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Are most small traders just losing ?


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View Poll Results: How successful have you been in your trading
Total Disaster 8 16.00%
Total Disaster
8 16.00%
Husband/Wife's gotta bail me out occasionally 0 0%
Husband/Wife's gotta bail me out occasionally
0 0%
Wasting time - losing on even days, winning on odd 13 26.00%
Wasting time - losing on even days, winning on odd
13 26.00%
Getting there 22 44.00%
Getting there
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I'm Killing it
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Are most small traders just losing ?

  #11 (permalink)
 blb014 
Dallas, Texas
 
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SMCJB View Post
I believe the 90% of accounts lose money industry folklore dates back to an old Refco study. A simple google search reveals articles such as NASAA report says 70 percent of traders will lose nearly all their money (note the word ALL in there, not just lose!) and here at nexusfi.com we have a discussion that includes some interesting data presented by @artemiso on his first hand experience as a market maker in the thread Can Day Trading be profitable, consistently, for retail traders. (Spoiler :- About 20% of small accounts made money)

Depends on the trading instrument. Artemiso deals in Forex, so yes I believe him 80% of Forex traders lose.

Is that same for equities? No not at all. Depends on your trading horizon also. The market would not be 140% of GDP with 80% lose rate in equities

Volatility is good for the market and trading.

Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
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  #12 (permalink)
FuturesTradr
Saint Petersburg
 
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Yes, majority of traders, as I have known a lot who think they have what it takes,then the market itself just crushes all the dreams and they blow their account. I studied myself for 9 years, long nights and going crazy trying to find something, until I came upon a group of traders, who basically make their goal every day and call it a day. Every since I asked to join, I have made good money with them. Unless you have a proven, tested system and absolute money management, you will do maybe okay, or at best, you will be at break even.

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  #13 (permalink)
babyninja
San Francisco, CA
 
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Who are some of the swing trading masters that post here on FIO who I can follow/learn from ?

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  #14 (permalink)
 
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 marc2c 
Barcelona, Spain
 
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babyninja View Post
I want to swing trade making 10% returns every 2 months. I'm up for whatever meaningful learning effort/research is needed but cant go insane learning every pattern/indicator combo out there. Personally, I have commitment and discipline. I am ok with risking all of my initial investment (meaning it won't kill me) but will have to stop completely if I lose that.

Are those returns doable ?

Great piece of work by by @artemiso BTW. Thanks for posting it.

Doable? Sure. But I think your goal is too much ambitious. In my opinion: small account + ambitious goals + inexperience = bad results.

Good trading and better results to all of you.

MC
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  #15 (permalink)
 
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 snax 
Chicago, IL
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@babyninja,

I don't see which instrument(s) you are interested in, but in my experience the e-micros (MES, MNQ, M2K, MYM) are a terrific learning tool. I have only traded the MES so I cannot speak for the other three but the MES is very liquid and trades just like the ES (except for some slippage of 1-tick here and there which is insignificant for my purposes).

This way you can work on your strategy in the live market (not sim) and avoid worrying about all this drama like "dreams crushed!" and "high failure-rate!" etc.....get all that out of your head immediately and learn to execute and manage your trades. This will help you survive as you learn and grow. You need to build a larger sample size to see what works and what doesn't.

Just my 2 cents.

Edit: There's a lot more to unpack here. You said you have commitment and discipline, but yet you're ok with losing so much you'd have to stop trading? And where did you get the 10%/2mo. figure for your returns? IMHO let go of the returns you're hoping for and set that aside, and learn how to survive in the market first so you don't have to stop trading if you are truly committed.

Again just my humble opinion. Good luck.

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  #16 (permalink)
 
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 SMCJB 
Houston TX
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babyninja View Post
I want to swing trade making 10% returns every 2 months....

Are those returns doable ?

Assuming sensible risk management, plain and simple. No.


blb014 View Post
Depends on the trading instrument. Artemiso deals in Forex, so yes I believe him 80% of Forex traders lose.

Is that same for equities? No not at all. Depends on your trading horizon also. The market would not be 140% of GDP with 80% lose rate in equities

Agreed but maybe not a fair comparison. If somebody makes 7% trading equities with a 1:1 return to drawdown, while over the same period the S&P500 returns 10% with a 2:1 return to drawdown is that trader a winner? In my books no.


marc2c View Post
I think your goal is too much ambitious. In my opinion: small account + ambitious goals + inexperience = bad results.

Agreed

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  #17 (permalink)
babyninja
San Francisco, CA
 
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marc2c View Post
Doable? Sure. But I think your goal is too much ambitious. In my opinion: small account + ambitious goals + inexperience = bad results.

Thanks marc2c.
What exactly is the problem with small accounts in swing trading ? No staying power if trades go south and need to hold for a bit ? Just trying to understand what I need to account for. @artemiso's post also shows the poor performance of small accounts but it could be the low stops they were triggering per his post or just plain inexperience not necessarily the size of the account per se. Or is it that the small account cannot cover more trades to spread risk ?

I don't have to earn a certain % or make certain amount of $$ as I won't depend on this income. I don't have a problem with just waiting till the right trade comes by. If my goal is unrealistic, I can just aim for lower ROI and throw more $$ at it.

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  #18 (permalink)
babyninja
San Francisco, CA
 
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snax View Post
@babyninja,

I don't see which instrument(s) you are interested in, but in my experience the e-micros (MES, MNQ, M2K, MYM) are a terrific learning tool. I have only traded the MES so I cannot speak for the other three but the MES is very liquid and trades just like the ES (except for some slippage of 1-tick here and there which is insignificant for my purposes).

This way you can work on your strategy in the live market (not sim) and avoid worrying about all this drama like "dreams crushed!" and "high failure-rate!" etc.....get all that out of your head immediately and learn to execute and manage your trades. This will help you survive as you learn and grow. You need to build a larger sample size to see what works and what doesn't.

Just my 2 cents.

I was looking into options and forex.

Thanks for your advice. Makes a lot of sense. I'll get cracking.



snax View Post

Edit: There's a lot more to unpack here. You said you have commitment and discipline, but yet you're ok with losing so much you'd have to stop trading? And where did you get the 10%/2mo. figure for your returns? IMHO let go of the returns you're hoping for and set that aside, and learn how to survive in the market first so you don't have to stop trading if you are truly committed.

Again just my humble opinion. Good luck.

Committment and discipline won't save me from my inexperience and lack of knowledge. I was just saying that I recognize this is inherently risky business and I'm logistically prepared to take that risk.

The 10%/2mo is an arbitrary figure I thought I'd need to do to make this worthwhile for me based on what I was thinking of investing. If that is not realistic, I need to rejig my account size and lower my expectation.

Noted your advice abt putting the returns aside and get the mechanics right. Thanks.

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  #19 (permalink)
 
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 shodson 
OC, California, USA
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The problem is that there are too few barriers to trading, and your expectations are too high.

Given your description, you are like a guy that has a basketball, some nice Nike shoes, have dribbled the ball a few times, and you've watched a few NBA games on TV. You are now ready to go play in the NBA! Fortunately, you wouldn't get drafted and you will be spared from the utter destruction you would experience going up against actual professional basketball players.

However, with trading, there is no draft. Open an account and, voila, you're a trader! Unfortunately, us pros are just waiting for you to enter the court so we can take your money.

So, what are you to do then? How do you achieve success diving head first into a pool full of sharks?
  1. Pick an asset type to trade. Stocks? Options? Futures? Crypto? Figure out which type of asset type you are more passionate about because to trade well you need to know and understand the market(s) you are trading.
    1. Stocks: if you like to follow companies, brands, trade companies of products and services that you know and love
    2. Futures: if you like to follow macro economics, commodities, overall stock market indexes, etc, then futures are for you. Plus, they get better tax treatment and offer interest-free leverage.
    3. Forex: if you like to follow international macroeconomics and foreign central banks then forex might be for you
    4. Options: these are derivatives of the above three asset types, more complicated, potentially dangerous if you don't know what you're doing, stay away for now until you are more advanced
    5. Crypto: if you are passionate about the emergence of cryptocurrencies and blockchain technology, mining, already have wallets full of crypto then maybe this is for you. But bid/ask spreads can be wide, transaction costs can be high, and brokers can be slippery, so only trade these if you really know the crypto world.
  2. Find a strategy that suits your personality
    1. Want to win frequently (65-75% of the time), but at the risk that your losers will be larger than your winners, potentially losing several months of profit in one day? Then mean reversion trading is for you.
    2. Want to get the occasional big-time home run trade, but have the rest of your trades win only 30-40% of the time, most of the time grinding out small losses and barely breaking even most of the time? Then trend-following is for you.
  3. Figure out how active you want to be
    1. If you want to look at charts and the market all day, then you might be a good day trader. However, after a while you'll find this is very mentally draining and is not as glamorous as it sounds. Also, day trading is the most difficult type of trading to be profitable at, but many beginners gravitate to it because they want trading to be a job replacement, and they want a lot of "activities" to perform so it feels like a job. Or, they are a degenerate gambler and just want a lot of action, like a video game, buying and selling all day, but paying lots of commission and slippage to their broker and never making any profits.
    2. If you just want to check the markets an hour or so a day, then maybe swing trading is more for you. You pay less commission and slippage, and ignore the noise of the intraday swings while you spend your day doing other activities, like perform an income-generating job.
    3. Some of the most successful traders I know check the market once a week. Some even only allow themselves to trade once a month! They pick stocks with good fundamentals and short-term momentum (IBD50), set their stops and let it ride. Often, doing nothing and giving the trade time to evolve is the best thing you can do.
  4. Learn to trade on SIM - learning to trade a simulator, or paper trading, is good in that it helps you learn the mechanics of how to execute trades. Once you can execute your trades confidently then look to make paper profits. Record your trades in a journal and/or spreadsheet. Treat it like a real business, because it is. Don't trade real-money until you can consistently make paper profits for at least three months. Real trading is harder than paper trading so if you can't paper trade your way to profits you'll get smoked in a real-money market. Think of SIM/paper trading as making the JV team, but you still need to make Varsity, play in college, and then hope to make it to the pros. One step at a time Sparky.
  5. Once you are consistent on SIM, go into a live market never risking more than 1% of your account on any single trade. This way, if you screw up a lot, which you will, you'll still have a chance to trade again tomorrow. Look to make a few months of consistent profits. Once you do, then maybe look to risk 2% or maybe even more if your usually don't hit your max loss because you are managing the trade before it can take a max loss.

Along the way you'll have to conquer a lot of psychological obstacles, but you will also learn a lot about yourself. And instead of expecting a certain monthly return, just take what the market will give you, and be content that you made good, disciplined trading decisions that protect your capital. Eventually you'll realize that successful trading is more about protecting what you have, not "killing it" by meeting an expectation of what the market owes you every month. Markets are always changing so its the most nimble ones that can navigate the changes that make the best traders.

That should get you started...Enjoy the ride!

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  #20 (permalink)
babyninja
San Francisco, CA
 
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Thanks @shodson for your detailed response. The approach you've outlined is the kind that appeals to my sensibilities. I know for sure I don't want to daytrade. I had some small success, accidentally perhaps, twice before using just basic charting and waiting for the move to develop as you describe and I want to do this more earnestly now. I will go for stocks and forex for thats what I relate most to. 2-4 week swings will be my thing.

Thanks for your help and practical tips!

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