Default Future and Success III

BarroMerics Views: Default Future and Success III

Quick recap:

  • Over 90% of traders lose money. The majority of these are in the group that effect no behavioural change: at one extreme are those who do not participate in any educational program; at the other are those who participate in every program within their financial means (and sometimes programs beyond their financial means). Between the two extremes are the different nuances e.g. those who participate only in ‘freebies’ etc.

But, the one characteristic that is common to all of in this group is there is no discernable change in behaviour.

  • The next group are those that do exhibit behavioural  change without any change in results. For example, within this group we find those who invest in an education, make a genuine effort to apply the rules, and still fail to show a positive result. 

What characterizes both groups is the effect of our default future. Both groups suffer from a focused lack of awareness that the actions they are taking stem from a base that first needs to examined, and then needs remedial action.

Many, many years ago, I was in therapy. I was fortunate that I got lucky and chose wisely in my selection of the therapist. One of Dr George Lianos’ comments that has stayed with me overtime is: “if a pattern of behaviour produces an undesirable result, focus on the pattern, and not the individual reasons for the behaviour”.

So, if you belong to this group, focus on the results of your trading. Are you producing a positive expectancy return? If not, what steps did you take to lead you to this result? For example, you choice of education may be the ‘instant success’ variety. Buy ‘xxx method’ for $197; enjoy instant success spending only 10-minutes a day.

Or you may be focusing on trading and/or risk management plans that don’t suit your personality.

Or you may have unrealistic expectations of what is possible for you e.g. ‘trading an end of day method with a 90% win rate’. Is this possible? May be for the blessed minority, but probably not for the likes of you and me. Better to focus on an achievable (for all) 40% win rate that is coupled with robust risk management to produce your positive expectancy.

The reasons for failure are myriad, but if we are to succeed, it is our job firstly to identify the problem and, then take remedial action. I know, easier said than done. And for this reason, so many of aspiring traders fail to attain the results they seek. And, it is for this reason, that only about 10% who start in trading go on to enjoy the success they desire.

4 thoughts on “Default Future and Success III”

  1. Hi Ray, Since i started trading in 1987, I have seen the figure of 90% or more , traders lose, bandied about.
    I had no real way to verify. But i found a fairly simplistic way to verify that figure, by looking at sites like Etoro and Zulu. Just browsing them, you can clearly see,most punters are in the red.
    So it kind of backs up the 90% figure.

    The 40% win rate of a system ,prima facie seems low,but possible with good money management, If you did the opposite would that improve bottom line?
    I ask because, somewhere i saw on Zulu or EToro you can take the opposite position of a punter. So instead of following a winner, follow a loser by doing reverse. Opposite of the crowd so to speak. cheers Baz

  2. Hi Baz

    Thanks for the note.

    It’s not the win rate that is important but the expectancy return. The 40% win rate is the norm for successful, EOD traders.

    I see figures of 70%, 80% etc win rate bandied about. Still waiting for a 3 years or where the average trader can attain these rates with low drawdowns and a decent expectancy return.

    As far as reversing what normal ‘losers’ do…..I don’t know. What happens when they find a flow condition? (G)

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