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I've been trying to wrap my head around this one for about a year, honestly, and for whatever reason I can't seem to come up with an answer. Here's the question:
If it is so easy to lose money in the market, and 90% of traders who start, fail, does it stand to reason that it should also be easy to make money in the market?
After all, that 90% is transferring their wealth in what appears to be a never ending outflow.
If I look at my first 3 years of trading, if I would have traded opposite of myself I would have done very well. Easily. I don't know if anyone else started out that way...where nothing they did ever seemed right. you got long and the stock tanked. You got short and it rocketed. You sold during a correction and price resumed trend and took off. You hung on during correction and price tanked. It was like magic.
Now, if I traded opposite myself for the last 3 years I would have lost money, but I didn't come about my profits as easily as I seem to gather my losses those 1st 3 years.
I think it's an interesting question and it always seems to pop up in my head when I think about the market. I think there's quite a few traders that experience those easy losses that never seem to stop.
I think Mark Douglas hints that once you hit the flow you enter the zone of easy profits which I tend to believe given the easy losses. And when I say "easy" I don't mean without work. I mean easy in the sense that Picasso nearing the end of his life could easily draw a sketch on a napkin in 5 minutes and sell it for millions. But he spent his whole life getting there.
Any and all thoughts welcome.
David John Hall
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A few things:
when I started things were so bad that I think it made me a better trader.
High commissions, telephone broker, no intraday data, no charting software, you already had to be careful.
Just to hold a position a week or more I had to learn option spreads.
Today's new trader has such easy access to info that it really allows him to shoot himself in the foot.
New traders who are failing would probably improve results just by switching to a weekly system
and only looking at stuff on the weekends. (prevents daily self-sabotage)
(of course their instinct is to go to smaller timeframes, " I can manage things down to the minute")
The other question is, if something is "easy" will you allow it to be?
From what I see, most set up their trades by what cant be done.
I cant buy this until it meets a pattern.
I cant buy this until it has the proper candle.
I cant buy this until earnings come out.
I cant buy this because the markets going down.
I cant buy this because its lower than $15 in price.
I cant use a 10% stop.
If I buy this I cant place a market order, must use limit.
You see the more cants we manage, the more we feel we are doing something.
The real question is are we?
Is this just some "human nature" thing that we put a "straight jacket" on what we do because we cant control it after we buy?
So when you say: Is it easy or hard?
Now you have to define "easy".
Thanks
diceman
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David, I too have heard this said many times. I have read stories of trading rooms where one guy is having a bad go of things and the guy next to him is on top of the world so the first guy asks the second trader what the secret to his success is? In response to his query the second man tells him that he just traded opposite to his trades, that being the trades of the first guy....
A funny story to be sure but in my opinion it is pure fiction. You see price action is not static so placing trades in opposition to your initial insticts will lead you to no better place. Sure there will be the lone stock that could take off in the opposite direction and go parabolic on you but the odds are just as much in your favaor of being on the right side of that trade.
Most of the damage is done on the "Management" side of a given trade and has little to do with your reasons for entering the trade. Emotions like fear, greed and lust are at the root of miss-management and.
Yes you are right that this happens more often to the new traders, they enter a stock only to watch it shoot the other way and yes in part this is because they know not yet how to actually trade. They think that they do but their learning curve is just begining. With time and experience they can learn the proper methods for picking winning stocks and learning how to manage the trade...
Below is a mock chart that shows an example of a trade that was miss managed and would have yeilded no better results had one traded the opposite... And as always these are just my opinions and observations, nothing more...
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Nice post and replies by others. By far the absolute biggest mistake I made over and over early on was pulling or lowering a logical well placed stop loss. Man, talk about epitome of poor discipline and allowing emotions to take complete control! Another huge mistake I made was averaging down. Fixing those two flaws, though it took much too long, stopped the bleeding exponentially.
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a few disjoint thoughts....
In a trending market, up historically, one can improve ones success by being patient. Again, avoiding self-sabotage of ... whatever. The fact is if your trade plan is resonable the chart almost always shows a profit after your entry, though your exit may have been too early or too late capturing a loss or missing a big profit.. So the a majority of the time the "If only I had..." mindset presents a psychologically corrosive introspective , undermining the will to trade effectively.
Trading is a high variance endevour, there will be times when you are "in the zone". It more often than not has nothing to do with your trading ability, just the luck of the market. However one credits ones self with being on top of their game. There will be times when one if "way out ouf the zone". These time may be the luck market and may be just bad trading. bad trading due to bone headed plan, or bad trading due to not trading the plan.
Trading is similar to Poker. Often in tournaments one sees a player making all the wrong plays, low probability plays, and building a big stack. The high variance nature of the endevour makes this very common. For the number of chips accummulated, the guy/girl looks like a master. More often than not, eventually the odds catch up with the player and his/her plan that was working so well show its true nature and they loose all their chips. The same can be said for Mutual Fund Managers, though they are playing with someone else's money and paying themselves a bundle to be in the game. The top performing funds are examples of this. In a couple years the will be back in middle of the pack.. Trading is a high variance endevour with the opportunity for wildly varying results, however captital resources are limited and most bget busted out of the game.
Plan the trade and trade the plan.
1. It is hard to find a plan that will succeed. There goes 60% of the traders
2. It is even harder to stick to the plan and not self-sabotage. There goes another 30% of the traders.
Or maybe it is 30% : 60%. Anyway not trading the plan is a real killer.
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ApsII, could you scale down your charts, otherwise the thread turns into a wide-load thread requiring scrolling to read the responses, particularly on laptop screens.
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Will do buddy.. I adjusted my photobucket settings down to 15 from the 17...
I am using wide-screen so did not realize it was a problem.. Sorry.....
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Thanks everyone for your responses. fpetry's, something you said really struck at the heart of what my thoughts have been on this matter. As you say, not pulling stops and not averaging down were great helps to stopping bleeding money. That's very close to the root of the idea that floats around my mind. "Bleeding" money is the exact connotation. Because bleeding out on one end is bleeding in on another. I suppose that's what I mean by easy.
I suppose my definition of easy would be:
Natural
Organic
Efffortless
And my definition of hard would be:
Unnatural
Manufactured
Difficult
Looking at pulling stops -- that's letting your losers run. I think that letting your winners run should be the opposite. While it is very easy to pull your stops, it is not very easy for me to pull my targets when I find myself in an exceptionally strong stock.
If I think about it -- in those early days most of my losses came from one or two massive losers because I also refused to get out and kept pulling stops. Now my gains come from a few exceptional winners because for some reason or another I actually recognize the strength and allow it to keep rising.
The other part of adding to losers also feels very easy. At least it did for me. Though it's very bad for the bottom line. Adding to winners seems very difficult to do.
And now I would have to make my conclusion: making money trading is hard because the correct steps to profitability go against human nature.
Letting winners run, adding to winners. These are very, very "hard/unnatural/manufactured/difficult" for me to do no matter how much statistical proof I have that a system works. Because, for me, most of my systems that do appear to work are contrarian in nature to begin with.
So the real work appears to be to learn the real rules of the game and spend my time shaping my own automatic responses toward matters that seem very natural and learning to incorporate unnatural responces on an ongoing basis.
After putting in all of that work and that effort and focusing on the right work for me I suppose others would think that profits come easily when in fact it had taken a lot of work and discipline to make it appear so.
Part of the answer, now that I think of it, came to me a few years back when I was in a trade that was going south and I was just pulling stops left and right and letting it run all the way down and buying more on the way. I thought, the guy on the other end of this trade is making a killing, what is he doing? I mean, this trade went on for months. I was convinced it was turing around any day. It was like clockwork. I would place a stop, pull it, buy more. The stock would drop, rally a little, I would buy more. Place a stop, pull it, buy more. What if I was on the other side? Letting it run, pulling targets based on strength, adding more. Up and up and up. That would take about 1 decision a week. But it would "feel" uncomfortable.
Thanks everyone for your responses and thoughts. You have really helped me get to the bottom of this one.
David John Hall
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But isn't logic and reasoning unnatural ... and insticnt and emotion natural ?
Don't we have to expend great effort to overcome primordial urges ?
Give a teenager a scale ... a bucket ... a bag ... a shovel ... and a pile of rocks ... and tell him to put 25 lbs of rocks into the bag ...
He'll set the scale for 25 lbs ... and put the bag on the scale ...
First ... he'll get about half a shovel full of rocks and put them in the bag ...
When that isn't enough ... he'll get a full shovel full of rocks ...
And when that still isn't enough ... he'll get a heaping shovel full ...
And now he's gone over the target weight ...
Logic dictates that with each pebble ... you are getting closer to your target weight ... and should be slowing down ...
But somehow ... that just isn't natural ... isn't instinctive ... just isn't how the human brain is wired ...
One thing that I learned in flight physiology ... many years ago ...
There is a pathway (I forget the name) between the left and right sides of the brain ...
In women ... it is twice as wide as in men ...
In men .. the pathway allows only for half-duplex data transfer ... whereas in women ... it allows for full duplex ...
What does this mean ?
It means that if you put a man in a highly emotional situation ... it jams the pathway with data ... making it nearly impossible to make a logial decision ...
Whereas a woman can be crying her eyes out ... and still access the logical/rational area of her brain ...
Some theorize that this allowed mothers the ability to protect the young when they were threatened ...
But ... I'm not really sure that they "why" is as important as knowing that the condition exists ...
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Very insightful Reality, thank you. Evenmore reason to create a plan, to manage andprotect against emotional responses. I am very glad I asked this question.The responces have been excellent. Thankyou again all.David John Hall
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QUOTE (davidjohnhall)
I suppose my definition of easy would be:
Natural
Organic
Efffortless
David John Hall
The problem is what's the difference between Effortless and easy? (not much I think)
Natural, Organic, Effortless mean different things to different folks.
I'm pretty sure I would find someone's "easy" too hard and they would find my "easy" too easy.
The other thing is what do you really want out of this?
99 out of 100 traders will respond with: "I want to make money/profit"
However, is that really the case?
Would you be happy with a Turtle/Conners type set-up where you follow rules and make money?
Wait a minute diceman, you mean I don't get to look for stocks, I don't get the chance
to find "my pick".
Tell me that and your telling me there's more than just making money gong on.
I think every "problem" you've brought up hasn't been about easy/hard its been about emotion.
Thanks
diceman
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I agree completely diceman. Once again I have found a different value than whatI thought I would. I think we are all ondifferent journeys and the activities weparticipate in are in some ways attemptsto define those journeys. Throughout this thread I've come to seethat by easy I mean effortless, as inafter years of surfing I can surf efortlesslywhereby my intended path down a wave isseamlessly matched to my ability to doso.Using that analogy I can see that my initial question would have soundedlike this: because it's so easy to falldown, does it stand to reason that it'sreally easy to surf?Looking at it that way I instantly havemy answer. What a great day for learning.
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I also see the large emotinal focus. Thatrealization is great for me.
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It's hard.
Regards,
ben2k9
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80% of traders lose money.
so, easy for some, hard for most, i guess.
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QUOTE (davidjohnhall) I also see the large emotinal focus. Thatrealization is great for me.
But ... in the end ... what isn't emotion ?
What ... does the average person do (or rerain from doing) in a day's time that is NOT driven ... alomost entirely ... by either fear or greed ??
No one really wants money ....
They want what they can trade money for ... or the status that having money affords them ...
And ... not all greed is greed of money ...
It could be related to companionship ... etc ...
Everyone yearns for something that they "think" that they want ... but do not yet possess ...
How many million is enough ?? ... as you are NEVER gonna have ALL of the money ...
What drives us ... the greed of money ... or the challenge of the game ??
Once that you have all that you will need for the balance of your lifetime ...
Why do you keep playing ??
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Excellent points, Reality.
I think fear or greed could also be equated to pain or pleasure and for me atleast, i can say that they definitly run right through the center of most things I do. I think the responses of greed and fear, pain and pleasure are natural and automatic and as I think I've discovered from this thread, they must be overcome or managed correctly in order to be successful in the market.
For the things I am passionate about doing I have an acid test: if someone gave me a check for a ton of money relating to that activity, would I continue to do it? When it comes to trading I would have to say yes, i would continue because I really enjoy the process. At this point I find it medetative and actualizing. Sometimes frustrating but always worthwhile.
David John Hall
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QUOTE (realitycheck) QUOTE (davidjohnhall) I also see the large emotinal focus. Thatrealization is great for me.
But ... in the end ... what isn't emotion ?
What ... does the average person do (or rerain from doing) in a day's time that is NOT driven ... alomost entirely ... by either fear or greed ??
No one really wants money ....
They want what they can trade money for ... or the status that having money affords them ...
And ... not all greed is greed of money ...
It could be related to companionship ... etc ...
Everyone yearns for something that they "think" that they want ... but do not yet possess ...
How many million is enough ?? ... as you are NEVER gonna have ALL of the money ...
What drives us ... the greed of money ... or the challenge of the game ??
Once that you have all that you will need for the balance of your lifetime ...
Why do you keep playing ??
What did we all become Gordon Gekko all of a sudden? (heh, heh)
Remember that if you hit your target you can always play the game but smaller.
One of the things that used to crack me up when Id get back from the casino,
people always asked: "What did you win"?
They never asked:"What did you bet"?
Thanks
diceman
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http://www.youtube.com/watch?v=ktKNEGSqLB4
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Hilarious and dead on right about market investing psychology for the masses. Near the end when the lady says she's now long because Cramer said "buy buy buy" was the highlight. Hit a nerve for me immedidately because this morning I was reading news about todays huge gap down for ADBE, I think it's largest gap down ever. Well, last week Cramer told his mindless followers literally to "buy buy buy" ADBE just a week before earnings. Thanks for video link Apsll.
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Yes we enjoyed this in my trading group today.... Funny stuff for sure.
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That video was excellent. I'm still laughing.
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just saw this one.my thoughts would be, people who loose haven't found the right study course.my first trades were good trades, my first loser was thinking it was easy and attempting options for a quick buck.charting the old way with paper charts gave me a feel for whats happening day to day, the eod charts did not have a meaning for each days action. it was the over all look using principals or is this principles? forgot.my issues started when this computer stuff looked interesting, a 20 line here a 40 or 50 there, over here a 200, add a 500 and the meaning of the chart is covered.volume and price are the real indicators on the chart, when their meaning is changed to looking what other indicators are telling us is a large part of the new traders issues. every trader should work with one training course until its understood. then venture into other thoughts (thousands of them writing about volume and price) attempting to make one feel a new indicator has been found. its all clever, and impressive, but spending the time to learn one way the right way of looking, then use the skill to look at what others say, see if it looks the same to you. check their effort. in trading if it doesn't look right move to the next stock, some days one might not be found.this is from the course I took in 1981 or 82. I read new thoughts all the time, some are very interesting, But it means the same as the book or article from yesterday or 2 yrs ago. hope no rain on any ones paradejust realistic?
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Getting old, left out the principles work with knowing where the stock or index is in the cycle, or its called knowing the position of the stock in in the cycle. something like that. it calls for one action then a test on decreasing or expanding price spread and increasing or decreasing volume. on second thought its not age I've always had a issue with not looking up the correct language.
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Hi Jim, thanks for your thoughts. I agree with you completely about finding a method and learning it completely. I was in the bookstore yesterday and overheard a conversation (okay I was eavesdropping) between an older gentleman and a younger gentleman. The older man told the younger man "one of the keys to being successful is to find something you like to do and then sticking with it. Stick with it, don't be swayed, learn all you can and don't jump around from doing a little bit of this and a little bit of that. This way, over time, you gain experience others just won't have".
I thought that was very insightful and applicable to trading.
David John Hall
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QUOTE (davidjohnhall) Hi Jim, thanks for your thoughts. I agree with you completely about finding a method and learning it completely. I was in the bookstore yesterday and overheard a conversation (okay I was eavesdropping) between an older gentleman and a younger gentleman. The older man told the younger man "one of the keys to being successful is to find something you like to do and then sticking with it. Stick with it, don't be swayed, learn all you can and don't jump around from doing a little bit of this and a little bit of that. This way, over time, you gain experience others just won't have".
I thought that was very insightful and applicable to trading.
David John Hall
Hi David,
I may have been in that book store, when I was looking for a way of studying the Market I checked out the book store in L A. At that time the L A market was in business. The fella with the book store went to O'neil's when it closed. it is important to have a way of keeping in mind some order when looking at all the information we have.
You had a good start living where the traders lived when the stock exchange closed. I'm half way between L A and San Fran. Nothing here.
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Our greatest weakness lies in giving up.
The most certain way to succeed is always to try just one more time.
-Thomas Edison
Thanks
diceman
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