Anyways this is what I personally feel and understand through research and experience why most traders fail.
1: You're at a disadvantage to start off with. Everytime when you place a trade, it's an uphill battle for traders because of fees / spread etc. Its like being in a poker competition, if the antes are too high compared to the buy in, common sense is to not join that competition. Similarly, it is essential to find a broker that has very low fees / spreads and regulated. At least then, your battle isn't that high of a uphill.
2: Most information / education materials out there on how to trade are just misinformation or provided by people who are retail traders. Source from Anton, education found on the internet at mostly provided by either the broker themselves or introducing brokers. The way the education is structured in a way that makes you trade more often, and lose. This is how brokers earn money, through spread / commission and trading against you. If thats not the case, then most are out there to scam you / or by people who are just as misinformed as you are.
3: Most new traders have the dream of having 100% , 1000% , 10000000% profits. They imagine trading as a get rich way while having a small portfolio. So they overleverage, risk too much on a single trade. They'd probably have a good run for a few times and then eventually suffer a small strings of loss. Then the inevitable happens to most new traders I know, they revenge trade, ultimately busting their account. To have a little context on a realistic ROI, Market average 10 - 15 % PA . Warren buffet average 20% PA. Some funds can achieve as high as 30 - 36% PA. Damn even Stephen Cohen with insider trading managed an approx 36% ROI PA. Taking this into consideration, you'd probably need an at least 100k account to be trading full time, and thats if you can achieve an approx 30% ROI. This is a marathon, not a sprint.
4: Poor money management and trading psychology. I quite often see traders don't stick to their trading plan, or have a risk management system in place. They do a lot of guess work, base it on their feeling etc, therefore often see new traders FOMO, closing their winning trades too early, shifting stop losses or even adding more position to losing trades. Personally I feel that money management and trading psychology plays the biggest part to becoming a profitable trader. Have those in check, even with a system that has 1:1 RRR, your system just needs to have a 51% winning rate for you to be profitable. Thats why casino are so damn profitable and they only need a slight winning advantage. Thats why a casino is considered a business, and people going to casinos are gamblers. Same thing for trading.
There is no one fits for all strategy, which beats the market all the times. Rather, a successful trader has learned a set of skills, which gives him/her an edge over the market. Indicators can be seen as tools, which can be applied to the currently prevailing market condition.
If one uses trend trading methods in a ranging market, one is a loser for sure. Trending market exists only a couple of times in a year.
Money management is important sure.
I want to challenge this:
'To have a little context on a realistic ROI, Market average 10 - 15 % PA . Warren buffet average 20% PA. Some funds can achieve as high as 30 - 36% PA.'
I think this is true for big money guys, who don't use any leverage.
There is nothing wrong executing several trades per day. One just needs to pay attention to spreads, and other costs.
A set of winning strategies is required, of course.
I think forex trading is actually easy, and damn boring, if you know what to do.
Anyways this is what I personally feel and understand through research and experience why most traders fail.
Your 3rd point about institutions is wrong. You cannot compare institutional trader with retail with profits PA. Retail traders has no volatility issues can trade anything and anyway he wants.
1. Institution has a balance you can only dream off. 2. They spread their trades across many portfolios/currencies. Their risk % wise is much lower than retailers, they hold position longterm only close/open partials on drops/breaks. 3. They have to hide their moves, often closing position sooner than retailer does.
While you can risk 1-2% per trade, go with 2-3-5:1 RR with winrate of 30-40% and be all happy and smiling. I have one shorterm strat wich RRR starting at 2:1, but it is not as often when I take a full loss, either I don't like how momentum drops in the middle of the trade or close break even. If you take in worst case scenario of 10 trades weekly, winrate 40% 2:1 RR:
First off, I totally agree that trading is any markets, fx / equities / options / commods etc should be boring. A trading system that answers the questions of 1. How do you get in 2. What is your position size 3. What's your risk 4. How do you get out
Once a trading system effectively achieve those, and with a good trading psychology, it is almost mechanical, doing the same thing over and over and over again on the daily basis that it becomes boring.
Next about entering several trades per day, mainly scalping or intraday trading I presume. I guess everyone has different perspective on this and I respect that. This is my opinion though.. essentially as retail traders, you're pretty much at the losing end as compared to institutions because of the higher fees incurred with higher frequency of entering trades. Institutes / props command much much lower fees, have access to advance technology/ speed/ information etc. If you already have a good strategy in place.. maybe don't mind trying it on a longer tf. You're incur lesser fees because of lesser trades, higher pips and of course, same % risk your strategy allows you on the shorter tf. I know many won't agree but ultimately my goal to go into trading was to have more free time to myself and family, and not be tied to the screen for hours. This is just my opinion though (:
Haha I realized quite a few disagree with my view of being having a realistic PA. No doubt I have to agree with you that there are traders I know personally who generate high percentage returns. But I've also seen a lot of retail traders start out with a .. 1k - 5k account and have unrealistic expectations. Ultimately busting their account in a short span of time just to hit their expectations.. mainly revenge trade, not sticking to their game plan, over risking, adding on to losing positions etc etc. Essentially, I'm targeting at a long time span of 7 - 10 years returns, and personally I feel if you manage a 25 - 30% PA ROI consistently every year, you're pretty much wanted by many companies. Not being disrespectful or a non believer to people who claim they do 100% ROI PA consistently over a span of maybe 10 years with proper risk management and substantial amount in their portfolio.. I'd rush to invest 10k in them and expect 10m returns in 10 years.
I have traded professionally for the fund 5%ers for awhile now and have traded overall for 5 years as my backround. i guarantee you i could give a losing trader a profitable system and they would still lose. i know because i tested it. People trade with emotions, they start a new system, get some wins, get overconfident, think they cant lose, start to over leverage and boom, string of losses, back in negative, and they blame broker and strategy then look for a new strat rinse and repeat. tats the biggest problem i see, also, follow my trading, 10% monthly is easy my firm requires that monthly with max 4% drawdown
It is not a profitable system if people can lose with it. If that is the case it means that you are teaching them an incomplete system. The system should not allow emotions to be a part of it. The system should tell them exactly what to do. Ideally so that even a robot can use the strategy and make money
I think you don't understand the point. Give a loser a profitable system, they will skip rules, revenge trade, use bad risk management instead of following the system exactly. They can turn a winning system, into a losing one.
A perfect example, I was using a system that had given me a 65% winrate over 2 years. I had a friend of mine who wanted me to help him start trading profitably as he had been losing for over a year, I gave him the system because the rules were simple to follow. He started sending me messages about how he kept getting losers for trades I had him screenshot and almost all of his losers didn't 100% match rules, they may have matched 1 or 2 rules, but never all of them. When it comes down to it the reason people lose is because even when they get a profitable system, they either don't follow the rules 100%, take trades that may meet the rules, but don't have a good risk reward which is never good, over leverage, or get into a losing streak which every system can have, and then decides it doesn't work when its still wihtin the systems risk profile to have said streak and still maintain that same winrate. So they decide to switch to something new looking for a holy grail.
IndiTrader posted: It is not a profitable system if people can lose with it. If that is the case it means that you are teaching them an incomplete system. The system should not allow emotions to be a part of it. The system should tell them exactly what to do. Ideally so that even a robot can use the strategy and make money
Oh .. I personally feel you're really wrong about this. The reason why algo / robot trading is so popular and good is because it takes away the trading psychology aspect. A strategy SHOULD be mechanical and systematic. However I've seen so many using a good system, step by step on every aspect of the entry / exit / risk / position size etc, but they still lose.. mainly because they just don't stick to the strategy. Truthfully, how many times have you entered impatiently because you fomo, entered before maybe a candle formed properly, or you've been having a good winning streak that you decide to place a huge position, risking more? I've seen many that had a good running streak for months and have it all gone including initial deposit in a matter of days. A strategy is only a small part of trading. Psychology and risk plays the biggest part.
TheSlyFox posted: A perfect example, I was using a system that had given me a 65% winrate over 2 years. I had a friend of mine who wanted me to help him start trading profitably as he had been losing for over a year, I gave him the system because the rules were simple to follow. He started sending me messages about how he kept getting losers for trades I had him screenshot and almost all of his losers didn't 100% match rules, they may have matched 1 or 2 rules, but never all of them. When it comes down to it the reason people lose is because even when they get a profitable system, they either don't follow the rules 100%, take trades that may meet the rules, but don't have a good risk reward which is never good, over leverage, or get into a losing streak which every system can have, and then decides it doesn't work when its still wihtin the systems risk profile to have said streak and still maintain that same winrate. So they decide to switch to something new looking for a holy grail.
That is very simple.
IF you have trading system program it into EA. EA will execute trades 100% matching the rules.
Mykl posted: Most lose because they think are using strategies and basing decisions on pure technical analysis but pictures and lines and ma's are not actually even needed for many profitable systems.
There is more than one way to skin a cat. There's always a debate between fundamentals and technical. But the truth is, it doesnt really matter what strategy you're using, as long as you have a proper money management and trading psychology, you're way ahead in this game.
I find that difficult to believe. Money management will not help you if your strategy is to open a Buy trade when the wind blows east and Sell trade when the wind blows west. Strategy is critical anyone who says otherwise doesn't understand Forex
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