Great post Nick.
Risk management, like a entry/exit/trailing stop mechanisms, are all 'hard wired' technical attributes. They are easy to understand and in most cased replicate, although as TH explains, not the secret to success. The reason why many fail, in my humble opinion, is people unwilling to accept the journey of trading, in other words they place too much emphasis on a single trade, or a small sample of trades. One cannot determine the long term outcome of success from 2, 5, 10 or even 50 trades. A small sample of trades is prone to market nuances which are part and parcel of the journey but people are unwilling to trade through those nuances, instead wanting immediate profits. Hardly will a new trader accept a break even result after 10 trades, let alone 50. So at trades and nothing to show for it they divert into some different method that must be better...and around and around they go.
People do not realize that even the greatest traders actually have strings of losing months, even losing years. Bill Eckhardt, arguably one of the best traders has had 4 losing years in the last 20. Yet, each day, each week, each month and again year after year he stands up to the plate, takes the good trade with the bad trade. the good months with the bad months, the good years with the bad years, but intuitively knowing that because he creates a positive expectancy that he can't fail.
That's where the 95% come unstuck.
Risk management, like a entry/exit/trailing stop mechanisms, are all 'hard wired' technical attributes. They are easy to understand and in most cased replicate, although as TH explains, not the secret to success. The reason why many fail, in my humble opinion, is people unwilling to accept the journey of trading, in other words they place too much emphasis on a single trade, or a small sample of trades. One cannot determine the long term outcome of success from 2, 5, 10 or even 50 trades. A small sample of trades is prone to market nuances which are part and parcel of the journey but people are unwilling to trade through those nuances, instead wanting immediate profits. Hardly will a new trader accept a break even result after 10 trades, let alone 50. So at trades and nothing to show for it they divert into some different method that must be better...and around and around they go.
People do not realize that even the greatest traders actually have strings of losing months, even losing years. Bill Eckhardt, arguably one of the best traders has had 4 losing years in the last 20. Yet, each day, each week, each month and again year after year he stands up to the plate, takes the good trade with the bad trade. the good months with the bad months, the good years with the bad years, but intuitively knowing that because he creates a positive expectancy that he can't fail.
That's where the 95% come unstuck.
Is 95% an official statistic?
The only reference to 95% was from a survey done by Refco back in 1982 on futures accounts under $5000. It showed 95% failed and since then I think its become folk lore.
The book is written by someone who worked for a brokerage house in 1917. He analysed the trading accounts of retail customers at the brokerage house and based on the mistakes they make he wrote this book under a pseudonym.
The author details his results in One Way Pockets. He found that 95% of them lost money overall and displayed the same trading pattern. They would enter a trade, it would show a small profit, and they would sell too early. Then seeing the stock leave them behind, buy back in at higher prices. They would hold on too long after the stock peaked. Ride it all the way back down to the bottom. Then finally they would capitulate and sell. That is most cases would become the perfect entry point for the next cycle up
The book offers a simple advise on how to speculate in the market successfully. There are 14 chapters and the first half deals with his analysis of customers account from 1915-1917, the second part offers a plan for ""Coppering" the Public "
The main point to bear in mind is that the public's speculative play is wrong. If an opposite plan of operations can be adhered to, or , in gambling parlance, if the public can be "coppered," there would seem to be a reasonable chance to beat the Wall Street game.
The book offers a plan for long term traders on how to trade by determining how trend starts, how one must identify the "bell cow" or the leading stocks, how to be deaf to news and rumors,how to correctly use stops, how to see the first reaction through, when to sell, when and what to short, and when to cover shorts.
The 64 page book has a complete method to successfully speculate in the market. Nothing changes on the street, including the advise to chart readers and technical analyst:
On the other hand, the operating plan is not akin to any of the arbitrary systems of chart play which have been in vogue during recent years. There was a time in Wall Street when chart students could and frequently did make money by playing their various systems, but that was before the Street was surfeited with literature treating of market technique. Now the followers of charts are legions; two out of every three active traders keep either a written or a mental record of tops, bottoms and accumulating and distributing areas, and consequently are fooled persistently by the large operators, who "work" the chart readers and their following at every available opportunity.
Guess what is the last chapter title" The Method and the man" and it outlines the importance of following a method.
. I know, because I have had two people just this week ask to be taught like TH trades. He i snot seeking it out. People wanting that experience are seeking him out - again, a natural demand.
I ..
I have had two people just this week ask to be taught like TH trades.
Hi nick
was my name mentioned too ?
I know, because I have had two people just this week ask to be taught like TH trades.
...
I find this amazing!
That people want to learn how to punch in buy and sell orders like a boxer on ice!
And they'll pay for it.
Some of the Qs are seriously funny, we should start a thread about it.
I find this amazing!
Bob Prechter:
More than 75 years ago, Don Guyon, the pseudonymous author of One Way Pockets, wanted to discover why his clients always lost money in a complete bull-bear cycle. It might be argued, he reasoned, that, at worst, they should have broken even, since at the end, prices were back to where they were at the start.
He found that the answer lay in the clients' temporal orientation to the market's future. At the beginning of a bull market, he found all his clients were traders. At the top, they were all "investors." This is not only precisely the opposite of the correct orientation for making money, but also entirely natural for human beings and a key reason why the market repeatedly behaves as it does.
Hank Pruden:
One report showed the following
telltale results:
• The average price at which each stock was bought was higher than
the average price at which it was sold.
• The trading methods of each account had undergone a pronounced
and obviously unintentional change with the progress of the bull market
from one stage to another.
• Stocks that were purchased at a bear market bottom were sold soon
after at a moderate profit, even though in a few months these starting
prices looked ridiculously cheap.
• As higher levels were established, the same stocks were repurchased
at prices considerably higher than those at which they had previously
been sold.
• At this stage, larger-percentage profits were the rule (evidence that
what was considered a “reasonable gain” had been upped).
• Stop-losses were not in general use at this level, whereas they had
been freely placed when prices were lower.
• The acquired confidence of the buyers seemed to have caused them to
buy extensively on the first major reaction from the extreme highs.
• These were later liquidated at substantially lower prices.
””Don Guyon, One Way Pockets,
first published in 1917
Risk management, like a entry/exit/trailing stop mechanisms, are all 'hard wired' technical attributes. They are easy to understand and in most cased replicate, although as TH explains, not the secret to success. The reason why many fail, in my humble opinion, is people unwilling to accept the journey of trading, in other words they place too much emphasis on a single trade, or a small sample of trades. One cannot determine the long term outcome of success from 2, 5, 10 or even 50 trades. A small sample of trades is prone to market nuances which are part and parcel of the journey but people are unwilling to trade through those nuances, instead wanting immediate profits. Hardly will a new trader accept a break even result after 10 trades, let alone 50. So at trades and nothing to show for it they divert into some different method that must be better...and around and around they go.
People do not realize that even the greatest traders actually have strings of losing months, even losing years. Bill Eckhardt, arguably one of the best traders has had 4 losing years in the last 20. Yet, each day, each week, each month and again year after year he stands up to the plate, takes the good trade with the bad trade. the good months with the bad months, the good years with the bad years, but intuitively knowing that because he creates a positive expectancy that he can't fail.
That's where the 95% come unstuck.
I find this amazing!
That people want to learn how to punch in buy and sell orders like a boxer on ice!
And they'll pay for it.
PS I know u were stirring .....
Happy to try to clarify better.
Firstly I'd say that if educators were not of use they wouldn't be in business.
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