Your Questions About Successful Traders Make

George asks…

Is Equity trading a good option if you are a math whiz but have no real trading experience?

What is the attrition rate for new traders. Is it a skill that can be learned or something you have to be a natural at?

John answers:

The attrition rate for daytraders is near 100%. The attrition rate for swing traders (one day to a week or two) is much harder to measure, but probably exceeds 95%. Millions of people trade occasionally, holding positions for a few months or years, but it’s statistically improbable that the majority of them can beat the market, and a lot fewer if you adjust for risk. Most answerers here will probably say that trading is a fool’s game and you should only invest in index funds, mutual funds, and maybe individual stocks with holding periods of years or decades.

It’s an endless argument if traders are made or born. There are some recent books on a famous experiment of training a somewhat random group of people to trade, and several of them were amazingly successful. They were called Turtles, and if you search a list of stock market books for “turtle”, the titles will come up.

A lot of math whizzes are crunching numbers to try to come up with profitable trading systems or at least tricks to give them an edge. They’re called “quants”. Other math whizzes (some with Nobel prizes) spend their careers “proving” that any edge is the product of chance or is at least transitory.

There is little argument that proper money management and position sizing will give you an edge over the blindly emotional investors. Money management starts with simple arithmetic, but can quickly get sophisticated with probability, risk measurements, volatility measurements, etc. This is probably the best place to apply advanced math skills.

My own take is that you should paper trade for a while, and if you’re profitable on paper, start with tiny trades at interactivebrokers.com, where most trades are $1 commission, and see how you deal emotionally with making and losing real money.

Ken asks…

Should I be worried if my friend turns into a trader again?

Cuz, she has already turned into a trader in the past. I just don’t won’t it to happen again.
Please what do I do?

John answers:

Is she good at bargaining? That’s really what’s going to determine how successful she is as a trader.

Maria asks…

anyone with real and successful experience on the FOREX?

I am investigating trading on the FOREX. Their are so many seminars offering this and that, and plenty of warnings on youtube to stay off the ForEx. Research Ive seen suggests 95% of traders fail and go broke, Ramsey says 7 in 10 traders lose money…I’m looking to find and hear from any traders with actual experience who are consistently profitable. Please Help!

John answers:

I made good money trading forex during 2005 and 2006, and actually made more than trading stocks and futures because of the high leverage. I was already a successful trader, and this was too good to be true. But then it became real popular and I had to rework my strategy. And then the rules changed.

Forex is largely unregulated and run by the banks. It wasn’t enough for them to make money from the newbies. They were taking on too much risk trading against real traders. If I could see their heavy-handed moves and fakeouts and stop running, then others could as well. I exploited their weaknesses and used their strengths against them. They began denying my market orders when it was clear I would make money and they would lose. What kind of crap is that? Are they making a market or not?

Too many outside traders were making too much money. So they changed the rules.

Their algorithms work perfectly now to take advantage of fear and greed of the masses. They know just how much to move price to make you cave in and give up, or feel like you’re missing out and get you in, then reverse it. They are masters of exploiting weak hands. Getting caught up in the middle of useless plundering is no fun.

There is almost no such thing as a trend anymore in forex; until there is and you wonder how you missed it.

I still occasionally trade forex, but trading stocks and index futures makes so much more sense, I find myself going for days without seriously even considering forex anymore.

The lure of forex is being able to start with so little money, high leverage and it’s easy to learn how to push a few buttons to make trades.

Unfortunately, it is the most difficult market you could choose, and those very same things spell disaster for the newbie: high leverage and being underfunded and little experience.

Save your money and learn to trade stocks and ETF’s. Develop a Trade Plan, and trade the simulator with fake money until you can show a consistent profit.

Contemplating making a living from trading is a pipe dream until you’ve done something; 90% of all traders fail in the first year, and there’s some pretty smart people in that group. Trading isn’t like other jobs, where you learn all you can, work hard, get the experience, and bing, you’re successful. There are no guarantees with trading. It can drive you insane with frustration because it’s more than 50% psychological, and not what you think you know.

The key here is that forex is a “trading” vehicle for experienced and advanced traders with lots of tools and computer power at their disposal. Even my two super-fast computers and eight monitors are no match for the mainframe computers used by the banks and hedge funds and currency traders around the world. You and I are just suckers to them; part of a little game they play for amusement on the side of their real business.

Are you a successful trader? If not, steer clear of forex until you are. You will lose your money and learn nothing more than how to push a few buttons.

Forex is no “game” like a video game. It’s a pool of sharks ready to feed and eat you alive; always circling your position. You will find yourself on the defense immediately, and it is no fun. Unless you can learn how to join them and go on continual attack, you will lose. Nobody ever made any any real money playing defense. Investors beware — this is not for you.

Sharon asks…

What is a reputable source (organization/school) for stock market and options play education?

I am a beginner/intermediate stocks and options market trader. I have not formally taken any course or read any books on how to trade in the US/Canadian market. I would like to find a reputable school/organization, in Vancouver, British Columbia or available online, that offers/teaches techniques on how to trade stocks and options. In person lectures are preferred; online courses are okay too. In addition, please supply a shortlist of reputable books/texts.

John answers:

Noone will teach you how to be a consistenly profitable trader, unless you can find a mentor who’s a successful trader him/herself. Go to http://www.elitetrader.com for the list of books and reviews among other things.

Donald asks…

How to go about in understanding the market if wanting to become an investment banker?

What should I do if I want to understand the market?
Also, which is better; a trader, stockbroker, business analyst or investment banker?

John answers:

First, school- get a degree in finance; that will give you a foundation. Second, and perhaps at the same time you are pursuing the degree, get an internship (a training position) with an investment bank. That will allow you to watch and learn how the professionals do it, which will be another education. It will also expose you to the different avenues you are asking about, and that will probably help you know which is better for you.

Remember- if you love your job, you will never work a day in your life. These professions can be very intense and demanding. If you really don’t like doing it, you will not be very successful and you will come to hate it.

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