new_trader
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I disagree. I'd say >90% of profitable trading is skill & knowledge. I don't get what you mean by 'emotional', do you cry when you trade?
And then what? Do you buy or sell?
anandsancheti
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look markets can be only compared to poker, the house is the exchange and the broker, they get the commission for us playing.
now if millions of people are playing on a table and they generally leave when they lost it all, that money stays on the table and as people fade and new one comes in some hands keep getting stronger.
the successful 10% turn sort of old and grumpy.
the pot size keeps increasing, and the longer you survive the more money you make.simple thats the way it works.
now this game cannot be a blackjack as you are not playing with the house, this is more like poker. some play blind some on probability and once you go all in you cannot afford to be wrong. wrong and you are out.
good game still i like it.
now if millions of people are playing on a table and they generally leave when they lost it all, that money stays on the table and as people fade and new one comes in some hands keep getting stronger.
the successful 10% turn sort of old and grumpy.
the pot size keeps increasing, and the longer you survive the more money you make.simple thats the way it works.
now this game cannot be a blackjack as you are not playing with the house, this is more like poker. some play blind some on probability and once you go all in you cannot afford to be wrong. wrong and you are out.
good game still i like it.
rols
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An understanding of what 'percent' means may help too.
(HINT There is no such thing as 200%
)stocks are not a zero sum game
agreed: the stock market is not a zero sum game, in that it does create wealth.
in fact that is the big concern when we all realize that the market market created too much wealth (is over valued) compared with the crap on the ground (buildings, services, potential real world earnings).
futures and options are a zero sum game because there is always a counter party. the huge problem with those markets is that there are more derivatives than underlyings. and everybody knows it. and the music there is stopping and everybody must find chairs.
Zero-Sum Game
agreed: the stock market is not a zero sum game, in that it does create wealth.
in fact that is the big concern when we all realize that the market market created too much wealth (is over valued) compared with the crap on the ground (buildings, services, potential real world earnings).
futures and options are a zero sum game because there is always a counter party. the huge problem with those markets is that there are more derivatives than underlyings. and everybody knows it. and the music there is stopping and everybody must find chairs.
Zero-Sum Game
AgentZ86
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Still depends on strategy
You see it still depends on strategy here. The 100k topic doesn't mean much if the person with the $10 dollars has a good strategy and the person with the 100k doesn't then who do you think will end up with the money.
Even if you took all the money from the wealthy and gave it to the poor, the wealth would have all the wealth again in matter of short time, because they knew how to get it and to keep it to begin with. So that theory is an ok way of looking at it, but it's not really the case, because thats sort of falling into agreement that you can't make money in trading unless you have lots of money and thats just not true.
I mean lets take your person who has the 100k and this depends on how he got the money to begin with. Lets say he robbed a bank, or perhap he got a large legal settlement and wants to invest into forex.
In your senerio he would be more likely to win at forex just because he has 100k as oppose to the guy who has a 1k in a mini account.
That would be unrealistic to say that because he robbed a bank and wants to double his money that he would now have an advantage over the guy with only 10 bucks.
Thats is so far from the truth, however I do get your point and believe that you would be better off playing against someone who has equal amount of funds, because unlike forex, in poker you can't call someone's bluff if you don't have the funds to match or call them etc. ? So basically you have to fold. So in the poker senerio that is true, however trading is not very much like poker in the sense that there are too many players at all levels and those with 100k and no strategy are sure to loose if their just gambling.
I would bet on the guy with 1k mini account and a good sound strategy that has been tested in a demo account for positive consistant gains against any guy with 100k that just thinks he will double his money by continuing to doubledown like in black jack etc.
Anyhow nice thought, but I don't agree with that assessment exactly, but perhaps only partially.
Anyhow just wanted to put in my 2.5 cents LOL
You see it still depends on strategy here. The 100k topic doesn't mean much if the person with the $10 dollars has a good strategy and the person with the 100k doesn't then who do you think will end up with the money.
Even if you took all the money from the wealthy and gave it to the poor, the wealth would have all the wealth again in matter of short time, because they knew how to get it and to keep it to begin with. So that theory is an ok way of looking at it, but it's not really the case, because thats sort of falling into agreement that you can't make money in trading unless you have lots of money and thats just not true.
I mean lets take your person who has the 100k and this depends on how he got the money to begin with. Lets say he robbed a bank, or perhap he got a large legal settlement and wants to invest into forex.
In your senerio he would be more likely to win at forex just because he has 100k as oppose to the guy who has a 1k in a mini account.
That would be unrealistic to say that because he robbed a bank and wants to double his money that he would now have an advantage over the guy with only 10 bucks.
Thats is so far from the truth, however I do get your point and believe that you would be better off playing against someone who has equal amount of funds, because unlike forex, in poker you can't call someone's bluff if you don't have the funds to match or call them etc. ? So basically you have to fold. So in the poker senerio that is true, however trading is not very much like poker in the sense that there are too many players at all levels and those with 100k and no strategy are sure to loose if their just gambling.
I would bet on the guy with 1k mini account and a good sound strategy that has been tested in a demo account for positive consistant gains against any guy with 100k that just thinks he will double his money by continuing to doubledown like in black jack etc.
Anyhow nice thought, but I don't agree with that assessment exactly, but perhaps only partially.
Anyhow just wanted to put in my 2.5 cents LOL
