Good Traders Bleed Slow…

(DISCLAIMER :This is my opinion. I am still learning.)

…Bad traders bleed quickly, and a very small number of traders make any money at all, substantially less than that make good money.

”90% of traders fail” is something everyone comes across at multiples while they’re learning about the markets, but obviously not something that most take too seriously. It is probably the same thing that makes people buy lottery tickets. The idea that “I know the odds are really against me, like super against me, but I am special. I am unique. My life’s story has to work out because hey, I’m the protagonist.” While nobody will usually readily admit it, we all secretively believe God/Fate holds us in just a little bit better favor than everyone else.

If you go back through all the old forum posts over the years here, basically every two to three years it is a completely different group of people. While it’s possible they just got bored with these forums, or made so much money that they moved to the Bahamas and retired, most likely they lost, or made so little when push-came-to -shove, that they just moved on to some other way of making their money work for them. Why is everyone selling trading ideas? Why does everyone have a book? If they were reeeaaalllyyyy doing well at trading, they would offer these things for free because they had that kind of time on their hands. Most likely, they know enough to make a little money, but they still need something to supplement their income and they know there is always a new group of people with a few thousand bucks coming up to the plate with dollar signs shining in their eyes.

I agree. It took me a couple of months of trading before I realized that there was something wrong with what most people were doing. I too saw that 90% number and thought...if I continue doing what the mainstream is doing I will simply fall into that random distribution with only a slight hope if falling into that 10% of success, what could I possibly know that someone else doesn't know better?

Early in 2014 I changed how I thought about the whole picture. I decided that if the herd was going to follow the trend, manage losers and let winners run then I would do the opposite. Also many people trade too big so I stay small. I don't use stops...ever. I manage winners early, I let losers run allowing duration and cyclicality work in my favor. I manage risk at order entry by defining risk with spreads and/or staying small. I fade big moves, sell high volatility and in general look to do the opposite of what everyone else is doing. I don't buy trading ideas, systems, snake oil or lucky charms....100% of what I have learned I have found on the internet...free. I still have a long way to go but the important thing is I have learned how to find the information I need and more importantly I am able to formulate the questions I need to answer.

Where I think the retail investor does have an advantage over the big firms is where we can really pick and choose what and when we trade, we can be far more nimble, we get priority fills with price improvement around 80% of the time. We have access to as good or better technology than many of the big firms. I may not have the same leverage they have access to but I can trade the same penny wide markets.

I find myself at a point where I care less and less about what big traders are doing or what other traders are doing. So many people think there is some secret edge that they, above everyone else, will see, or can buy or something that makes it easy money for them. It's not easy. It's damn hard. One has to be willing to put in the time and effort into understanding as much as possible.

The problem I'm facing at this point is just getting my account size to the point where I can trade more naked positions allowing me to go further Out Of The Money than a defined risk trade can. It's a long road but I already feel like it has changed my life for the better in more ways than just finance management.

sheesh that was a mouthful

The old saying "A sucker is born every minute" come to mind? Or the tulip bubble?

However, I would argue retail traders have a much greater advantage than institutional traders these days. With the advent of online brokerages we have the same access to the markets as hedge funds do. We can be much more nimble trading a $50,000-$100,000 account than a hedge fund trader with $1 million+ buying/selling power any given minute. Using daily charts for big picture ideas and then zooming in to shorter time frames, being able to see every trade price and size, along with how much size is trying to sell or buy can greater impact my decisions on the fly. If I see that big sell coming in, I can get out too or short it down with them. Or if we have bid supporter into a breakout, its go long time. We can use the herd as our friend if you know how to read the action. Because you are right, someone has to buy for the price to go up..... Which comes down to: I like to be in trades for 'the move' not buy and pray for a move. Thus I look for specific setups and action. I don't care why the action is there, only that it is. Then, play accordingly.

The problem is, the 90% don't take the time to learn. Many new 'traders' end up 'investors' because they buy at the 'right' wrong time and then just tell themselves they'll hold for awhile. I'll take their money any day....

Acstudio and I may disagree on some things, but I give him props for sticking with his plan. At least he was willing to learn a strategy and put it to use over the past year. I hope he has many more years to go.

As for market opinion and trade idea sites; I have ran a 'free' site and a 'paid' site. My paid site was exponentially more successful than my free site. I found those who put skin in the game upfront are more likely to stick with it and try to learn a few things. I also had/continue to have much more professional relationships through the paid site compared to the trolls who came to the free site trying to get rich quick. I know a few traders who have made over a million dollars a year trading who offer their trade ideas and educational materials to the public for a premium. The idea that they should offer free advice is like saying because Apple makes a lot of money on iPhones they should just give away their patents and contact info for Foxconn so we can all go make our own iPhones....