Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Why most traders fail, in 1 minute of an interview
and perfectly correct. True for the super intelligent, extremely well prepared and the experientially seasoned traders...say nothing of the regular guy who might be none of that AND undercapitalized.
Curious if anybody fundamentally disagrees with the statement at 4:35 as a fundamental reason for failure among traders:
"Most people, when they are about to make a decision, want to make the right decision -- and that is a guaranteed path to failure, because you'll never be able to forecast the future."
Isn't this really the essence of what failure looks like for traders? I know that it is an all-too-familiar statement for me.
To paraphrase a little bit of Mark Douglas with a bit added:
We start with: we want to be sure that the trade will work
so ==> we learn more about markets, technical analysis, etc., hoping to remove our risk
which leads to ==> fear of pulling the trigger because we talk ourselves out of a good trade because we're not quite sure,
which leads to ==> missing good trades,
which leads to ==> chasing the market or taking subpar trades to make up for those we should have taken,
which leads to ==> a poor outcome because the trade wasn't really a good one,
which leads to ==> fear of pulling the trigger .... and repeat.
All along, of course, the problem is staring us right in the face, and that is that our original desire/goal cannot ever be met: we can NEVER be sure that a trade will work; we can never REMOVE the risk!
All of this stems from wanting to make the "right" decision, in an effort to remove risk. And this effort to remove risk, that manifests itself in the need to be right on this next trade, is the entire problem.
We cannot know what will happen next, we should not try to know, and we cannot remove risk; we can only define it. The next trade has a purely random outcome, because the market at this moment is comprised of a unique subset of all traders in the world who are in a unique circumstance at this moment, and any one of them can affect the outcome of your trade. It is unknowable, and to try to know is to show a lack of acceptance of this fact (that the outcome of this trade is purely random, just like pulling the handle on a slot machine). Quoting heavily from Mark Douglas, THE man, here.
Thanks for starting this thread @josh I absolutely agree, I think most traders eventually figure out that the psychology of decision making that involve money is the big culprit, however I think you have done a beautiful job at pointing at the underlying issue which is a need to be right.
When I talk to traders most of our conversations can be boiled down to this "this is stupid, wth is the market doing, people are idiots for selling/buying here". The implication: I'm smart and right, the market is dumb and wrong. I fall into this type of thinking most days, which points to the next hurdle once you accept that what you really want at your core is to be right, not to make money, and decide you have to change this core belief and behaviour to start making money.
I can know this intellectually but to deal with it emotionally is the truly tricky part, when trading in the moment. When I close a losing trade I feel like i should not have taken the trade at all, this is my brain giving me feedback to help me survive in the future, terrible advice for the world of trading, great for the caveman. When I take profits and it continues to run more without me, I also feel bad and like a idiot.
I try to the best of my abilities to just stay objective, if price trades at this level I get out because I need to manage risk, the trade might reverse and go to my target, I don't care (intellectually ofc, but emotionally, I care a lot...). If price reaches my target on a range day I get out, I don't care if it spikes 50 points my way one moment later (right... easier said than done). If one can do this, and prove to themselves that it works in the long run, ie sticking with it, eventually I believe the emotional part will be suppressed, hopefully, but I can't know for sure because I'm not there yet but I've definitely noticed a change over the last year.
The "right" decision, as the context of the remainder of his statement makes clear, is: the decision which will produce the best outcome, as if you knew the future in advance. In the context of trading, that means buying at the low, somehow knowing it won't move against you. In life, it means figuratively peering into the future and determining what all possible outcomes are from my current choices, and taking the decision now which produces the optimal outcome.
And the point here is that there is no "right" decision, because the future is unknowable.
Watch every one of Mark Douglas' videos you can find. He has a common message in every workshop he's done; there's nothing fancy there, just mind-blowing, simplistically, powerful stuff. You can distill his wisdom down to a few points, and these are repeated over and over in his workshops across the years.
There's no doubt that change can be difficult; for those people who are further along in their life maturity it will be less work, but there's work for everyone, for sure. Douglas contends that ultimately desire is what effects change. However, on a practical, day-to-day basis (not delving into our darkest places and confronting our most evil demons), it's as simple as this: trade from a "series of trades" perspective, rather than caring anything at all about what happens on the next trade.
Easier said than done, but it's the core of the probabilistic mindset -- what happens after you put on your trade (unless you are a market mover) solely depends on others, and you have no way to know who they are, let alone their intentions and actions, so trying to do anything other than let your edge play out is the epitome of futility. Doing otherwise is the root of trading errors, which lead to large losses, small profits, and a non-smooth equity curve.
Pretty important point. This is what "probability" means: probability applies to a set of events, not to any one thing. One thing alone has no "odds" at all in itself -- but if you do a hundred of them, the actual odds, for the group, will become apparent.... And if they are in your favor, that's when you will benefit. The single event can be whatever it happens to be.
So as a trader, you need to be able to consistently take enough trades to allow your "edge," if you have one ( ), to work out. You really don't have any other job. (Well, except having an edge in the first place.)
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Thanks Bob -- and in particular, not only take enough trades to allow the edge to work, but not make trading ERRORS on those trades (taking an abnormally large loss by removing a stop or adding size, or taking profits sooner than defined in the edge, etc.)!
), to work out. You really don't have any other job. (Well, except having an edge in the first place.)