If 90% of traders fail, why not just do the opposite? - Psychology and Money Management | futures io social day trading
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If 90% of traders fail, why not just do the opposite?
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View Poll Results: Would trading the exact opposite turn the 90% traders who lose into winners?
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If 90% of traders fail, why not just do the opposite?

  #1 (permalink)
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If 90% of traders fail, why not just do the opposite?

Some thoughts:

1] Poll: DO you believe that trading the exact opposite way they are trading would turn the 90% losing traders into winners? ie instead of going long, short, and vice-versa.

2] Would it seem that the best way to trade would be to share real time executions (with bad, or really bad traders) and simply do the opposite of them? Seems a great way to make money! Could put an ad out: "I'll pay you $200 a week just to know what you're doing (as long as you can prove you've been losing money)." That'd be a great investment. You pay people to give you terrible advice and you simply do the opposite.

(Obviously, you can't use your own trading to "do the opposite" - as that is inherently flawed and hopelessly biased.)

3] Or.. if 90% of traders are losing money, could one simply trade opposite of the most commonly misused indicators, and rake in the cash?

4] And finally.. if say we did trade against the predictions of common indicators - and that still did not produce winning trades.. then what does that tell you about indicators?

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  #2 (permalink)
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  #3 (permalink)
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Good thread idea!


chrisflow View Post
Some thoughts:

1] Poll: DO you believe that trading the exact opposite way they are trading would turn the 90% losing traders into winners? ie instead of going long, short, and vice-versa.

It's not that simple.


Quoting 
2] Would it seem that the best way to trade would be to share real time executions (with bad, or really bad traders) and simply do the opposite of them? Seems a great way to make money! Could put an ad out: "I'll pay you $200 a week just to know what you're doing (as long as you can prove you've been losing money)." That'd be a great investment. You pay people to give you terrible advice and you simply do the opposite.

(Obviously, you can't use your own trading to "do the opposite" - as that is inherently flawed and hopelessly biased.)

Sounds right, but I don't think it would work, see below.


Quoting 
3] Or.. if 90% of traders are losing money, could one simply trade opposite of the most commonly misused indicators, and rake in the cash?

Nope! Same as #4.


Quoting 
4] And finally.. if say we did trade against the predictions of common indicators - and that still did not produce winning trades.. then what does that tell you about indicators?

It tells you indicators are not the answer. In both scenarios, indicators will not be the answer.

I understand what you are trying to get at. I've thought about this myself.

The reason people lose money is all about psychology and poor money management.

It might seem easy to simply "do the opposite" of someone else, but then again most traders think it would be easy to follow their own rules. Remember, trading is simple, not easy.

If you could somehow automate the process so that you are on the opposite end of every single trade at the exact same price (no spread penalty), then yes it would work. It would look something like this:

[Trader 1]
- Goes long @ 1102.50 on ES.
- Closes long @ 1098.75 on ES for a 2.25 point loss.
- Goes short @ 1099.00 on ES.
- Closes short @ 1104.00 on ES for a 5 point loss.

[Trader 2 - opposite]
- Goes short @ 1102.50 on ES.
- Closes short @ 1098.75 on ES for a 2.25 point gain.
- Goes long @ 1099.00 on ES.
- Closes long @ 1104.00 on ES for a 5 point gain.

It is important to minimize or eliminate the spread, or results will skewed. Remember, if you trade 5 times a day, that's 100 times a month and if you pay the ask (which you would need to do, to be certain to get a fill) that's $1,250 just in slippage on the ES.

The losing trader would need to lose more than their commission costs, too. In above example of 100 trades a month, commission is roughly $500 so he would need to lose more than $500 for opposite-trader to actually have a net gain.

But the real problem is, unless it's 100% purely automated (and even then, it won't work exactly the same because of the spread penalty) that even opposite-trader will suffer the same psychological and money management problems as Trader 1. Simply doing the opposite entry/exit doesn't solve money management and psychology problems.

I can speak from experience -- if you have a room of people and a trader who is making really good money shouts "GO LONG @ 1100.00!!!! HOLD FOR 1108.00!!! STOP AT 1096.00!!!!" a lot of people in the room won't do it.

Even with a proven track record and "experience" with this trader, people will not follow the rules. They will say, hmm, I don't think its going any higher -- and will exit early, or hmm this is looking bad and will exit @ 1097 even though it never went to 1096 so the first person didn't get stopped out, etc.

It's all about psychology.

Mike

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i really dont understand how its possible for 90% of the traders failed .
were do you get these number from? is this a myth

i am saying that only because i think that with today traders education and sites like THIS!!! help traders not just to follow indicator and actually understand what they trading

if you trade with automated system maybe you will failed as a trader but if you trade and follow the your rules and have a good money management , you will get it!

ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

-- Albert Einstein
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  #5 (permalink)
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benbrooke View Post
i really dont understand how its possible for 90% of the traders failed .
were do you get these number from? is this a myth

i am saying that only because i think that with today traders education and sites like THIS!!! help traders not just to follow indicator and actually understand what they trading

if you trade with automated system maybe you will failed as a trader but if you trade and follow the your rules and have a good money management , you will get it!

ben

There are some studies listed in the book "The Futures Game: Who Wins, Who Loses, & Why" that explands on these numbers.

And the reason why doing something opposite to the failed traders wont work is because the trades are mostly random and are based on flawed logic/biases etc.

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Who wins every time is your broker :-)

You know what you know but you do not know what you do not know.
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In life you do what you want but you do not want what you want.
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I have been trading for a long time and one thing I do know is that the majority of those that fail are those that have no experience or training in trading. Too many people jump into the forum assume they will be on the road to riches and watch their money disappear. I have visited many chat rooms and forums related to the forex and it kills me to see that the majority have absolutely no training behind them.

I have also noticed that the majority of successful traders do have some training behind them. If you are going to take trading seriously, you need to seek training and improve the chances of becoming a successful trader.

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Refining the definition of doing the opposite

Nice answers!

Mike I like the consideration of the spread in the calculations..

I do agree with everyone in that "trade management" should be like an immutable law for everyone who wants to trade: Entering and exiting with discipline will save your ass, and allow your winners to run.

Do 90% fail? Could be an urban legend, but I include in the definition of failing as either losing money or trading X hrs per week but ending up neutral. I do know a bunch of traders who fit this definition.

I do pose this question: Perhaps you can program say, NinjaTrader to shadow your moves with an opposites portfolio in double the shares of stock you bought, or even purchasing opposite play in options.. You go long a stock, it tanks, but the options do well.

Forgive my ignorance but wouldn't this similar to the arbitrage that market-makers utilize in order to protect themselves yet supply liquidity? Isn't this how the house always wins?

*I thought about what I wrote and it sounded pretty stupid to use the word "arbitrage." However, still, I propose the idea of a shadow portfolio of 2x the amount of shares in the opposite direction. 2x in order to take care of slippage & commission costs?*


Last edited by chrisflow; March 16th, 2010 at 10:40 PM. Reason: (My own ignorance)
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CTGUY View Post
I have been trading for a long time and one thing I do know is that the majority of those that fail are those that have no experience or training in trading. Too many people jump into the forum assume they will be on the road to riches and watch their money disappear. I have visited many chat rooms and forums related to the forex and it kills me to see that the majority have absolutely no training behind them.

I have also noticed that the majority of successful traders do have some training behind them. If you are going to take trading seriously, you need to seek training and improve the chances of becoming a successful trader.

Where does one go to find this training? I follow a few guys on twitter who own prop shops and do webinars from time to time, and both of them have said they won't back (train) anyone who already has trading experience.

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Re: If 90% of traders fail, why not just do the opposite?


But not only direction matters: trader can choose a good entry point and direction, but place too tight stop, for example, so stop can be trigerred and trade lost, but with wider stop it could be winning trade.

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