Do you have an edge?

[jonnyrich007]

In trading, think incrementally small, not big. Thinking big kills traders. And all failed traders think too big. Think returns on your principal of 3% per week. This worked for me in stock daytrading and it is working for me on forex.

[BruceBanner]

Thanks Daniel, I think your post answers my question. I will make "forex-money" and my new life starts today.

[MeiHua]

MeiHua, so how do I know that I am the right kind of person?

You don't really know until you try. According to Dr Van Tharp there are 3 types of personalities that will see the hardest difficulty trading and much less reach the upper levels of trading (trading consistently with multimillion dollar figures). Most are able to trade profitably with some hurdles and 3 are able to get the higher levels of trading without as much obstacles. I guess you could call it talent, average and lack of talent. For the talented and the average you can become profitable with work. I fall into the average category according to van tharps tests, I am an administrative trader like Tom Basso. Brett Steenberger uses learning curve slope after 1 year and 2 year bench marks. If you haven't seen significant improvement then your time would probably be better spent somewhere else where you can focus on your strengths. The problem is no one can tell you beforehand if your the right kind of person and what hurdles you have to crossover to get to profitably and consistency. A majority of people with hard work can do it, so I would guess you can too. But in the end only your performance will tell, and how hard you perceive trading to be. If after a year you still find trading excessively difficult and are still struggling significantly then I would reevaluate.

[AKS]

I found this book somewhat relevant in the context of discussion here and a very good read anyway..
Trading in the zone- Mark Douglas

Also, a bad trader can make a good system go wrong..and any system will go wrong a lot of times anyway..as kungfu panda says ())..."Inner Peace" is the key...

To peace..

AKS

[R Carter]

90% of people lose, actually i had 2nd hand info that a study conducted by bear stearns says only 7% are profitable. I got that number last week so it should be fairly up to date but then again its just rumor i have not seen the study myself. 10% is the general number for all types of traders.

I think the question that comes off every newbies mind is Why such a small fraction? Its not just risk, its not just process, its not just psychology. Really people harp on the same stuff over and over again. The reason why most people fail is because a million things can derail you. Really its about consistency and alignment. You must have a profitable system that provides an edge over the markets, be in a good psychological state, have a reasonable money management strategy, and be able to repeatedly execute trades while all of these factors are in alignment no matter what. If any factor is off, it will be detrimental to your financial health.

Most people think that having a system that provides an edge over the market is having an edge. Which is definitely part of it but there exists something called the "profit gap". This gap is caused only by the trader. The potential of the system vs the results of the trader. The best example of forward testing of this that most people experience is the difference between live accounts and demo. But here is a more concrete example, imagine you have a completely mechanical system that provides an edge over the market and have a computer trade for 1 year. Now you have a trader who trades the exact same system by hand, for the same year on the same instrument. The closer the trader's result to the computer's result the smaller his 'profit gap' is or rather the smaller negative affect his other elements detract from the system. sure this could go into EAs and bots etc to remove that and that is what some people do. But I think that the clearest example.

Basically bottom line, you could give a completely profitable system to a trader and his profit gap could be so large it actually returns him negative results. Completely independent of the system itself, purely because his own performance is not adequate enough to profit from the system.

Actually you might be suprised... in the data I recently looked at around 60% of trades taken on EU were right i.e. the traders selected the correct direction of PA... most notably on the 4h TF. Unfortunately of these 60% only 37% ended up in profit. The reason? Hanging on to a winning trade too long and it turning into a loss. And our Newbie special... over leveraging and not being able to stay the distance. A very great friend of mine, sadly no longer with us, always said get out early and leave a few pips on the table for the others. I like that... nice man... sadly missed.

[bobmaninc]

I honestly believe what rcarter put. I know a couple of my friends did both. Would cut there trades early to get profit. Or cut a trade before it worked out for them because of something they read online. And as always they put it all on red. They are successful business owners but not so much as traders.

[MeiHua]

Actually you might be suprised... in the data I recently looked at around 60% of trades taken on EU were right i.e. the traders selected the correct direction of PA... most notably on the 4h TF. Unfortunately of these 60% only 37% ended up in profit. The reason? Hanging on to a winning trade too long and it turning into a loss. And our Newbie special... over leveraging and not being able to stay the distance. A very great friend of mine, sadly no longer with us, always said get out early and leave a few pips on the table for the others. I like that... nice man... sadly missed.

Everyone can have winning trades, that just goes to show the difference between being able to have winning trades and being a winning trader. TBH I dont care about the reason they ended up losing, it could be a million different things. All i know is the people who took those trades made a mistake. Based on the 37% of 60% which is 22%, therefore 78% of trades taken when closed (which is all that matters) end up as losers. Sometimes you should just take that +1 pip because that would have been a profitable trade at one point? I can tell you that 90% of my trades have ticked at least 1 pip in my favor that does not mean i have a 90% win rate. I guess we can throw stats around as much as we want. But it comes down to the trader. The systems and trades people put on may be profitable at some point but at the end of the day only traders that have a small profit gap can take the money off the table into their bank accounts.

[bobmaninc]

Everyone can have winning trades, that just goes to show the difference between being able to have winning trades and being a winning trader. TBH I dont care about the reason they ended up losing, it could be a million different things. All i know is the people who took those trades made a mistake. Based on the 37% of 60% which is 22%, therefore 78% of trades taken when closed (which is all that matters) end up as losers. Sometimes you should just take that +1 pip because that would have been a profitable trade at one point? I can tell you that 90% of my trades have ticked at least 1 pip in my favor that does not mean i have a 90% win rate. I guess we can throw stats around as much as we want. But it comes down to the trader. The systems and trades people put on may be profitable at some point but at the end of the day only traders that have a small profit gap can take the money off the table into their bank accounts.

MeiHua I wil be honest a trade that made me 1 pip in my book is a losing trade. If I dont make at least what I risked I can not call that a winner. Made out alive yes but by no means a winning trade.

[Fxmall]

You are on the look out for a real crystal ball..it is not possible to rule the market at least, not the way you have stated..let us know if you succeed in your quest and FYI, we are all on the same one.

[AKS]

Everyone can have winning trades, that just goes to show the difference between being able to have winning trades and being a winning trader. TBH I dont care about the reason they ended up losing, it could be a million different things. All i know is the people who took those trades made a mistake. Based on the 37% of 60% which is 22%, therefore 78% of trades taken when closed (which is all that matters) end up as losers. Sometimes you should just take that +1 pip because that would have been a profitable trade at one point? I can tell you that 90% of my trades have ticked at least 1 pip in my favor that does not mean i have a 90% win rate. I guess we can throw stats around as much as we want. But it comes down to the trader. The systems and trades people put on may be profitable at some point but at the end of the day only traders that have a small profit gap can take the money off the table into their bank accounts.

Can you pls share the Bear Sterns report that you were referring to before- looks like a very interesting analysis.