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This was really a great question you asked... Why do Traders Fail?
1. Dusant cites "fear" as a principal reason - Fear of losing money,
and "fear" of the signals being wrong, and not pulling the trigger..
agreed wholehaertedly with Dusant. I have noticed that in my earlier
days I would miss out on a real winner, then try jumping in on
signals and finding two three bad trades and then walk away humbled
and miserable.. the past did not repeat itself immediately anyway.
2. This leads to my second point. Most of the lagging systems
generate 30-50% bad trades unless you qualify them carefully. 40%
good trades with a 2:1 winnings to loss ratio is a good startegy.
Interestingly, 30-50% good trades can easily give 4-5 bad trades in a
row out of 50 trades or more trades, and yet provide a 40% win
status. I hate repeated failures. Now I realize that too is
inevitable and part of the probability and statistics of trading.
3. Sudden drops have a strong tendency to make your positive energy
disappear.. - and you lose confidence. Yet if you persisted, often
the systems continue to apply and make up the return. Many of us do
not have the nerves left after such a drop and we abandon our system
on a stock - this is where "Money management" plays a key role in
making that loss feel less.
4. As the market goes, so does many sectors and stocks. I think many
disregard this truism, and continue to trade when the market is
turned down or going sideways. They fail.
5. Can we really make lots of money constantly searching new
opportunities, when each stock is new and has unknowns behind them? I
am migrating to a "synthetic" approach with stocks and options that
permit me to cautiously make money in an "up" or "down" market,
focusing on just a few stocks, with somewhat diverse sytems on them.
I am biased towards mostly lagging systems. In this approach, every
time I buy a stock, seeing a long direction, I buy put protection.
That reduces my risk of losing a lot of money should it turn on me
and also gives me confidence to stick to the process. By following
only a few liquid stocks, and trading stocks/options for "up"
and "down" markets - 2 out of 3 , third being sideways, , I see a
smoother equity curve. Sideways drwas down some money; but the
drawdowns are limited. Sharp drops are a thing of the past.. and I
think I can reach my goal of making steady money and not failing due
to the earlier reasons.
We each have to understand the failure modes and consider evasive
actions suitable to our personality in order for us to succeed. This
is not easy to do by any accounts. We say the enemy.. and it was us.
Rvalue1
--- In equismetastock@xxxxxxxxxxxxxxx, "metastkuser"
<andysmith_999@xxxx> wrote:
> Thanks to the folks who replied.
> This is a really good forum.
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "TecloGeo" <teclogeo@xxxx>
wrote:
> > 1) A lack of professionalism, self-confidence, self-esteem
and
> > discipline. At the opposite end, arrogance that because they read
a few
> > books they know everything. Laziness - a feeling that they are
somehow
> > "owed" success. Also, over-complication, a lack of perspective,
too much
> > back-testing, not enough walk-forward testing/real-time practise.
The
> > pitfalls are many.!
> >
> > 2) More theory, less time actually doing. Sounds like you've
read
> > enough books to be able to put together a workeable strategy by
now!
> >
> > 3) Over-theorising. Lack of dedicated action.
> >
> > 4) There are plenty of experienced traders around here that
can
> help
> > you out with just about any question.
> >
> >
> >
> > _____
> >
> > From: equismetastock@xxxxxxxxxxxxxxx
> [mailto:equismetastock@xxxxxxxxxxxxxxx]
> > On Behalf Of metastkuser
> > Sent: Tuesday, June 14, 2005 5:24 PM
> > To: equismetastock@xxxxxxxxxxxxxxx
> > Subject: [EquisMetaStock Group] Why do traders FAIL?
> >
> >
> >
> > I have a question (unrelated to Metastock) for the experienced
traders
> > on this forum.
> >
> > I have now read a dozen books on trading -- not the foo-foo books
that
> > promise $10M in the next trade, but ones by Tharp (my favorite),
> > Chande, Le Beau, Stridsman, Elder, Covel, Schwager (and O'Neil,
> > Link,...) and a couple of Tharp's IITM publications on money
> > management etc. Will get to Kaufman next. And of course every
issue of
> > Roy's MSTT which are simply marvellous.
> >
> > I've put a couple of hopefully positive expectancy systems
together
> > (discretionary at this point so it's not easy to use the system
> > tester). The systems have four stages: 1) setup (to identify
market
> > trend and stock trend but not entry), 2) entry (looks at timing),
3)
> > exit and 4) money management. I have spent quite a bit of time on
3)
> > and 4) because I believe they hold the key to being a successful
> > trader. I use volatility as a significant determinant in all 4
stages.
> >
> > So I've done my homework. The odd thing is that none of this has
been
> > difficult to understand -- not just for me but I'm sure for
anyone who
> > takes the time and has some patience.... and now I am confused.
> >
> > 1) Why do so many traders fail? Have they not read these books?
> > (Please don't reply that they are undercapitalized and/or they
have
> > the wrong psychology for trading).
> >
> > 2) What do reading the next 50 books buy me (besides the
enjoyment of
> > reading them)? Surely the law of diminshing returns kicks in right
> > about now.
> >
> > 3) At this point, what would the typical causes of failure be?
> >
> > 4) This is a Metastock forum. Can someone point me to a more
> > appropriate forum for this type of discussion (I have not found
one).
> >
> > Thanks!!!
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > _____
> >
> > Yahoo! Groups Links
> >
> > * To visit your group on the web, go to:
> > http://groups.yahoo.com/group/equismetastock/
> >
> > * To unsubscribe from this group, send an email to:
> > equismetastock-unsubscribe@xxxxxxxxxxxxxxx
> > <mailto:equismetastock-unsubscribe@xxxxxxxxxxxxxxx?
subject=Unsubscribe>
> >
> > * Your use of Yahoo! Groups is subject to the Yahoo!
> > <http://docs.yahoo.com/info/terms/> Terms of Service.
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