Can all traders be successful traders?

[stevespray]

Jtrader….

In my opinion the answer would have to be “YES”.

In fact, most people who followed the rules that you have laid out are likely to be successful traders full stop.
The problem is that what you have laid out is simply the first step on the long journey. You a noted a series of methods which would lead to a successful system. The hard part is actually following your methods or rules. The reasons that people have problems following their own rules are simple. Doing something about those problems is not easy. This is why many fail. Whatever system you follow, be it yours or someone else’s (or even a ‘blackbox’ system) you will be exposing yourself to emotions which you may have failed to consider. If you have system like Tradestation then you can backtest as many systems as you like. The system will churn out 100’s of statistics about your programmed system. Some of these statistics are pretty meaningless to all but the most seasoned of technicians. There are however some statistics which are worth bearing in mind when considering the psychological impact of trading a particular system. Things like the number of consecutive losing trades, for example, can have an absolutely massive impact on your discipline and motivation. The time that you spend in losing trades vs. the time you spend in winning trades can also be a factor. Do you have the mental strength / discipline to run winning positions or will you pressure yourself to ‘outsmart’ your system and break one of its rules. After five good wins on the spin will you still be able to keep to that money management strategy which seems, in your mind, to limit returns rather than stop losses and capital drawdown. If only you’d doubled up your last couple of winners you’d be so far ahead of the game. All these psychological factors are beating away at you. CAN YOU FOLLOW YOUR PLAN ?

Even seasoned traders who follow their plan for years come unstuck when they venture from the path. People place themselves in danger because the stray from the ‘comfort zone’ without assessing how they will survive outside that zone. In such surroundings the subconscious mind takes control and will normally make the wrong choice for you because, all your subconscious mind is programmed for, is surviving in situations when the conscious can properly cope. The best example of this I can give is the ‘skidding car’ analogy. Obviously we’ll ignore ABS breaks for this one. When most people are in a moving car which is heading towards a crash they panic. The subconscious takes over and automatically presses the brake. The car enters a skid, all wheels firmly locked. Of course it is impossible to steer the car as the wheels aren’t turning, the car is simply gliding along on 4 patches of stationary rubber. As you get closer to the point of possible impact the subconscious reaction is to press the brake harder still, the subconscious mind is determining that you need to stop the car more quickly and therefore more braking is required. In order for more braking to occur the pedal must be pressed harder. The subconscious mind fails however to consider that the friction coefficient, which keeps the tires in even contact with the road (and turning), has already been exceeded. The result is obviously a ‘loss of control’. Of course the correct way of handling such a situation is to release the brakes slightly in order that the wheels re-establish proper grip on the road surface. This not only makes you stop more quickly but also allows further control of the car through steering which might mean that you are able to avoid an impact even if you don’t actually stop the car. The same is true in a skid when the car is turning, the subconscious makes you turn the wrong way which increases the skid instead of turning in to it to try and re-establish grip. Likewise with a caravan which is going to jack knife, people sense its going to happen and the subconscious makes us brake when acceleration is what is required in order that the car and caravan are pulled back into a straight line. Of course you can take advanced driving lessons and towing lessons which will ‘train’ you to react better should such a situation occur, or, even better, they will train you not to let the situation occur in the first place. Essentially what these lessons do is expand your ‘comfort zone’, they expand the areas where you are still consciously in control of what is going on. This is what is so vitally important in trading, to be in control of your trade rather than your trade being in control of you.

So in the analogy the car is your ‘mechanical trading system’ but you are still the driver. It is your mind which is operating the system. How will you handle the ‘adverse’ driving conditions today ?

Wishes,
Steve.

 

[LION63]

Trader 333

I do not wish to stray too far from the original topic of discussion so I will be brief. You will note that your post specifically mentions "we in the Western world." The last 100 years or so has seen a vast transfer of 'wealth' from the so called undeveloped nations to the West. Many would say that it is best described as exploitation. Unfortunately, things are starting to turn full circle and it will not be long before the shoe is on the other foot. Note that America has gone from being the largest creditor to the largest debtor (in how many years?). Who now owns these promissory notes? Where are all the jobs going?

No matter how you wish to explain things away it is still REDISTRIBUTION.

Stevespray,

I hear your analysis loud and clear but sadly it is still REDISTRIBUTION.

If I sell you my house for say £250,000 you may well choose to pay me in cash; I take the money buy a £50,000 car, and put the balance in a savings account. I may feel rich but all I have done is swap a house for a car and cash in the bank. You may feel rich because you now live in a better house (no offence, just an illustration). But are you any richer? No. You have simply traded your cash for a home. As for the examples of shares going higher and higher and higher; millions of shares traded per week etc.......Sure, but sooner or later someone is left holding securities that are worth less than they paid for them, they are the losers in this equation.

I AGREE that it is possible for all of us as day traders, swing traders etc. to make money (and have a good life in the process) but once again all that would happen is that we are taking from the long term investors and they end up paying the price. Why is it that every time the markets move in a volatile manner governments, pension funds, socialists etc. want to ban speculators (us)?

Gentlemen, no matter how we look at it, it is a ZERO SUM GAME.

 

[Trader333]

LION63,

Sorry I disagree but as you dont wish to discuss it then fine. The only point I will make is that manufacturing by its very nature takes raw materials which are made into a product that then has added value. This then enables growth in wealth without your model of redistribution. You still havent explained where the wealth came from to start with if all that has ever happened in recent times is wealth redistribution ?


Paul

 

[harryc]

"If all traders were to use a trading system that ensures greater profits than losses - and stick to it, is it fair to assume that all traders can be profitable/successful and make a living from trading?"

As long as that system is adhered to religiously then that is a fair assumption .

The biggest problem is that a lot of traders whether they be full or part time come into this 'game' not having the ability to deal with a loss . I took more than my fair share in the early days ( some in the 000's - hold it , it will bounce , YEAH RIGHT !! ) but the trader who comes into this game expecting to lose will go a long way because I've yet to meet ANY trader and I've met a few both here and on the other side of the pond , that have NEVER lost a trade .

just my 2p worth

 

[LION63]

Trader 333,

In order to make a cabinet, one would need to cut down a tree which is on land that is owned by someone who requires some form of compensation. The wood is now sawn, cut, chopped before being treated; whoever does the work requires compensation. The cabinet is then finished off by a skilled carpenter who sells it (for compensation). I will assume that it is sold to a shop owner who uses it to display his goods. The landowner goes into the shop and purchases some equipment (for compensation}.

There has been an improvement in the lifestyles of all the parties concerned and their general well being but have they collectively created any real wealth as a group? This is what economists mean when they say that real wealth is not created in absolute terms.

May I clarify that my earlier reluctance to continue the discussion/debate was because I wanted to avoid departing too much from the original post. I strongly believe that when parties engage in meaningful debate, they all learn and benefit in different ways (why else would we have joined T2W?).

 

[stevespray]

Lion…..

Likewise (from your last response to me), I understand the point that you are making. I still feel that you are missing a number of points. Firstly, your argument stops because you consider money to be the ‘base unit’ on which all business is conducted. Of course in the ‘real world’ (like the model that you and Paul have been debating) this is taken to be so. In actual fact money is just the same as any other commodity, in fact, it is a form of derivative in its own right. Take a look at a Ten Pound note, or any monitory note issued by the Bank Of England. On it you will see written “I promise to pay the bearer on demand the sum of Ten Pounds”….essentially it is an open ended futures contract (which I know is an oxymoron in financial terms). If you went to the BoE and demanded ten pounds, which is actually your legal right, how would they pay you ? Give you another tenner ? Who knows.

The point I make is this. The value of money is itself determined by supply and demand. Therefore again ‘wealth’ is perception of the current value of something, in this case the value of ‘cash’. As I said, I understand your argument, however, you stop your argument half way in an attempt to prove your point. If you follow your argument through, on a logical basis, then the sum total of all wealth would be absolute zero. This is in fact the point that many argue and I see their reasoning for such an argument. The problem is that we don’t exist in a world where there are such imbalances which lead to the value of everything returning to zero. What we live in is a world where the prices of ‘things’ (cash / goods / stocks / futures / bonds and so on) are determined by a balance which creates a fair value for any given ‘thing’. The stock market is the clearest example of this action at work. The order books for each side of the market show where people see ‘the balance’. The end result is that there is no earthly way that we can convert what we ‘own’ (ie our assets) into anything other than another asset of some kind. If you think about your argument logically and mathematically then you will see that there is a need to establish an absolute value of something (against an absolutely fixed benchmark or ‘anchor’ as I think it is known) in order that you can state that new wealth is not created but, ‘old wealth’ is merely ‘redistributed’. This is because what you claim is being redistributed is ‘wealth’ which in itself is a perception of wealth based upon a price which is set by a balance which is achieved by the two sides of the market. I’m not sure that I’m explaining this so well.

I guess the basis of my point is, that if you follow your argument through to a natural conclusion, total wealth is equal to zero. Therefore, how can you distribute something that does not exist ? Logically therefore, all that can be being distributed is the perception of wealth as wealth itself doesn't physically exist (re the ten pound note example). Therefore, the will always be a mathematical difference of some kind between wealth and the perception of wealth. When we say that ‘wealth can be created’, we are in fact saying that there is a perception that the value of wealth is increasing. Physical wealth itself obviously stays at zero and is unchanged which, I would agree, supports the side of the argument you present about no real wealth being created, however, because of this your argument regarding ‘redistribution’ can not be true.

My head hurts !

Steve.

 

[LION63]

Stevespray,

Whilst the majority of transactions worldwide are carried out for money there is still a substantial number that do not ie. it might well be trade by barter or services for goods. My argument is based simply on the fact that no real additional wealth is created in aggregate terms. That is different from me saying that the value of everything returns to zero. I would find it impossible to repeat such a theory as it is ludicrous to say the least.

You have explained your points in a very clear manner and I have no problem with what you are saying. One thing that I must say though is that we are saying more or less the same thing. Correct me if I am wrong -
1. Wealth exists
2. It is transferred from one party to another (money, goods, services etc.).
3. Imbalances do not last forever.

Once again, I state for the record - There is no real wealth created in aggregate terms, it is simply redistributed. Wealth exists and the sum of the total is not zero.

 

[stevespray]

Lion….

I would agree with a large amount of what you are saying. As you suggest, we are talking along similar lines on several of the points. There are however some points which I feel are incorrect. Obviously all our points are mere theory.

I would challenge you on your point that “Wealth exists”. I would suggest that for your argument to hold it should read “the perception of wealth exists”. Why ? Because wealth is measured in terms of money which itself, and its value is determined by perception of wealth (ie is the pound stronger or weaker today).

Imagine this…..

You and your wife are the only people on Earth, Adam and Eve if you will. You are placed on large expanse of land which you understand is yours. How much wealth do you have ? If you are the only people on Earth is all the wealth yours ? As time passes you find that you are not the only people living on Earth. Have you lost some of your wealth ? Or is the wealth effectively stored in every tree, fish, wild moose and mineral deposit ? If that is so then what about sustainable forests ? Do they ‘increase’ the wealth in the world ? What about a solar panel or wind farm ? Surely this is adding something to wealth overall.

Or this……

I start with a large piece of land with nothing on it and you start with £1,000. We are the only two people in our world. Over the next twenty years I grow 50 nice big trees. One day you come and see me. You pull from your pocket a wad of crisp twenty pound notes. You proceed to offer me £20 per tree. I refuse and ask for £40 per tree. You laugh and leave my land. Surely at this point in time, I have 50 trees worth £20 each (based on the fact that something is only worth what someone else is prepared to pay for it) and you still have your £1,000 in cold hard cash. Effectively therefore, our joint wealth is now £2,000. I have added £1,000 worth of wealth to our world. If I relent and sell you 20 trees for £20 each I will now have £400 and you will be left with £600 and a pile of trees worth £400. I will of course still have 30 trees worth £20 each although I admit that now you have your 20 trees the remaining demand for the 30 maybe less and hence worth less in value. However, whatever way you look at it, the remaining trees will be worth something.

Very interesting discussion,

Wishes,
Steve.

 

[LION63]

I am killing myself (my sides are aching and my head is about to explode). I surrender, I do not know what your occupation/vocation is but I have a rough idea.

I can labour the point until hell freezes over but then, I will stop enjoying the debate. Your arguments have been backed up with challenging and interesting examples (I do not know where you got them from or how you dreamt them up).

I appreciate the discussion, we must do it again on another topic/subject.

NB.
If my wife and I were the only people in the world/on earth how would we get hold of a solar panel?

 

[stevespray]

Lion….

You say that You can labour the point until hell freezes over. The point surely is, as Paul has previously pointed out, that you don’t labour the point. You seem to simply regurgitate the same few short sentences again and again. I don’t wish to insult you but your point seems plagiarised as you don’t seem to be able to back it up with reasoned argument and example. I’m not trying to overpower or blast a fellow poster but simply provide a good stimulus for an interesting subject which has the most direct of impacts on the markets that most of us trade every day. That point being that it is purely the very short term balance of supply and demand which determines the actual ‘value’ of something. As I have said previously, the ‘value’ of something is exactly the price which someone else is prepared to pay for it. My guess is that most people would consider ‘the total wealth’ as the value of, all assets which exist, added together. With that in mind, the total calculated wealth of the world is always going to fluctuate.

As for my occupation. I am an electro-mechanical engineer. I run a few businesses. You could say that I have a keen interest in mathematics and physics. I also trade the markets on a daily basis. From that point of view I am fairly ‘mainstream’ if Dr Alexander Elder is to believed as he states that, aside from financial professionals, engineers and doctors make up one of the largest groups of private market speculators.

I enjoy reading books on trading although I learned a long time ago that there are only a few lines in each book which will be relevant to individual. I take 4 or 5 holidays a year and normally read 2 books per holiday. However, having said this, I still regard trading the markets as my hobby. I have never seen trading as work even though I have made some considerable gains through trading. Some friends have suggested that it is that attitude which has led to that success and that I would be less successful if I was forced to trade full time as my only source of income. This could well be true. I actually find it incredibly stressful just commenting on my market positions via internet boards.

Out of interest what did you think my occupations was ?

With regard to the solar panel. If you read carefully, you only ‘acquired’ the solar panel after you became aware that other folk also lived on the earth. How you acquired it is not relevant. The point that I sought to make was one of simple physical principle. You start with no money and a solar panel, you end up with money and a solar panel. The resource which you have sold in order to gain money is not drawn from the ground nor is it taken from the air. It is not taken from any place or thing on the Earth. It is taken from a burning star which is located some 93.5 million miles away. Simple physics tells me that you start with A and add B (which is an absolute) which means that A+B > A (assuming of course that the panel works and produces a product which has some value ie electricity).

You shouldn’t believe all that you read and hear. You need an open mind. People say that oil will run out in 30 years time. The fact is that it won’t. The value of oil, like most commodities, is established through a balance of supply and demand in the short term time frame. If supply drops then the price will rise. The rise in price will dampen some of the demand which is causing the rise. The reduced demand will see supplies last longer and so on and so forth. The chance are that oil will never totally run out, the price would get too high before that happened. The overall demand, verses time, is a similar principle to one of Zeno’s Paradoxes but I’m not going to plagiarise that on here.

I’d be more than happy to discuss anything which I felt I had an insight into.

Good Night,
Steve.

 

[LION63]

Stevespray,

Just because most people view the value of wealth as the total wealth that exists altogether does not mean that that is the right definition or theory. I will address the first paragraph of your post before dealing with the rest. The fact that you say you do not wish to insult me is an insult in itself, but I do not take it to heart. People have different ways of expressing themselves, I have my way and you have yours yet you have chosen to try and make disparaging remarks about the use of short sentences and recycling the same sentences. Plagiarism is the act of stealing other people's ideas and it is not a decent thing to accuse people off. May I remind you that in the first post, I stated that it is Economic theory; I did not say that it is/was by workings, belief or theory. Finally, I am and have been very willing to discuss this topic with all of you and listen to your arguments without levelling any personal slights at those that have posted responses (regardless of their economic soundness), therefore, I believe that I deserve the same treatment.

When I said that I was killing myself laughing, it was not as an insult or anything like that, on the contrary, it was because of the analogies you used and how they explained your side of the debate. Do you think that it is easy to put those things together? So I wondered how long; what a good sense of imagination etc. The question about the solar panel was just something that made me laugh. I am sure you will agree that life is stressful and trading adds to it; for people like me, it is the posts like yours that are witty and contain sound (right or wrong is a different argument) argument that remind us that it is not all bad.

I thought that you had a degree in Literature due to the way you put your points across. Now I realise that that is a very serious hobby (how many books do you read each year) and not a job. Keep up the good work ie. reading, writing, running businesses and making money in the markets at the same time.

You finished your post with a paragraph about oil but that is exactly what I was trying to avoid. I did not think that other members would warm to the fact that 2 or 3 have changed the original topic. Oil is a popular topic and once again there is a divergence of views and opinions, I for one would like to discuss it but this may not be the thread for it. That does not mean I disagree with your view.

 

[henry766]

zzzzzzzzzzzzzzz

 

[trendie]

zzzzzzzzzzzzzzz

how common is the affliction of sleep-writing ?

 

[henry766]

i'm not sure trendie , how many people read the above , that should answer ya question!!

 

[philhackett]

If all traders would understand that the most successful method is the 8-21-34 EMA crossover system teamed with say a Schaff momentum and a DiNapoli Macd everyone would profit.

Traders lose money quite simply because they do not know waft they are doing.

Try searching th Net for trading with moving averages.

Most of the people here do not understand how little they know and fail to train as Technical Analysts

Phil

On many occasions I have read things like '90% of day traders fail' and 'for every winning trade, there's a losing trade on the other side.'

From this I would assume that the odds of survival/success are firmly stacked against day traders.

However, the aim of a trader is not not to make any losing trades, but basically to ensure that gross profits exceed gross losses.

We will all make losing trades at different times, in our chosen markets, as part of our daily routines.

If all traders were to use a trading system that ensures greater profits than losses - and stick to it, is it fair to assume that all traders can be profitable/successful and make a living from trading?

Cheers

jtrader

 

[roguetrader]

Jtrader,put simply. The answer to the question posed by this thread is simply NO
And I find ir quite absurd that anyone would argue to the contrary, and at the same time claim knowledge of how markets work.

 

[PurplePerson]

If all traders would understand that the most successful method is the 8-21-34 EMA crossover system teamed with say a Schaff momentum and a DiNapoli Macd everyone would profit.

Would they? Surely if everyone adopted the same winning system (any winning system) it would be very quickly negated by market awareness of it.

Good luck with it if it works for you at present ;o)

(I'll stick with the Mandini Curve and KK-cycle. But the last thing I would want is everyone else doing likewise)

 

[ZDO]

(I'll stick with the Mandini Curve and KK-cycle...

Just curious - what is Mandini Curve and KK-cycle ?? Thanks.

 

[Trader333]

If all traders would understand that the most successful method is the 8-21-34 EMA crossover system teamed with say a Schaff momentum and a DiNapoli Macd everyone would profit.

This situation is impossible because if everyone was using it then no one would lose any money so how could anyone else make a profit ? ie where would the profit come from ?

Paul

 

[wannagetstacked]

"If all traders would understand that the most successful method is the 8-21-34 EMA crossover system teamed with say a Schaff momentum and a DiNapoli Macd everyone would profit."

lol, is this statement a joke or are you being serious?