Why do so many traders lose money?

[gamma]

An issue which has not been mentioned on this excellent thread is the effect economic announcements have on trading.
Most "Traders" ( and I use that term cautiously) base their trading on technical indicators unfortunately all technical analysis is thrown out of the window when major news is out.
Not having the capability and resources of the big trading houses the lone trader should keep out of the market just before and after economic news announcements.
A very recent casing point was the GDP figures out Friday just gone.
I trade a purely mechanical system which goes into shut down mode when impacting news is due in the next 2 hours.
Quite simply technical systems (on which most trade) do not have the capability of coping with fundamental issues.

 

[NetTecture]

MOstly agreed, though I turn mine off once the market gets shallow, or 5 minutes before the news hit. Go back online when I see a coupld of bars on 3 minute chart that look "normal" again, and the order book (level 2) has normal volume. Basically when the wild swing is over.

 

[Black Swan]

An issue which has not been mentioned on this excellent thread is the effect economic announcements have on trading.
Most "Traders" ( and I use that term cautiously) base their trading on technical indicators unfortunately all technical analysis is thrown out of the window when major news is out.
Not having the capability and resources of the big trading houses the lone trader should keep out of the market just before and after economic news announcements.
A very recent casing point was the GDP figures out Friday just gone.
I trade a purely mechanical system which goes into shut down mode when impacting news is due in the next 2 hours.
Quite simply technical systems (on which most trade) do not have the capability of coping with fundamental issues.

Not so sure on this buddy, although this argument/stance has been done to death. "Don't trade the news, trade the reaction to the news"..., and that 'reaction' I can see in/on my charts anyhow...

 

[NetTecture]

Oh, Black Swan. I suggest next time you watch the markets before and after a big announcement.

Your indicators as well as normal trading setups are useless during this time. Want to trade with a stop based on volatility? Have fun, when ATR is 10 and the spike bar is 80. And goes down 130 the bar after.

Want to have stops? That is fine - if your normal bid/ask is 10-30 cars on the next tick, but before and during the annoucement you dont have 20 cars over the next 5 ticks, simply because noone is there.

I use short term trading - 3 minute, 89 tick. I stay out - the volatility is way beyond my calculations, and indicators simply dont work. By the time they realize something is bad, my stops have been hit with a 10 tick slippage.

This is not "dont trade news" stuff - it simply means that you need special setups for that. The sudden change in market characteristics simply is not part of your system.

Just watch the market next fed announcement. We had a very nice situation like that friday in the YM. Ridiculous to trade with a setup made for normal markets.

 

[gamma]

Not so sure on this buddy, although this argument/stance has been done to death. "Don't trade the news, trade the reaction to the news"..., and that 'reaction' I can see in/on my charts anyhow...

Hi Black Swan,
What I am saying is, most lone traders simply do not have the capability and resources to analyse the news very quickly.
I am told that the big trading houses, have economic modules that are preset to give they traders an immediate picture of the likely outcome for a 0.1 difference, in the GDP figures or payroll data ,etc.
All this, has been put together by an army of analysts,economists and programmers using they massive man, computing and financial power.

As a lone trader I simply know, not to go in when the water is too deep.
Avoiding trading around news time will certainly help novice traders, avoid some of the pit falls, I know it has helped me a lot
And the reaction to the news I avoid that as well.

 

[cuotes]

most lone traders simply do not have the capability and resources to analyse the news very quickly.

Avoiding trading around news time will certainly help novice traders, avoid some of

A good piece of advice. It's important to be aware of our puniness

Of course, if someone is able to profit from news, congratulations!!!

 

[plazake]

I wish this guy turns out good, into a future italy striker. god i have high hopes for this guy
:clap::smart::clover::innocent:
comparatif simulation taux credit auto - Taux crédit auto. Comparatif des offres! Les meilleurs taux crédit auto sont sur le net !comparatif simulation taux credit auto

 

[karl6666]

The following text is long and boring. I know :|
Anyway I strongly recommend you to read it and please... take a minute to think about it!!!


Many things have been pointed out in this thread.
Most of them (maybe ALL of them) are true.

This topic is of vital importance since it is the fact of making or not making money what determine in the long haul wether you are successful or not.

This job (because trading is a job, believe it or not) is different from others. In contrast to other jobs, here it is not about style, renown, fame, image, contacts, social networking or whatever.

It's a matter of MAKING MONEY OR NOT.

Let's have a look on reasons and causes already pointed. If you think of it, the most of them can be separated in two big areas.

1. Lack of seriousness and professionalism. As I stated before, this is a job, not a hobby. You're here in order to make money. Hobbies COST money.

2. Lack of a good fit between the trader and the environment.

The last one is such a terribly huge issue... that nobody pays attention to it. I strongly encourage you to stop for a minute and think of it.

Are you trading in the market segment that best suit to you???? PROBABLY NOT, otherwise you wouldn't be losing money.

Maybe you are in a market that is too much fast for you, or your leverage level is too high for you, or maybe you are using a product not suitable for you (futures are not for everybody), or perhaps the problem is that you are working with a timeframe too long or too short for you.

Some people I know trade ES or YM futures because it sounds good. It sounds professional. It sound like you playing in the big league. You look yourself fighting against the greatest pros. And that make you feel good. And moreover, you do scalping because it sounds awesome, technically advanced and make you feel over the standard citizen. You feel powerful.

And you loss money again and again.

Have you ever thought that you could make a killing trading Wheat Options?
How do you know that you are not the king of Silver futures?
And... if you stop scalping and begin to swing NQ? (keep positions for a couple of days)

My advice:
Try different markets, with different products and different timeframes

Maybe your problem is simply that you are in the wrong place.
Just move to other place!!!!

Quality - your face should be on money...........




K

 

[trader_dante]

The following text is long and boring. I know :|
Anyway I strongly recommend you to read it and please... take a minute to think about it!!!


Many things have been pointed out in this thread.
Most of them (maybe ALL of them) are true.

This topic is of vital importance since it is the fact of making or not making money what determine in the long haul wether you are successful or not.

This job (because trading is a job, believe it or not) is different from others. In contrast to other jobs, here it is not about style, renown, fame, image, contacts, social networking or whatever.

It's a matter of MAKING MONEY OR NOT.

Let's have a look on reasons and causes already pointed. If you think of it, the most of them can be separated in two big areas.

1. Lack of seriousness and professionalism. As I stated before, this is a job, not a hobby. You're here in order to make money. Hobbies COST money.

2. Lack of a good fit between the trader and the environment.

The last one is such a terribly huge issue... that nobody pays attention to it. I strongly encourage you to stop for a minute and think of it.

Are you trading in the market segment that best suit to you???? PROBABLY NOT, otherwise you wouldn't be losing money.

Maybe you are in a market that is too much fast for you, or your leverage level is too high for you, or maybe you are using a product not suitable for you (futures are not for everybody), or perhaps the problem is that you are working with a timeframe too long or too short for you.

Some people I know trade ES or YM futures because it sounds good. It sounds professional. It sound like you playing in the big league. You look yourself fighting against the greatest pros. And that make you feel good. And moreover, you do scalping because it sounds awesome, technically advanced and make you feel over the standard citizen. You feel powerful.

And you loss money again and again.

Have you ever thought that you could make a killing trading Wheat Options?
How do you know that you are not the king of Silver futures?
And... if you stop scalping and begin to swing NQ? (keep positions for a couple of days)

My advice:
Try different markets, with different products and different timeframes

Maybe your problem is simply that you are in the wrong place.
Just move to other place!!!!

Best post I've read on here in months.

All losers should look past the constant bombardment of FX marketing and the fact that everyone else trades it (poorly) and try other products.

You need to be aware of what is out there and trade something that you can understand and get in tune with.

I always find it amusing that everywhere you look there are systems for FX and adverts for FX brokers and adverts for courses that teach you FX and sites full of information on FX and yet the vast majority of the prop firms I know refuse or strongly advise against letting new trainees that they are training and backing into FX and instead have them on Bunds and equities.

I worked with a guy that traded equities for nearly two years, grinding away with little success until he one day was told to try the Bund and he's never looked back since and is now making money consistently.

I've always had an internal debate whether I should specialise in one market as a lot of pros do this (after trying a few and finding out what suits them) but for me it has always been about moving into whatever is hot because that is where the "easy money" (this is a relative concept before anyone jumps down my throat) is made.

I still consider myself predominantly an FX trader as most of my trades get made in that market and yet looking at my stats, my best performer is Gold closely followed by the Bund and one of my biggest ever winners has been in Wheat which I have traded only two or three times, if I remember correctly, in the last two years.

 

[meanreversion]

Some good feedback here, but I'm still trying to boil it down to the simplest denominator. As an example, I often speak to traders who tell me that moving the stop to breakeven is the most important thing to do (once the rate has moved far enough in your favour), because then it's a "free bet". Also, if the trade is a long way in your favour, then start ratcheting the stop up (trailing stop loss). These two approaches sound perfectly logical, reasonable etc.

BUT I've done a fair bit of testing on this, and frankly the best method is to leave your stop loss and take profit alone..... tinkering ruins performance of the strategy because there will be times when you get stopped for breakeven, only for the rate to reverse and go back again.

So I'm starting to wonder if trading is difficult because of the simple reason that everything which is INTUITIVE is wrong, i.e. humans are not NATURAL traders, they have to learn it.

Golf would be a good analogy here.. much of the swing is counter-intuitive. Want the ball to move right? Aim left and watch it slice. Want to hit the ball hard? Swing as fast as you possibly can and (most likely) duff it 20 yards. Golf requires years of practice and training, and the vast majority of people who play it are simply not very good.

 

[tenbobtrader]

"BUT I've done a fair bit of testing on this, and frankly the best method is to leave your stop loss and take profit alone..... tinkering ruins performance of the strategy because there will be times when you get stopped for breakeven, only for the rate to reverse and go back again."

 

[robster970]

Every now and again, you take a beating...............

...............and yesterday afternoon E-Mini session was mine.

I managed to not blow my account nor eat into my initial capital, but I did quite successfully manage to blow away the entire of last months profits in the space of 2.5hrs.

I sat there last night having a beer and tried to dissect why it had happened. The main reasons are as follows:

- I ignored my own risk management rules which inflated the extent of my losses, even though my stop losses were not tinkered with. Keeping the stops in place and not tinkering with them was my only saving grace.

- I was not focussed whilst trading. I had not tuned into the mood of the market before I started the session. I did not do my usual prep of checking news, looking at the morning session behaviour and going through charts from higher to lower timeframes to arrive at my trading context for the session.

- I ignored my usual set-ups and impulse traded on techniques that I know do not suit me or my personality (I am a lousy swing trader but good with breakouts/fake-outs). I have empirical evidence from demo trading to show I am rubbish at them, so god knows why I chose to execute in such a way.

- I ignored the fact that I was tired and was not mentally prepared for the session.

- I got emotional and revenge traded 3 of the 6 trades. The other 3 trades I just got wrong in terms of volatility stopping me out and drawing trend-lines in the wrong place (I run really tight stops but can afford to do so most of the time because my S+R line placement on 5m charts is good enough to run tight stops within the current volatility context).

I don't think there is ever one reason why people lose but what hit home to me last night is that you only need 1 aspect of your trading methodology to be wrong in order for the market to take you to the cleaners.

So the moral of the story in a really boy-scout way is always be prepared and disciplined.

As Ray Liotta in 'Goodfellas' said, "Every now and again, you have to take a beating".

It's whether you get back on the horse and learn that makes the difference.

 

[meanreversion]

The more I think about it, I start to wonder - are humans naturally good at anything? There isn't a lot we can't improve on.. even simple things like running and breathing. I read about how most people take breaths which are too shallow; it's something I know I do wrong!

So maybe the way it works is this - some things are technically easy and some are technically difficult. As humans we are (through accident) more likely to be good at some things and worse at others. Also, as we evolve, we learn new skills. Nature and nurture.

There isn't ONE SINGLE THING we couldn't improve on or do better. Trading falls into the "technically difficult" category and the simple fact is that the majority of traders either don't spend enough time working at it (nurture) or don't have the raw toolkit to trade in the first place (nature).

So in summary, the only "advice" should be - it's hard work. BUT even if you do work hard, not everyone can do it. So give it a shot, be realistic, then assess after a year and decide whether to proceed or not.

 

[tenbobtrader]

1. The majority do not understand what the market is and how it facilitates trade in all timeframes for all players
2. They acquire part truths and information and act prematurely usually at the wrong location due to 1.
3. They have not acquired enough knowledge regards the market (house built on sand)
4. They have then built a complete method built on sand
5. They give up / blow up when they should return to 1. and start again

unprepared unprepared unprepared

they cannot trade = the truth

SUN TZU ON THE ART OF WAR

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.


later

Andy

 

[meanreversion]

I would also add that there are different types of trading. The recent bank results have shown trading to be very profitable. However, this is really more a reflection of a) increased bid/ask for market makers and b) traders earning the difference between buying bonds from the government and then selling them to the central bank.

At trade2win, we are prop traders, not institutional traders, and have to act accordingly. I'd advise against trying to "understand the market" too much, as much of what happens is random. I think it's more about understanding yourself, and how you operate within the context of the market (which will always defy perfect comprehension).

 

[Stewenson133]

many traders lose money 'cause making money just standing in front of a monitor in your home can not be easy, otherwise no one will have a real job...

 

[meanreversion]

That is also a good point. I think this is one of the best threads I've ever read, even if I am a little biased

 

[cuotes]

'cause making money just standing in front of a monitor in your home can not be easy

It isn't, indeed!

That's why is so important to have a little 'office' outside home.
Maybe that's the reason why arcade tradings exist.

 

[everyonerich]

offshore trading room for rent, contact me for more info..

 

[gamma]

No patience and that itchy finger is another reason


p.s can someone please tell me how to start a new thread ,I know as a veteran member this should be easy, but I simply cannot. Must have forgotten how (old age dementia)