90 Av Tilvalg Tradere Tape Penger

Hvorfor de fleste handlende mister penger og hvorfor markedet krever det I dag tar jeg en mer abstrakt og dypere titt på spørsmålet om 8220 hvorfor de fleste handelsfolk mister penger.8221 Mens du leser, og som jeg påpeker i artikkelen, kan enkeltpersoner flykte fra herding oppførsel og skape over gjennomsnittet (eller under gjennomsnittlig) avkastning. Når det er sagt, for å bryte fra flokken, er det mange ting som må være kjent om deg selv, menneskelige tendenser og hvordan disse kombinerer for å danne samfunnsmessige bevegelser (som aksjemarkedet gjenspeiler). Denne artikkelen vil vise at det du tror kan være din egen vei, kan være den nøyaktige tingen som holder deg til en del av besetningen, og dermed alltid inn og ut av markedet på feil tidspunkt. Det er en ganske lang artikkel, det kan pisse noen mennesker, men i lang tid å godta og lære å håndtere problemene som tas opp i denne artikkelen, kan du hjelpe deg med å flytte inn i det lille området til vellykkede handelsfolk. Hvorfor de fleste handlende mister penger og hvorfor markedet krever det av: Cory Mitchell, CMT De fleste handelsfolk har hørt statistikken8230822195 av handelsfolk tape penger, 8221 8220 Bare 5 av handelsmenn kan leve på det, 8221 eller 8220Only 1 av handelsmenn virkelig tjene penger. 8221 Uansett hvilket nummer som kommer fra nyere studier, er det faktum at mange handelsfolk vil miste penger, og det kan ikke bare unngås (for noen harde numre, se Dagens suksessfrekvens, det grundige svaret). Alle slags grunner er gitt for det, for eksempel forvaltningsulykker, dårlig timing, dårlig regjering, dårlig regulering eller dårlig strategi. Disse er alle bra og gode, og noen av dem spiller definitivt en rolle i individuell handel suksess8230 men det er en dypere grunn. En dypere grunn til hvorfor de fleste handelsfolk vil miste, uansett hvilke metoder de bruker. Jeg hevder at selv om alle handelsmenn visste hvordan (husk å vite og å gjøre er to svært forskjellige ting) å handle vellykket basert på dagens forhold, vil de fleste handelsmenn likevel miste på lang sikt. Hvorfor de fleste handlende mister penger 8211 Markedet er ikke uavhengig av oss, det er oss Hvorfor de fleste handelsfolk mister penger og hva handlerne ofte ikke klarer å innse er at markedet er den kollektive bevegelsen av sine handlinger og reaksjoner på sine egne handlinger og til andre mennesker8217s handlinger. Lyd forvirrende. Tenk på dette: Du tar opp en handel, lukker øynene dine og treffer 8220enter8221 (åpne handelen). Du har ingen anelse om hva markedet gjør (øynene dine er fortsatt stengt), men du begynner å reagere på din action8211 du lurer på om du har tatt den riktige avgjørelsen, hvis du skulle justere stoppet ditt eller hvis du skulle ha fått tidligere eller senere . Det fortsetter å skje etter at du har åpnet øynene dine og ser hvordan handlingen din (handel) handler i forhold til andre handlinger og reaksjoner. Selv erfarne handelsmenn kan gå gjennom disse følelsene til tider. Markedet er med andre ord en gigantisk tilbakemeldingsløype som viser handelsmenn (og alle som ser på markedet) et termometeravlesning av det sosiale humøret som handlerne, og ved utvidelsessamfunnet, driver. De fleste handelsfolk ser ut til å tenke på markedet er noe som har noen ekstern verdi utenom prisen som tilskrives det av handelsmenn. Jeg foretrekker å tenke på det som en sanntidsmåler av et samfunns syn på egen produktiv kapasitet8230 eller mer bare put8211 sosialt humør. Når markeder blir forstått, er ideen om at alle kan tjene penger ikke bare unøyaktig, men umulig og latterlig. Alle som tjener penger betyr at det ikke er noe marked, fordi hvem som ville ta den andre siden av handelen. I tillegg føler de fleste handelsmenn at de kan bevege seg med publikum for å få et (papir) overskudd, og deretter gå ut for publikum og snu det handel inn i en reell fortjeneste. I teorien er dette lyd, men husk at alle andre er ute etter å gjøre det samme. Det er denne mengden bevegelsen som tillater handelsmenn å tjene penger til tider. Uten en stor del av næringsdrivende som kommer til samme beslutning, vil markeder ikke bare bevege seg. Det tar overbevisning av mange handelsmenn å skape en trend, så det tar euforisk aksept at 8220 dette er den nye norm8221 for å avslutte den og 8220bøye den. 8221 Det tar så masse desillusjonering å krasje det den andre veien. Hvorfor de fleste handlende mister penger 8211 Bare enkeltpersoner kan slå markedet, ikke mengden (og mengden er 80-90) Vurder et øyeblikk hvis hver handelsmann fulgte regelen om ikke å risikere mer enn 1 av sin konto per handel og brukt lignende strategier toted av fagfolk. Stopp tap ordrer vil utløse over alt og prisene vil oppblåse og deflate8230 akkurat som de gjør nå med folk som følger sine egne (og forskjellige typer) strategier Med andre ord, alle som prøver å gjøre det samme 8220right8221, skaper de samme markedsbevegelsene som alle gjør sin egen 8220wrong8221 ting. Det er derfor de fleste handelsfolk mister penger, og det er paradokshandlere som må overvinne, for som Master Oogway proklamerer i filmen Kung Fu Panda 8220Enner møter ofte sin skjebne på veien han tar for å unngå det.8221 Heldigvis, akkurat som det er nesten umulig å overbevise en tyr som en bjørn når han eller hun har tatt stilling, ville det være enda mer ufattelig å overbevise hver handelsmann om å handle på en bestemt måte. Poenget er, det gjør ikke noe om hvordan folk handler nå, eller hvis alle handles den samme, vil de fortsatt miste. Massens forsøk på å unngå dette (eller til å skape fortjeneste) skaper den svært nose de ender opp med å henge seg med. Hvorfor de fleste handlende mister penger 8211 Ikke forstår den sanne naturen av markeder Med erfarne forhandlere kan lære å bevege seg med mengden, og også innse crowd8217s svake natur (og deres egen svingete natur også). Traders kan også endelig vite at sosial stemning dikterer markedene og nyhetene. Dette står i direkte motstand til den vanlige oppfatningen om at nyheten og markedet dikterer sosialt humør (se: Skaper Nyheter Sosialt humør, eller Sosial stemning Lag nyhetene) Vellykkede handelsfolk finner noe som fungerer og holder fast ved det, ikke lar andre trekke dem vekk fra deres strategi. Det er her de fleste handelsfolk går galt og hvorfor publikum mister penger. Til tross for de fleste mennesker8217s beste innsats kan de trekke seg bort fra mengden når det virkelig teller. Når alle vennene dine kjøper aksjer og snakker om oljepris 200 eller 20 (eller uansett hvor dagen er) og analytikere er over TV, sier det, er det vanskelig å ta en kontrarisk visning. Tross alt, hvis du tar en innsats mot alle andre, og du har feil, ler dine venner på deg fordi de tror at deres papiroverskudd som fortsetter å ekspandere, kommer snart til å bli kontanterbare på banken. Du opplever angre på at du ikke går glipp av å tjene penger, og kan også føle deg litt sosial skørhet. Og himmelen forbyder at du har rett og folk hater deg fordi du bare tjente penger mens de mistet skjorten sin. Lyd latterlig Tenk offentligheten opprør under opptatt Wall Street-protester, eller folk føler seg stor motvilje mot hedgefondene og handlende som har gjort milliarder ved å se boligprisen kollapse og dra nytte av det. Eller lederen som er resented for å få jobben sin mens flere av hans ansatte er lagt av. Vinnende handelsmenn og riktige analytikere er ofte 8220crucified8221 under store markedssvingninger når flertallet mister. (Husk at markeder er en refleksjon av samfunnet og en ledende indikator for økonomien, så når aksjene beveger seg ned, er økonomien teetering eller allerede i tilbakegang og dermed er folk allerede 8220 på edge8221 selv). Det er veldig enkelt å si 8220 Jeg vil følge publikum og vet da når jeg skal komme ut. 8222 Faktisk er det noe helt annet8230som det er grunnen til at folkemengder beveger seg sammen. Dette kan i stor grad skyldes den menneskelige tendens til å ekstrapolere trender. Trend-ekstrapolering er en tendens til å projisere nåværende forhold inn i futures, og antar ofte at alt annet vil forbli likeverdig. (se Stock Market er ikke fysikk del 1 for mer om dette). Og gjør ikke feil, de fleste hedgefond og verdipapirfond er ikke annerledes, de fleste tar treff sammen med detaljhandel investorer og handelsmenn, men vanligvis ikke til ekstreme av den uutdannede handelsmann som er mer sannsynlig å helt tørke ut hisher konto når ting går dårlig. Det som er veldig interessant er at mens et sikringsfond kan utgjøre et gjennomsnitt på 20 år over de siste 20 årene, har den gjennomsnittlige investor i det fondet en høy tilbøyelighet til å gjøre langt mindre enn det. Hvorfor Fordi de investerer og trekker ut pengene sine på feil poeng, akkurat som de gjør i markedet (se kort video på slutten av denne artikkelen). Sikringsfondet eller fondet er et (mikro) marked. hvor investorstraders kan sette inn og trekke ut basert på hvordan de tror fondet vil gjøre. Side notat. Traders og investorer må også være oppmerksomme på 8220 survivorship bias .8221 Vi vil sannsynligvis høre flere historier om mennesker som gjør en drap enn å høre om folk mister alt fordi folkene som mistet alt, er borte fra det offentlige øye og ikke snakker om det. De få som tjener penger, er sikker på å la alle få vite om det og dermed skape en slags illusjon8211intentivt eller utilsiktet8211 at alle kan gjøre det de diddo. Også innse at alle setter ut til å være et individ og handler sin egen måte, og ved at de fleste blir til sammen med mengden som mister penger (husk Master Oogway). Hvorfor Fordi hver person lar det skje .. unwittingly. Sosialt humør, enten det er optimisme, grådighet, frykt, osv., Sannsynligvis blir drevet av det samme sosiale stemningen som er vanlig i samfunnet. Det er ingen feil at individer begynner å like det samme motet som alle har på seg. I et forsøk på å forandre, slutter flertallet av samfunnet å skifte sammen, bevege seg mot lignende ønsker og bort fra lignende misliker. Derfor, hva markedet tilbyr, gir den nøyaktige tingen som vil lokke handelsmannen inn i mengden. For eksempel har noen som har liten erfaring med å investere i aksjer involvert fordi alle andre i sin sosiale sirkel er, annonser er over tv, og selv deres nattlige nyhetsredaktører snakker mye mer om hvordan markedet er så bra. I dette miljøet kan du være sikker på at det vil være mange 8220 hjelpende hender8221 for å ønske denne investoren velkommen til publikum, lære dem å være en del av publikum og initiere dem i blindens verden som fører den blinde. Hvorfor de fleste handlende mister penger 8211 Ekstremer krever nesten alle å komme ombord Selv om det kan begynne å bli klart, kan du fortsatt lure på hvordan det er mulig at de fleste mister penger og hvordan de ser ut til å bli med i mengden på nøyaktig feil tidspunkt. Når et sosialt humør, slik som 8230h, la det ringe 8220bullishness8221 tar tak i et samfunn eller en person, kan det være veldig vanskelig å se bevegelsen for hva det er8211 noe som vil passere Alt passerer (akkurat som våre stemninger svinger) 8230 akkurat som dille over tulipanpærer (Se: Ekstraordinære Populære Utsettelser og Madness of Crowds av Charles Mackay). Så folk kjøper og kjøper og kjøper, og så ser andre mennesker dette og kjøper og kjøper og kjøper. Så er det folkene som holder ut, og sier 8220Noen må jeg ikke gjøre det igjen. Og likevel, jeg hørte 80 av analytikerne er allerede bullish, så det kan ikke gå noe høyere. 8221 Men markedet holder tikkende høyere, og så får noen av stragglers delta i og kjøpe. Noen holder seg fortsatt og markedet holder tikkende høyere. Endelig er 85 av befolkningen bullish, og det er fortsatt noen stragglers8230 og markedet fortsetter å gå opp. Folk proklamerer sine prestasjoner og chanting at bommen og byste sykluser er en ting fra fortiden. Endelig er hver person blitt en storfe, eierskap, og hvis de ikke har bestemt seg for å kjøpe, har de gitt opp (eller blitt fortalt avstengt) på å forsøke å advare andre om ikke å kjøpe8230 og markedet dør på den andre veien. Tabellen nedenfor viser dette på en litt annen måte. Siden handlingen er viktigere enn snakk, når fondslederne har nesten ingen kontanter på hånden, betyr det at de er 8220all in8221 på markedet, og det betyr at en reversering sannsynligvis vil skje snart. Problemet er at markedet generelt ikke reverserer til fondet investorer er i, og det beveger seg betydelig høyere inntil pengene er trukket ut av markedet, og de fleste investorer har mange penger til å reinvestere. Kilde: Robert Prechters April 2010 utgave av Elliott Wave Theorist. Markedet er usannsynlig å vende i noen vesentlig grad til nesten alle er på den ene siden. Hvilket betyr at nesten alle som kom til det festen, kommer sent til å miste. En gruppe mennesker kan bare bestemme seg for å vente, men det vil også markedet. Og hvis folk er delt da vil markedet bevege seg på en rekke måter. Mennesker er katalysatoren og uten at folk skal skape en ekstrem, blir markedet vunnet, og omvendt blir markedet ikke handlet på egenhånd, mens folk8230 er markedet. Med andre ord, vil bommen og byssyklusene ikke ende. Vi utvikler seg og går tilbake og fortsetter fremover. Forsøk på å lovgjøre bøyd og buste sykluser er ikke noe annet enn politisk pandering, og er resultatet av de samme mentale prosessene som skaper bommer og byster i utgangspunktet. Igjen henviser jeg tilbake til Master Oogway8217s kommentar i Kung Fu Panda 8220Enne møter ofte sin skjebne på veien han tar for å unngå det.8221 Politiske forsøk på å stoppe markedskrasj er ingenting annet enn å møte vår skjebne på veien for å unngå det, et annet problem er enkelt opprettet eller et boblekrasj oppstår et annet sted. Markeder er ikke mer enn samfunnets sosiale stemning8217s deltakere uttrykker deres syn på sin egen og den kollektive produktive verdien. Dette kan forenkles ytterligere ved å si at min egen produktivitet i stor grad er bestemt av min generelle stemning. Hvis jeg føler meg håpløs, jobber jeg ikke så mye eller så hardt, og jeg selger aksjer. Hvis jeg har det bra, jobber jeg hardt, spiller hardt og kjøper aksjer. Dette gjelder for nesten alle og mens individuelle erfaringer varierer, på samfunnsnivå spiller det ut på samme måte. Inntil nesten alle (som ser på tidsrammen, og har evnen og interessen til å handle det) er i trenden, vant det. Tendensen vil fortsette, lokke flere mennesker inn, og når den når kritisk masse (som det kan gjøre uten ganske mye alle ombord), skjer det en reversering. Denne forandringen i formue (verre) forårsaker bekymring og deretter panikk når en full reversering oppstår. Og ettersom samfunnets stemning fortsetter å vokse, blir det mørkere folk som føler seg mer håpløse og gir opp fantasifulle oppfatninger om å tjene penger med eiendeler, og at aktivaene fortsetter å falle. Folk klander og velger deretter kamper med andre på grunn av deres ulykke for politikere og vellykkede handelsmenn som ikke har mer kontroll over situasjonen enn noen andre. Dette er et resultat av en annen menneskelig tendens til å forvirre årsak og virkning med hendelser som bare skjer i sammenheng med hverandre (se 8216devil gir deg et ønske8217 eksempel på aksjemarkedet er ikke fysikk del III og også se 8216Probabilities in Trading8217 eksempel i Sannsynligheter: Hva er oddsen Sannsynligheter i handel er beregnet feil del 1). Det var society8217s eget sosiale humør som skapte situasjonen, og samfunnets sosiale stemning som de (oss) selv var en del av, bidro til å skape og kjøpte inn. Vendingen når da en bearish ekstremitet der folk ikke ser noe håp, men det er fortsatt aksjer der ute og gull å kjøpe, og så begynner noen å kjøpe, og hele prosessen starter igjen og skaper bølger av mindre og større grader over tid. Hvorfor de fleste handlende miste penger 8211 Et enkelt nummer Game Finansielle kommentatorer vil gjøre uttalelser som 8220Meste profesjonelle penger ledere can8217t slå SampP 500 benchmark8230.blah blah blah.8221 True. Men det er ikke profesjonell pengeforvalter som viser sin uvitenhet, det er disse kritikerne som ikke forstår noe om markedsbevegelser. Mesteparten av markedsbevegelsen er skapt av profesjonelle pengeforvaltere som administrerer milliarder dollar i eiendeler, og også av andre profesjonelle bedrifter som trenger å transaksere eller sikre risiko for å fortsette sin virksomhet. Derfor, hvis markedet øker 10 om året, er det fordi disse profesjonelle fondforvalterne i gjennomsnitt har kjøpt markedet opp 10. Derfor er det umulig for de fleste profesjonelle pengeforvaltere å gjøre mer enn 10 det året fordi det ville være tilsvarende å be noen om å slå dem selv på et spill tennis. Avkastningen vil bli spredt ut fra negativ avkastning til tresifret avkastning, men i gjennomsnitt vil de ha gjort rundt 10, minus et administrasjonsgebyr og utgifter som betyr at de fleste fondsleder vil underprestere. Hvis markedet er 10, kan gjennomsnittlig sikringsfondets avkastning ligge i ballparken 8 til 9 etter avgifter, eventuelt lavere. Flertallet av investorer og forhandlere vil ikke slå referansen fordi de selv lager og er en del av det referanseporteføljen. Dette betyr at markedet overholder den effektive markedshypotesen. Ikke i det hele tatt. Enkelte handelsmenn klarer å overgå konsekvent. Også, husk 8220survivorship bias8221 kort sagt nevnt tidligere Mange handelsmenn og nybegynnere investorer kommer til markeder med en håndfull regninger og mister den. Det er en jevn og kontinuerlig strøm av disse menneskene. De spiser kattene til de handelsmennene som er vellykkede. Også det faktum at så mange mennesker hoper seg til (ut av) markedstopp (bottoms) betyr at det er gunstige muligheter for dem som kan holde et objektivt øye på markedet. Siden de fleste handlende handler på en kortere tidsramme enn investorer, bør du vurdere dette eksemplet. På dag 1 er markedet opp 1 og på dag 2 er ned 1. De fleste handelsfolk vil være svært nær flate og deretter trekke av avgifter og de er i hullet. Noen handelsfolk vil være opp betydelig, mens andre er nede betydelig. Hvilke handelsfolk er lønnsomme, og som er tapere, kan endres fra dag til dag i løpet av de neste månedene, ettersom lignende opp og ned bevegelser oppstår i markedet. Konsekvent tapere vil slippe av, og bidra til det store antallet handelsmenn som mister penger. Traders som er lønnsomme noen ganger, men ikke veldig ofte, beveger seg sakte mot slutt å skyve av markedet grid også. Vurder også dette. For at herlighetshistoriene skal skje, så som handelsmenn som gjør en 100. 50082302000 returnerer (om på en dag, ett år eller flere) hvor mange handelsmenn må miste skjorten sin (eller gi opp fortjeneste) for at det skal skje. det er en annen måte. Den dagen som handler som gjorde 6.000.000 i fjor, fikk pengene fra et sted. Siden små detaljhandlere komponerer det meste av det totale antall handelsmenn (høyt antall, små i verdi sammenlignet med profesjonelle), var det sannsynlig at 6 000 000 ble tatt rett fra disse detaljhandlerne flere tusen dollar om gangen. Noen mistet penger (gi den til denne vellykkede handleren) eller ga opp fortjeneste (slik at den vellykkede handelsmannen kunne tjene). For en dagbror å gjøre 6.000.000 i et år betyr det at 120 mennesker mistet 50.000 hver og orkan ga opp 50.000 hver i potensielt fortjeneste. Det er selvfølgelig ikke et direkte forhold, det er mer enn det. men det gir et perspektiv som ikke ofte vurderes. Med andre ord betyr det veldig at det som lokker folk i kjeller til markeder (store avkastninger), betyr at de fleste av disse menneskene vil være på den tapende enden av denne utvekslingen. I en annen ironisk vridning, når folk clamor inn i markedet alt på en gang ut av grådighet og en tro på at en ny æra er begynt, gir de nøyaktig motsatt. Som enkeltpersoner bortsett fra mengden Publikum er ikke en mengde før de fleste er involvert. Crowds can8217t skape sterke trender til de fleste er involvert. En trend som vunnet8217t stopper til nesten alle er ombord med publikum. Når alle er ombord, reverserer den. Siden det var sannsynlig at 8220big money8221 (som må byttes) som fikk trenden startet og sannsynligvis vil være den første ut, er denne lille prosentandelen av handelsmenn med de største lommene sannsynligvis i vinnerens sirkel, selv om det betyr å gjøre markedet gjennomsnittlig avkastning. Det store antall småhandlere (en svært høy prosentandel av alle handlende) som hopper på trender for sent (eller for tidlig) og deretter har en tendens til å gå for sent (eller for tidlig), vil skape den høye prosentandel av handelsmenn som mister. Derfor er de fleste handelsfolk som mister penger, uunngåelig i finansmarkedet. Bare de få som forstår dette konseptet, som aksepterer at det som føles naturlig og godt, er sannsynligvis feil valg, kan klare å tjene penger på dette spillet. Mens denne artikkelen gir en bred sammenheng, gjelder den også i liten skala. Daghandlere blir fanget i samme mengdeadferd uten å vite det. Den aksjen som vunnet, som de ser hele dagen før, hopper i bare for å få den til å bevege seg den andre veien, er det samme fenomenet i mindre skala. Kjøpere og selgere kan bli utmattet, opptatt eller beroliget på en hvilken som helst tidsramme. De opplever korte og eller lange følelsesmessige utbrudd, noe som resulterer i korte og langsiktige handlinger, som alle fører til mønstre som er synlige på alle tidsrammer. Det er også grader av bullish og bearishness på tvers av tidsrammer, noe som ofte betyr at kjøringer og reverseringer vil være aggressive og andre ganger mer sedate, avhengig av hvor mange forhandlere (og offentligheten) er involvert. Vurder også at hvis et referanse gjennomsnitt er et sted nær hva fagfolk gjør i gjennomsnitt 8211let8217s sier 15year8211 den gjennomsnittlige detaljhandelen forsøker å gjøre mye mer enn dette, og sannsynligvis risikere for mye for å gjøre det. For folk som ønsker å leve av handel er det vanskelig å gjøre det av å gjøre 15 år på en 30.000 handelskonto. Derfor vil detaljhandel investorer trolig over-trade og miste det meste av hva de har direkte bidrag til 15 gjennomsnittlig avkastning av konsekvent lønnsomme sikringsfondsledere. For flere hedgefondsforvaltere å tjene 15 på milliarder dollar betyr det at mange små handelsmenn må mate den katten. Den eneste gangen flertallet vinner er når det er et skifte i samfunnets samlede produktive kapasitet, for eksempel det imponerende aksjestyret av 808217s og 908217s 8211 8211, hvorav den siste delen var mer eufori (boble). Etter min mening var det noen store fremskritt innen teknologi i løpet av den tiden, noe som potensielt kunne gjøre mye godt, og dermed var oppgangen berettiget. Dessverre har vi for det meste slettet det potensielle gode på å primært skape produkter og tjenester som reduserer produktiviteten i stedet for å øke produktene som gir oss en flukt fra den virkelige verden, i motsetning til å hjelpe oss med å utnytte den virkelige verden. Disse store grunnleggende skiftene skjer ikke ofte, noe som betyr at i lulls mellom de fleste handelsmenn og investorer vil miste penger. Hvorfor de fleste handlende mister penger 8211 Bottom Line Bunnlinjen er at handelsmenn må holde seg til en veldefinert plan og handle den planen selv når det er ubehagelig (og det vil ofte være). Det store flertallet av befolkningen, og dermed det store flertallet av handelsmenn, spenner under dette ubehagelige trykket på samme måte som de når for sjokoladebaren i stedet for gulrøtter. Siden det meste av befolkningen er mer enn glad for å bli med i mengden. ved å ha en viss disiplin kombinert med en anstendig strategi er det mulig å være en av de få vellykkede handelsmenn som faktisk kan forlate publikum før det implodes på seg selv. Jeg ønsker velkommen dine begrunnede kommentarer, tilbakekallelser eller spørsmål nedenfor, uansett om du er enig eller uenig. Det er noe flott å lese om hvordan vår biologi ser ut til å være koblet til mengden atferd. Robert Prechter har samlet en del av det i sin bok 8220 The Wave Principle of Human Social Behavior og The New Science of Socionomics 8220. Som lovet er her den korte videoen om hvordan hedgefond investorer vanligvis kommer inn og ut på feil tidspunkt, selv når sikringsfondet er vellykket. Video: Prechter on Hedge Funds and Herding Se denne overraskende beskrivelsen av hvordan hedgefondsinvestorer oppfører seg: Cory, jeg snublet inn på denne siden mens jeg lette etter en figur som til hvilken prosent av den investerende befolkningen handler Futures, for en bok jeg skriver. Ikke lykke med å finne det nummeret, men jeg liker noen ganger å lese artikler som folk post om å tjene penger på handel. Vanligvis finner jeg humor i kommentarene til falske profeter som tyder på at de kan vise deg hvordan du tjener penger. Jeg begynte å lese artikkelen din og må si kudos til deg for å snakke ærlig. Venner spør meg regelmessig hvordan jeg skal tjene penger, og jeg informerer dem alltid ikke en gang om å prøve. Bare invester, se din skatteeffektivitet, ettersom utgifter og gevinster er en og den samme, og over tid håper du det beste. En ting jeg ikke enig med er imidlertid kommentaren din om statistiske avvik. Det er feil som en funksjon av tidsintervallet du bruker som 1 års mellomrom. En aktiv profesjonell næringsdrivende kan vurderes hvert år på ytelse på 250 intervaller, gjennomsnitt og standardavvik. Når jeg tenker på min personlige handelsprestasjon, så har jeg alltid sett det, hvilken prosent av DAYS I handlet positivt. Over karrieren min gir meg flere tusen datapunkter. To andre kommentarer Jeg kan gjøre for alle som fortsatt vil spille dette spillet, et spill jeg ikke lenger spiller meg selv. Regel 1 8211 (av min 97 regelenummer 18217s) 8211 En god handelsmann er ikke noen som ser fremtiden riktig, det er noen som styrer sin risiko riktig. Hvis du spiller et spill som er i hovedsak 5050, og du tar fortjenesten raskt og lar dine tap løpe. Du lager nå en ulik skalafordeling mellom vinnerne og taperne, og du er død før du begynner, tiden vil fullføre deg raskt. Dette tar en seriøs følelsesmessig kontroll, en som nesten krever en sosiopatisk personlighet. 2 - Noen mennesker er egentlig bare spektakulære handelsmenn 8211 tenker at du kan spille mot disse menneskene, er det samme som jeg tenker jeg kan rette opp på riktig offensiv tackling mot en 300 lb defensiv ende. Det endelige resultatet kommer ikke til å være bra. Jo mer sofistikert produktet 8211 tror alternativene 8211 jo verre din ulempe blir. Ingen som leser dette burde noensinne handle på alternativer. Nok en gang, Kudos til deg for din ærlighet. It8217s sjeldne. Matt Williamson sier: 8220Ingen en leser dette burde noensinne handle alternativer8221 Alternativer er både langt enklere og langt vanskeligere å handle. Når strukturert riktig, kan en lønnsom handel bli hatt mens du er feil i retnings-, tids - og volatilitetsretning, de tre hovedkomponentene i opsjonsprising. Kort sagt, bare fordi du kan gjøre det, don8217t kastet ditt teppe av spredning på alle. Jeg gjør det vel som en detaljhandel. Det kan gjøres. Det er bare vanskelig å finne ut det. Matt, Med alt hjertets generøsitet, ønsker jeg deg det beste. Jeg visste ikke at jeg hadde automatisk svar på, så jeg mottok din kommentar i dag i min e-post. Jeg vil stå ved det jeg sa og informere deg om at det kommer fra noen som startet sin karriere på et boutique-derivatfirma, og fortsatte å holde tittelen som handelshansker hos tre av verdens største handelsfirmaer. Kjernekompetansen min er ikke-lineære derivater og syntetisk strukturering, og jeg likte stort sett å handle i 1000 masse klipp, men tenkte ingenting om å ta ned 10 til 50 000 om gangen og har ført til utløpsstrekkrisiko på over 200 000 på flere anledninger, som er ganske galskap, selv etter mine standarder. Jeg var også medlem av NYMEX, COMEX, AMEX, CBOT, CBOE og CME før jeg ble 27. Jeg ble pensjonert i en alder av 34 fordi jeg brente ut helt og bare kunne ikke gjøre det lenger. Jeg har heller aldri hatt en tapende måned i karrieren min da arbitrage fjernet variabiliteten som jeg er sikker på at du ser forsøker å handle alternativer retningsbestemt. Jeg ønsker deg godt skjønt. Hilsen, - wrldtrst Hei igjen Cory, jeg leser bare denne artikkelen, og det ringer virkelig med meg. Jeg prøver å forstå hvorfor alle her i USA er så sjokkert over Trumps seier. Investeringsanalytikere på tvers av brettet klipper alle på hodet og sier 8216 ingen så dette coming8217 WTF Unnskyldningen er at alle meningsmålinger og presse hadde det i boksen til Hillary. Det forsterker bare at markedene er en utvidelse av folk som en masse. Denne innsikt kan hjelpe meg å forstå hvordan markedet er mer sannsynlig å oppføre seg, bruker du den modellen eller sporer du tilbake fra det vanlige tenkning til markedsadferd, hvilken vei rundt vurderer du takk Cory Mitchell, sier CMT: Dette er tøft spørsmål , fordi det endres. Mye av tiden er det godt å følge flokken i en viss grad. Jeg er en trendhandler for det meste, så når ting går opp er jeg en kjøper (bare på pullbacks skjønt). Men det kommer et poeng når den følelsen blir for sterk. Hvis en trend har gått opp og opp og til slutt begynner alle å ta det for gitt. På det tidspunktet har nesten alle som ønsker å kjøpe,. Med ingen kjøpere igjen begynner prisen å gå ned. Eller vi ser også følelsesekstrater på ulemper. Etter hvert som oljen falt tidligere i år og sist var det lønnsomt å satse på nedgangen. Men når du begynner å lese vanlige medier som snakker om forsvinning av olje, og nesten alle du snakker med å si at oljen er ferdig, er det vanligvis når jeg begynner å kjøpe (jeg har også begynt å kjøpe fordi vi var i nærheten av 2009 nedgang i oil8230 annen dårlig tid i historien men oljen rallied aggressivt av disse lavene). Så jeg ser på følelser litt, men vanligvis kan du bare se det ved å se på langsiktige diagrammer (for investeringer). Du ser langsiktige områder hvor prisen har toppet (sentiment for bullish) eller bunnet ut (stemning for bearish). Innimellom pleier jeg vanligvis å investere, bare se for å kjøpe investeringer når alle andre hater dem8230, men at historikk dikterer er en god tid å kjøpe. (Noen ganger må det gjøres justeringer for inflasjon, bedriftsvekst osv.) Kortsiktig handel er virkelig det samme, men vanligvis at jeg ikke ser eller tenker på følelser i det hele tatt. Jeg er bare trading trender og tar handler basert på gunstig belønning: risikofaktorer og vurdering av om trenden er sannsynlig å fortsette eller ikke (basert på den siste prisen action8230 som gir en ide om om kjøpere eller selgere sannsynligvis vil være sterkere i over kortsiktig). Så stort sett stoler jeg på diagrammene mine, men for investeringsformål når jeg begynner å høre mange ekstremt forutbestemte proklamasjoner på markedet, begynner jeg vanligvis å handle i motsatt retning av slike krav. Hei Cory, Takk for en så tankefull respons, it8217s er veldig nyttig. Også et flott nytt innlegg i dag fra deg, jeg skulle ønske jeg var allerede satt opp for daytrading for å dra nytte av dine innsikter Eric Martin sier: Hei Cory, Nice artikkel. Du sa, 8220 Etter min mening var det noen store fremskritt i teknologi i løpet av den tiden, noe som potensielt kunne gjøre mye godt, og dermed var oppveksten berettiget. Dessverre har vi for det meste slettet det potensielle gode på å primært skape produkter og tjenester som reduserer produktiviteten i stedet for å øke produktene som gir oss en flukt fra den virkelige verden, i motsetning til å hjelpe oss med å utnytte den virkelige verden.8221 I8217m nysgjerrig hva de 8220escape8221 produktene er I8217m gjetter videospill8230 ikke sikker. Bora Yagiz says: what a depressing article. just what i needed8230 Cory Mitchell, CMT says: Or liberating. Each person can forge their own path. Just depends on how you look at it. an article telling you have basically ZERO chance of making can NOT be liberating sorry8230 not more than the motto written on the gates of a concentration camp (8220work makes you free8221). unless, of course, you have a different definition for that word. censoring those who disagree, and leaving only positive comments, eh maybe its depressing because the points the article is making about how traders loose to the markets hit sensitive points within you. maybe you just don8217t want to do the work to investigate these points so become a better trader. how do you think it happens. you wake up one morning and you8217re a great trader. no. it takes your work. most traders have an idea of wht they think the markets are. they romanticize it so they can be the winner. but reality hits and the market doesn8217t care what a trader thinks. its being the market 100 and if you want to capture profits. get in the flow of the markets. This is such a great article and the comments and your replies are worthy of a post in themselves, perhaps you could elaborate on the theme in your reply to Abhi8217s question, there are some real gems there to be polished The whole article has really got me thinking. I have been seriously following investment blogs and websites for a few years now as I find it an intriguing subject matter which straddles many other subjects including behavioural and group psychology and social anthropology (which was actually my subject at university). There are some incredibly bright and interesting people talking and writing about this field and I love to follow these intelligent guys, I wish I could meet them too and listen I also enjoy podcasts, which I would love to hear, if you have one. But, strangely, I am not actually invested in the market as yet. Ha I may be a late straggler and lose everything I am enjoying the debate and insight and often philosophical humour that prevails in the articles, there is a depth in this field which is difficult to find in political, economic or business blogswriting. I8217m in it for the wisdom, philosophy and humour and the personalities of the people behind the blogs. Having said that, naturally I would consider investing and I have a number of fantasy accounts to play with strategies. I have friends who day trade but I would not previously have considered that as a viable way to earn income. But on reading this article, I am thinking day trading would be a very rapid way to learn the reality of trading and the stock market. I feel bad for commenters Fab and Sarbinson8217s accounts of their losses after decades in the market. Would day trading be a kind of microcosmic method of learning about how markets work and how to best read them and work in them for a profit Cory Mitchell, CMT says: Thanks for the feedback. Yes, day trading is like the microcosm of investing. It will show how prices move. Typically patterns that play when day trading also play out over longer time frames as well. While my investing strategies are different than my day trading method, they are based on similar concepts. If the ultimate goal is to just invest, then learning to day trade8211which takes considerable time and effort8211seems kind of pointless. Better off just to focus on learning how to invest. But if day trading is the goal, then by all means focus on that. Whether day trade, swing trading or investing a person only needs to learn one strategy that works for them in order to make money. All other knowledge is excessive, and not required for making money8230but may be accumulated for the sake of interest, or to sound intelligent in conversation Gud Evng Every One, Mr. Cory Mitchell Sir, it8217s v. insightful amp inspiring article, its cutting the noise and provides smart ideas. Thnx kudos to u, for detailed explanations, its v. rare . My name is Amit, a independent research student and rampd pro from India, Apart from research and work i am having passion in Investment Management, Applied Behavioral Finance amp Analytics, Behavioral Science for Investing. writing, reading, learning new things etc i want to utilize my research:analytical, due diligence, attention for detail skills for doing investment analysis and do research based trading aswell, but after reading ur article now i want to adjust the focus i have 1 question in 2 parts - a) sum people says 8220MIMIC 8216ACTIVIST8217 INVESTOR8217S MOVES8221,what ur take on this idea b) whr to find the (activist8217s) foot prints, in India as well Thank you for your time and consideration. Leadership is not about ur title, its about ur behavior. A Wise Man Cory Mitchell, CMT says: a) MIMIC ACTIVIST INVESTORS MOVES, what ur take on this idea People can do this. But ultimately they still need to follow what the successful trader is doing. This is quite hard. It is no different than just following a winning strategy (following a strategy or a person are the same thing). Most people can8217t do it, and end up deviating. So basically no matter what approach you take to the market, assuming it can theoretically produce profits, the ultimate success of that plan relies on the individual8217s ability to follow the plan. If you follow what a winning trader does, exactly, you should be profitable. Yet few who take this approach are8230see video at end of article. b) I do not know the successful traders in india, nor do I follow much about the Indian stock market, so I can8217t offer any guidance there. Cheers, Cory Great article. Now the even greater irony. Even without reading the comments above I would imagine the overwhelming majority of such commenters will indicate they totally understand what makes a trader successful. Cory8211 Thank you very much for your insightful analysis The more I use behavioral analysis in my investing, the more successful it becomes. 8211Steve RUB1G (RUB1G) says: In the end, it8217s all about identifying the kind of market your trading in and recognizing it when it shifts to a different type of market and being able to change strategies that work given the market you8217re trading in. To get to that point, you have to have inherent, God given traits of perception, patience, intellectual capacity and nerve and years of experience. Most don8217t have the innate ability and those that do, usually lack the staying power. That8217s why there8217s so few who are truly profitable. This is a great article. People are so obsessed with numbers they forget the market is entirely psychological and largely qualitative and it8217s why I find markets fascinating. I realized the keep up with the Jones8217s thing ends in doom every time if you stick on that too long. Sell sell sell buy miners. Hi everyone, I keep studying and learning and trying different strategy but none really seems to work I have done courses read books and still I can t find anything that really give me an hedge, so I start wondering do they really exist a profitable strategy I have done long term trading( holding up to 6 month) for 2 years and did well 30 average return per year, I have been day trading for 1 year I m down 10 Cory Mitchell, CMT says: That is a respectable day trading return in your first year. Many people lose all their capital in the first year of day trading. You are likely doing some things right, it is just a matter of continuing to fine tune your approach. Look through your trades, and spot areas you could improve. For example, is there a way to make your losses slightly smaller Does the price tend to run a bit further after you get out If it does you could seeks to expand your profits slightly. Very minor changes over many trades can take you from being a losing trader to a consistently profitable8230but it takes constant monitoring and adjusting to current market conditions. Your other option is to stick to longer term trading, as that seemed to do well for you thank you, yes many times I get out and price keep going up I went from 70 winner to 70 loser since i m studying technical analyses Cory Mitchell, CMT says: In what way The market operates as a leading indicator for the economy. There are times where there seems to be a disconnect though8230. and we will shall see if it continues to act as a leading indicator in the future as more and more central banks interfere with the market. But markets (more accurately: traders and investors) buysell based on what is expected in the future, which means markets move in anticipation (lead), and then based on the trader8217s conditioningbeliefs they buysell based on what they think will happen next, and so on. Very insightful article. Indeed market is irrational. Oil went up yesterday when it seem that oversupply is still rampant in the market. Lost money by betting against it Cory Mitchell, CMT says: Losing trades happen. That is part of trading. But believing oil will fall because of oversupply on a particular day is not a prudent strategy. Oil has been rising for weeks in spite of oversupply. Successful traders trade off things they have tested and that have proven to reliable over and over again. Also, oversupply was the reason for the decline that took oil below 30 in the first place. That information was already priced in. It8217s old news. Almost everybody was on-board with that idea, and that is why oil fell so much. But as the article states, when everyone is on-board the trend can8217t continue. Oil prices had to go up (in the Canadian Investing Newsletter I have been buying commodity stocks since January). Markets move ahead of the news. They started dropping as oversupply became a potential problem, and then fell heavily when it started getting some publicity. But markets are forward thinking8230so the price rises in anticipation of supply eventually dwindling because some oil companies will go bankrupt and as oil producing countries get squeezed financially there is an increased chance of conflict which would further increase oil prices. The drop was priced in, everyone was onboard, which means there was no one left to keep pushing the price lower8230.so it had to go up. As it pushes up, everyone who sold at the bottom is forced to buy and get out of their losing positions, pushing the price up further. Ultimately though, none of this matters. Study the charts and find patterns that work over and over again. They are there. Then don8217t let the news of the day distract you. Trade the pattern when it occurs, and you will find greater success in the markets. Hi mitchell, I have created a simulation chart based on random numbers, resultant chart look very similar to our real market charts, there will be trends small, major and all kind of, now seeing that trends also form in randomized charts and today most trading happen by algo hft machines, which are not following trends in most cases rather selling buy to capture the spread, so it confuses me whether the trend formation happen due to conviction of many tradors or some other reason behind it. Cory Mitchell, CMT says: Great point and question Abhi. I think your question relates to the fact that something appearing similar is different than cause and effect. La meg forklare. If you go into a casino, you can track whether the roulette ball falls on black or red, or if baccarat hands come up player or banker. If you chart this, you will see trending periods, as well as choppy periods. It will look like a stock chart. Yet we know that the results of the ball falling on red or black or the cards dealt in baccarat are random (assuming fair play). So you have a good question8230if the random charts generated above look like stock charts8230are stock charts actually random I say no. What creates the random charts above can8217t be controlled or impacted by the players in the game. Yet with a stock chart, the players do impact what happens on that chart. I can buy and buy and buy, causing an uptrend. But in the casino it doesn8217t matter what I do, the cards are already determined. So while your random charts may look like a stock chart, the cause and effect are different. Stock charts may appear random, but the underlying driver is fear and greed. On a random chart (or in the casino), fear and greed can8217t affect the outcome of the cards or spin. Stock movements are created by thousands or people (or few) buying and selling based on their future expectations, but then reacting as their expectations come to fruition or not. While I have never tried, it, I doubt the strategies I use would work on random data. They work on real markets because there are moments when you know emotion will kick in, and the market (other people) will react in a very specific and predictable way. I do view markets as random much of the time though8230I can8217t make sense of many of the movements. Yet, trading is about finding those specific criteria and moments where the next move becomes quite predictable. You don8217t have that on truly random charts (or games), and therefore, comparing markets to randomness is likely a fruitless endeavor. The real market is about thresholds and conviction (and other people8217s lack of conviction or changing their convictions), and that is often what drives trends. For example, say I decide to start buying a stock. I don8217t even need a reason, I just start buying. Other traders notice this, and also start buying. Anyone who sold to me is now in a state of pain as I continue to push the price up. Eventually they start buying (or covering their short positions) because they fear missing more upside, or their short positions are becoming too costly. As more buyers step I become the seller, unloading my shares on those people. That8217s the power of markets8230one person or a group of people8217s convictions can drive the price (changing other people8217s convictions, and thus creating a somewhat predictable outcome), which then brings more people into the fray. Then, as the conviction changes again, the same thing happens the other way. The chart may look random, but we collectively affect the outcome8230which makes it not random. This is why most people lose. They chase the price, and then person or group that started the whole move unloads their shares on these people. The way to make money is research and practice ways of spotting where emotion will be high, and a thus a predictable outcome is likely to follow. Most people don8217t know that, and so they buy or sell and hope (with little conviction) they are right8230.and those are the exact people who will create the high emotion trades that make successful traders money. Hi Mitchell, thank you so much for the detailed reply, your blog is eye opening, I agree that, chart look same but the causes are different and in trading it is greed and fear, which a trader can know, until the trader knows about it, stock market is similar to random number chart btw we hear all the time that algo trading in majority, how much the greedfear factor play here I deploy some of the high speed order placing mechanism through the robotic softwares that i8217ve developed but i have no idea on exact mechanism that large autohft trading corp use, it is mixture of man and machine btw you can take a look at apps. techfiedstock for random chart, just need to refresh or press redraw, funny that you will sometimes see very clear support and resistence lines. Although chart is based on pseudo random numbers but i think its not going be radically different from true random generators made using hardware. Cory Mitchell, CMT says: Interesting8230those randomly generated charts do look like a real stock chart. But yes, the causes behind them are different. As for mechanical trading, there is technically no greed and fear on the part of the machine, but it is still impacted by greed and fear since other participants in the market are driven by these emotions. Also, even if the market was all mechanical, the bias and strategies of the traders making the robots would create chartsmovements that look like what we have now. The market is still a zero sum game. Regardless of the input (mechanical or man) the end result stays the same8230the best tradersprograms win, and those that don8217t know what they are doing will lose. right, you are always to the point, I am yet to see any profit thru my frequent scalping8230. but i hope things will be different now on. Excellent article Cory Mitchell, thank you for sharing it. It has been really helpful. Took a day off from trading and came across this article. It8217s certainly one of the best articles on trading I have read. The key takeaway (of many) that I got reading this is that the market is a living organism and is a reflection of the 8220mood8221 of the traders in that particular marketinstrument. What I am beginning to understand and dread is that in a market like futuresES for example, even a single contract bought or sold can have a ripple effect on the market. What I have seen trading a simple suppresis strategy recently seems to support this hypothesis. My results in SIM are much better than in real trading. This leads me to believe that perhaps there are algos running that tracks open positions and number of contracts being traded. For example, if I am looking for a reversal after a run up (I identify my areas of interest premarket and use order flow) and short 10 contracts at my resis area, can these 10 contracts in real trading actually affect the movement Are there algos that track that there are now 10 extra (vs SIM) open short positions and continue to push price higher to set off stops Let8217s say it does push price higher to set off stops, and another trader jumps in to short 5 contracts, will that 5 contracts affect price to move higher Machine learning at it8217s finest happening here Cory Mitchell, CMT says: Yes, on small and large scales that happens. Your orders do affect the market, because someone else is on the other side of the transaction and doesn8217t want to lose. Whether it is one person or hundreds, there is a collective action of those on the other side of the trade to do everything they can to make you lose (and others on your side of the trade as well). And you, and other trades on your side of the market, are trying to do the same to the people on the other side8230whether we like to admit it or not. Here8217s some food for though. I used to trade thinly traded stocks. I would watch the level II and see if I could spot bids and offers which looked like short-term traders. I would then take their shares (whether they were bidding or offering) and then continue to push the price offside on them. The goal was to force them out of their position when they bid or offered to get out of their position at a loss, I would exit my trade at a profit. It is a zero sum game, if I made money, the other trader(s) lost. This is a small scale version of every single transaction that occurs in every market every day8230whether a market is liquid or thinly traded this type of action is going on. It is easier to picture though when talking about only a couple traders battling it out in one stock. It8217s not manipulation, it8217s not unfair, it8217s how the market is set up. Now imagine I and the other trader have millionsbillions of dollars to trade with. Other people may see us going at it, buying and selling to each other like crazy trying to force the other guy out at a loss, but it has nothing to do with technical or fundamental analysis. Other traders may join in, not knowing what is going on. Now you have a scenario which reflects every liquid stockmarket. That is why I only trade off the price action. My goal is to join a trade as soon as I see one side taking victory over the other, then the other side is forced out and I can ride that price wave. The premise is the same as what you talk about. Analysis (in day trading) matters but not as much as most people think. It is more about adaptation. I (or others) can push the price for no reason at all except to make you exit and produce a profit for myself. Other traders can do the same to you or me. I now trade liquid instruments because I didn8217t like picking on other individual traders, but trading something liquid isn8217t any different. I am still trying to take positions where I know the other person is likely to lose. Otherwise I lose. That8217s the game. That doesn8217t mean it8217s impossible to make money though. There are still patterns that develop. If someone noticed what I was trying to do in those stocks, they could have smoked me, I did get smoked from time to time. Trading is much more dynamic than most people think..you are up against thinking and learning peoplemachines. They will not politely let you take their money, they will fight back, and try to take yours. Longer-term there are factors which drive large scale social mood changes which affect prices over the long-term. But in day trading it is more like chess match8211you see what your opponents are doing and they see what you are doing, and both of you are trying to do what you can to win and outsmart others. For example, some days there are may be patterns where traders are triggering false breakouts and then taking the price back the other way. Instead of getting angry and calling the market unfair, notice the pattern and adapt to it. ES is probably one of the best markets. I really like it and it is one of the better ones to trade. But make no mistake, the person who fills your order to get into a trade does not want to lose either. It is not cause for dread though. It is an opportunity. When the price action dictates that buyers or sellers are winning the battle, a fairly consistent price action follows because the losers are forced out. That doesn8217t mean you win every trade8230I only win about 60 to 65 of the time, but more often than not if you watch price action you can see the shift of who is winning. Sometimes you will be wrong, and that is fine, but align yourself with the trend and those who are in a stronger position and the odds will favor you. If you find yourself on the losing side more often, look at the charts8230spot the trend and which traders whereare in a stronger position. Consider why you were fooled into picking the wrong direction (or enteringexiting too early or too late), and then adapt. The Trader Mentoring page has some examples of charts with trades from ES: vantagepointtradingtrader-mentoring showing the types of price spots where the odds shift back into the trendingstronger player8217s favor. What if all traders just went long when their trades went against them Just wait it out. Your cash will be useless until that time but at least it won8217t be a loss. And do some traders not use limit stops OK, I8217m not a trader but am trying learn how to manage risk better. Cory Mitchell, CMT says: Lots of traders make 10 or higher each year. But the vast majority don8217t, even if the hedge fund or long-term average gain of stock market is 10. As the video at the end of the article describes, even if a hedge makes 10 a year (or more), most investors within that fund actually lose money, because they deposit money and pull it out at the wrong times. Hi, what if everyone understood that and stopped trading 8211 forever And started being productive instead What if it was against the law to trade accounts below 500 000 Oh, and side notice 8211 the big money goes bust to from time to time, not only retail. And PS. the answer to these questions is probably a world war or spoliation, plunders like in the old days. There must be the transference of capital goods from small to big, weak to strong 8211 no matter what 8211 so pay your dues and thank almighty you don8217t have to kill to eat. I must add something I noticed recently. Brokers have been putting out comparisons for how profitable their traders are. Like discussed here: forexmagnatesexclusive-q2-2013-us-forex-profitability-report-35-of-retail-clients-gain Beware such numbers, as they don8217t tell the whole story. In a given quarter about 35 of traders may make money, but 65 are losing. Span that out over several quarters and the statistic indicates that many of the profitable traders will gravitate to the negative sphere. Yet it may not show up in the quarterly stat which will usually stay around 3565. Unless it is the same 35 staying profitable, the statistic is useless. To stay in that 35 you need to be consistently profitable, but this stat doesn8217t address that. The 35 that are profitable could be different every quarter and in the quarters they aren8217t profitable they are part of the losing group. We also need to consider survivorship bias. The stats considers trader accounts that are active during the quarter. If you completely draw down your trading account this quarter you are counted in the losing 65. But since you will be inactive next quarter (no money and no trading) you aren8217t counted as a loser again. But this tidbit throws a wrench the idea that 35 of the traders are profitable. Because it doesn8217t count all the guys who went broke in previous quarters. The stat that needs to be divulged is this: Of all the accounts opened since the brokerage began, how many are showing a profit today (or a profit when the account when the account was closed) You ask that, and I am sure you will get a much much smaller of profitable traders. A vast majority of the accounts opened will be inactive due to depleted funds. Here is an example to make this clear. While I was a trader on a trading floor we had about 30 full-time traders. In a given month at least 25 were profitable (but they were all profitable overall, otherwise they wouldn8217t have a job). A high percentage of winners. But what the stat doesn8217t tell you is how many traders tried to make it onto the floor and failed. Over the course of 6 years we probably had about 10 guys a month come in for training and attempted to make money. That is about 720 potential traders. They all failed eventually or a few became part of the 30 full-timers and other formerly profitable traders fell out. So instead of 25 out of 30 being profitable (this is the type of stat the brokers are divulging, which is bullshit), we need to count the guys who blew up. The real stat is that 25-30 out of 750 were profitable, or about 4. If anyone has a historical brokerage account stat like that I would love to see it8230especially if it proves me wrong. helen senior says: FYI trading is not a zero sum game. Most traders are under this massive delusion. Market makers have an obligation to provide liquidity. The odds are extremely high that your broker is providing the opposite side for your trades. When you lose, that money becomes their profit, plus the commissions. So with their variable spreads and your stop losses, their software aims to take as much money out of your account as possible. Once they8217ve made their quota, the traders who are lucky enough not to have gotten stopped out might make a profit although this is nothing compared to what the brokers will have made in the process. Why don8217t you ask your broker who their liquidity provider is and how their variable spreads are calculated. If you8217re with a market maker or dealing desk broker, chances are you8217ve got no chance of making consistent profits. Your success or more likely, failure as a trader has much more to do with this than any strategy you implement or psychology you adopt. I don8217t think this is the case helen because if you open different charts from different brokers the price movements are the same, to say a brokers softwares is hunting stop losses would mean prices with that broker are not consistent with market prices with other brokers, but that is not the case, i once thought my broker hunts my stop losses but i when i opened different charts the price movements were all synchronised. The point that trading is most definitely not a zero sum game is correct. It is a negative sum game. The buyer and seller bring X dollars to the table but some of that gets raked off due to commissions and spreads and other ancillary costs (data feed, subscriptions, etc). A zero sum game would be a game of poker at your friend8217s house. In 1990 I went through membership class with 19 other people. After six weeks, I was the only person still standing. The 95 rule seems to hold. I would say that of every 100 people that lasted maybe 3-4 were truly standout, raking in the money, hand over fist, traders. Now if you go to a top Ivy school 8211 or equivalent 8211 and get on a top trading desk at a top investment bank, your odds invert and you probably have a 95 chance of success. Success being seven to eight figures a year. So if you want to be a successful trader start thinking about it when you are about 10 years old. Leave a Reply Cancel replyWhy Traders loose money Trading Index and Stock Options 90 of option traders lose money Even people who are highly knowledgeable about the financial markets and work in the industry do poorly. There is evidence all over the place that losing money in options is normal and everyone in the know knows it. I never got good at options trading, but I never encountered anyone else who was good at it, either. Some people admitted that they lost money overall, while others, although they spoke readily of their wins, were evasive about losses and totals. This was less surprising when I discovered, to my disappointment, that many of the people who traded options were also gamblers. Most people who continue trading options lose ALL the money they allocated, if they were smart enough to allocate an amount. Trading options was the one activity at which I could not improve by studying or practicing If I study hard and work at something, I get better at it. Two years of effort and study did not improve my results at trading options. When study and practice bring no payoff at all, it is a red flag indicator that the activity might be one at which it is not possible to improve. The possibility must at least be seriously considered. Option purchases are a limited-risk speculation but the limit is 100 The same is true of stocks, but you will almost never lose 100 on a stock. The limited risk feature of options only distinguishes them from futures contracts, where you can lose much more than you invest. Your loss in an option is limited to 100, but you can lose 100 over and over again. To offset those losses, your gains, when they occur, must be very large. They can be, but they rarely are. Options lose time value from the moment you purchase them Your stock must not only move (assuming the option follows the stock, which it doesnt always do), but must move in time for your option to overcome its time-value loss since you bought it. Options markets lack liquidity In India, except Nifty most of the Stock Options lacks liquidity and there are wide difference between Bid and Offer Price and Brokerage can make Succesful Option trade less profitable forget about Loss making trades Commissions on option transactions are high Your options must make a significant move in the right direction just to overcome your commission costs. Options are short-term, and they expire You are forced to trade often. You cannot simply buy and hold. If you want to stay in the market, you must replace expired options with new ones, incurring repeated commission expenses. You cannot use a long term strategy to wait out setbacks. If a stock makes a big move against you, your chances of it recovering before expiration are small. Option prices are not formally related to the price of the underlying stock From the emphasis that is so often placed on formulas that supposedly calculate the value of an option, you would think that there must be a formal relationship between the price of a stock and the price of an option on it, but there is not. Like everything else, the value of an option is whatever someone is willing to pay for it at a particular point in time. If its hot, its hot, if its not, its not, and an underlying stock and the options on it dont always fall into and out of favor at the same time. Option prices move independently of the price of the underlying stock, and sometimes track the stock surprisingly poorly. Option prices reflect the expectations of options traders about what the stock is going to do. As soon as a technical move looks likely, the options will often move in anticipation of it, to the point that they would be worth after the move has already occurred. If the move doesnt happen, the options drop. If the move does happen, often the option has already made its move, and wont budge any further. If you wait for a signal, others (like the specialist or floor traders) will get there first. If you anticipate a signal, youre going on nothing. The real fair value of an option is probably its market value. Trading strategies are arbitrary, contradictory, and only work in retrospect There are many trading rules such as Cut your losses, but let your profits run, or Sell after any 5 retreat, Always use limit orders, etc. They all sound like good strategies, and they all are good strategies in one situation or another. Unfortunately, you dont know ahead of time which strategy will look good in hindsight, and they are all so vague and contradictory that they have no use except in hindsight. You might just as well complain, Oh why didnt I buy low and sell high like I knew I should because most trading rules are of little more use than that one. They are fine for looking back, but they dont help going forward. After a bad trade, you can always go back and see where you went wrong, discovering how some particular strategy would have saved you, but the same strategy that would have saved you this time would kill you another time, so what use is it In options, perfection is required, but something always goes wrong You must correctly predict the stocks move and the time during which it will make that move. You must buy the option at the price your calculations are based on. Then you must sell at the right time, in the right way, having chosen the right method (stop-loss, limit order, or market order at time of sale), and your order must be executed rapidly and correctly by your broker and the options exchange. In too many option trades, some part of it goes wrong. I am not saying that you cannot make a killing in options. Du kan. But its extremely unlikely, and if it does happen, its not because you are good at it. People Made Killing during May 20 2009 in Nifty calls after election results, but its like once in a time kind of phenomenon. To some this will sound like a sour grapes story, but I know that there is a difference between an activity that I cannot become good at and one that no one can become good at. Lets compare forms of gambling as a somewhat appropriate analogy. I do not like gambling, and if I thought thats all that options trading was, I never would have had any interest in it. There are games like poker that require skill and that it is possible to become good at. Newcomers usually lose, but their results improve as they gain experience. I would be a bad poker player because I dont have the skills. However, experienced and consistently successful poker players do exist. On the other hand, there are slot machines, state lotteries, and roulette. They require no skill, do not reward skill, and are mathematically impossible to become good at. I would be bad at those games not because I am unskilled, but because no one can be good at them. Its in the nature of the activity. My conclusion about options is that because of the factors described above, I cannot become good at it, and neither can anyone else. Its in the nature of the activity. HOW TO LOSE 250,000 IN THE STOCK MARKET Friends For Life I recently had the pleasure of having dinner with an OEX trader, Floyd, from OEXOPTIONS. com. whose on-line advisory service has been rated in the top five by Stocks and Commodities Magazine for two years running. Floyd flew in from Florida to have dinner with my friend Johnny and his wife. A trading friend and I were happy to tag along. During our conversation Floyd mentioned to me that his most popular article is about his losing 250,000 in the stock market over a 6 month period . He certainly got my attention. I suggest you read the article in its entirety for it may just offer some important clues about how to make 250,000 in the stock market. What follows is an amended version. I lost 250k trading options in a 6-month period. 250k Thats a lot of money. Heres the sad story, and pleaseits worth your reading, as it could have been or could be you. For many years I traded stocks very successfully, and built a strong nest egg. My methodology was simple. I bought what made sense, and had no loyalty, selling on big moves up. I trained in the Wyckoff Method, was a student of CANSLIM (Investors Business Daily), and used the point and figure charting philosophy. They served me well, and I became a success story for investing. Mind you, not a yacht and 9 cars success story, but a middle-aged man with a sizeable nest egg. I for years had been reading about option trading, and had tried numerous times to play options around my stock investing. Sometimes with success, and sometimes with losses. If I ran a tape to what I did with options within this time period, including subscribing to many services and buying many books, Im sure I made a bit of money, but not enough. At that time I began studying the new ETFs and index funds, and reading the logic of using index options as an investment tool. Every part of it made sense, and still does. Off I went to become a trader in index options. I started with the S and P 500 (SPY) and the Nasdaq (QQQ) and began trading index options, simple puts, calls, and straddles. Self employed, I made sure I took time each day to study, and work the various subscription services Id paid for, and I began trading daily. My successes mounted, and confidence built. During the upswing markets I first traded in I began to actually DO WELL . and make money. My option time increased, and my profits at first mounted, then fell. Again, if I took a tape to it, at that time I was making money, but not as much as I thought I was making . As I forayed into the OEX, the most stable of the index options, I began thinking I understood patterns, charts, and that this could be my way to riches. My trading time became more fevered, with more emotional time buying the ups and downs, and increasing the size of my investments. I began subscribing to a number of services and systems, and saw that I could become a full-time trader, making real money at this. Unfortunately, I was deceiving myself, and things were taking a serious turn for the worse. Youve read that 80-90 of all option traders lose money. Youve probably even been to websites and explored services that selling options is the way to gosell to the idiots like me that buy them, right And youve read many claims of foolproof systems, mechanical trades. ways to learn to consistently make 50 to 150 returns on options. What happened to me over one year of trading was making money, sometimes big money and losing money, and finally. putting more money into the market to make back money. It really doesnt matter the amount I lost, but it was 250,000. It could have been 50,000. It could have been a retirement account. What it was, and Im being honest here, is multiplying mistake upon mistake, continuing patterns that I thought were working, and they werent . It took me some time to really figure this out, obvious as it seems. I continued to try again, to hone approaches, to read different OEX subscription alerts, or trade tips, or call spreads, etc. Good at none, doing all. All the time I continued to read about the great successes in options, and just knew that I could make money, too. I figured out the problem finally . 250, 000 poorer. It was me. Not the OEX. Not the charts. Not the subscription services (though most had bad advice and confusing lies on how they really performed.) It was how I traded, and what I didnt do. Ren og enkel. It was me trying to act natural in an unnatural environmen t. So what changed What did I do If youre patient, and you really read this and really do what is going to be suggested, youll learn, and youll know what it takes to be a successful trader, someone who times investments. But, if youre typical youll just scan this article, note a few things, and promptly do nothing with it. And, in the end, whenever that is, youll lose money trading options, or stocks, or any investment vehicle. You know all about FEAR AND GREED . right Its the traders lament. But its really only a small part of why a trader can do poorly. As I bottomed out in trading, realizing the losses, I suffered from classic pessimism. (Its bad now, and it will only get worse) to even more classic arrogance (I get it Look what I just didokay, it will get better now.) Does any of this seem familiar to you so far I began keeping a journal . This took a lot of time and was hard to do. My journal tracked the trades I made, how I did, and what happened, and had a column for the events and emotions that took place as I traded. Heres what I learned about me: Euphoric, when successful. Irrational with despair, when not. Consistently repeated the same losing strategy over and over again. On downdrafts tripled or quadrupled the bet to get the price right, with no structure. When a bad month or week occurred, took money from other good investments to add to my option bank, only to lose more. Read a lot of books, studied charts, but only enough to get half information. Subscribed to lots of option services, but never really read all the instructions, or did any of the real research. Unbelievable, but true, never really perfectly analyzed just how many options I lost money on. Pretended I did, but didnt. Created opportunities to buy, even when none existed. Huge despair when I lost, usually then tried to read something else and do that, but never really did change my lack of method. I learned that to trade successfully I needed to TRADE AGAINST HUMAN NATURE The emotional trader lives in peaks and valleys of pufferfish (over confidence), fear, and sorry Charlie (regret). This is where online instant trading, with instant news, fuels the drug of the emotional trader. Trading plans, if one even has them, evaporate. I found that both experienced and inexperienced traders have emotional outbursts, fueled by input, and react without reason. As I began working with a journal that tracked my trades, and my emotional patterns, I found, in studies, that a number of other methods helped me control my emotions . Music. I use headphones and listen to alphabetatheta sounds (left and right brain equalizing music. This music is a type of biofeedback, and extensive research has been done proving its equalizing and calming effects. After I place an order to buy or sell, I take a break. From the computer, from myself. I set calm and stop the input. My journal identified to me the triggers where I made mistakesI took an actual inventory of my errors, and noted the times of the day, excitements that caused me to become fearful, greedy, pessimistic, and arrogant. I wrote these triggers down, and made sure, as I traded, that NONE of them were present. Identified what is most embarrassingwhere I self-sabotaged myself. This, I found, is a typical issue with many tradersI kept repeating what wasnt working, over and over again. I actually had patterns and rituals for failure. I began analyzing my consistency in preparation, order size, sell prices, and stop losses and found I had no real rules of engagement even th ough I told myself I did. I HAD NO PLAN . Began to see trading as a business. Options are just inventory. Some inventory doesnt sell, and you sell at a loss, and other inventory sells well. You learn what sells. Just as a sport, it is the GAME of finding the right inventory. I wasnt seeing it this way and expected all my inventory to sell profitably. Business doesnt work that way. I quit focusing on what I was doing wrong, and started focusing on what I was doing right . I found out what I was doing when problems were not occurring . I eliminated too much study. I found in my journals that I was studying many approaches, subscribing to services, studying chartsand really was on many different paths. I had always said Ill do things differently, but before the journal and the analysis of my personality type, I never really knew what I did wrong. Once I identified my emotions, and what I repeated over and over again in error, I set rules of engagement. The journal showed me I had patterns to my emotions. The way I broke these was by talking out loud, almost acting as a commentator or newscaster recanting out loud what I was doing. Busy bees tend to be calm pre and post market, and crazed during the market. Many traders are busy bees with good methodologies and structures, until they trade. Patterns emerged from my journal that when I was steady and reliable in my thinking I made money, and when excited became irrational, falsely exuberant, or pessimistic. Being a busy bee I never took time to process the market that is, learn to read the shifts and momentum that occurthe actual flow of the market. By slowing down and stepping out of myself I began to actually feel the flow. In all of this self-examination, I began to set real rules of engagement. And stuck to them, and began making money. THE RULES OF ENGAGEMENT How much I was willing to lose on a trade, and setting mental stop losses exactly at that point. How much I wanted to profit, and setting limit orders to sell at that point, and NOT canceling out to HOPE for more, only to see the price deteriorate. Setting my charts up with just the indicators that mattered to me (see No Noise Charting on our website). Once I began watching the charts, I talked out loud and NEVER let myself vary. Setting time limits. On all trades I set rules of how long Ill hold the option, and unless special conditions exist (our Alerts detail this) I NEVER VARY. Invoke The Silent Witness. Going outside yourself and watching your behavior. Its like sitting in a room and watching another person without their knowing it, except the person is you. See what you are doing as if you are not doing it. WHEW. This simple technique took me time, took deep breathing and learning how to gain calm, but crazy as it sounds. THIS REALLY WORKS Dont be like the typical trader reading this and nodding your head, but then do nothing with it. Otherwise, youll lose your ass, as 90 of option traders do. Its so sad. Option trading is no different than owning a business in which you buy and sell inventory . You go broke if you buy wrong, sell wrong, or have the wrong inventory. Its easier with inventory, or so it seems, as you LEARN what sells. With option trading, however, the emotion takes over and you soon forget that its just this inventory. So, I lost 250k. It really hurt. Actually it traumatized me. But, I got serious, and I researched, thought, and began following rules. But before I began setting the rules of engagement I learned about ME, and what I did. Emotion is good . I did best when I got outside myself and watched my behavior, the silent witness. I saw patterns to what I did wrong, over and over again. Taking a simple psychological test helped me understand my emotional style, so I could see what I had to work from. Learning how to break those emotional patterns, acting unnaturally, and controlling the input helped me succeed. What stands out to me is Floyds emphasis on rules and simplicity, while ignoring all the none-sense and noise in the markets. Check out his site and sign up to receive his free blog posts. You may just learn something or find reinforcement in what you already know to be the truth. Disclaimer: I am in no way paid or reimbursed to discuss Floyd andor his site. He did not ask me to share this article. This is unsolicited for informational purposes only. I simply welcome his market studies and the opportunity to share it with others who may benefit from his years of market wisdom. Email him and let him know that you appreciate his honesty for it is not easy to admit your mistakes. Floyd has done so without disgrace or regret. We should all benefit and be like-minded.