Learning To Succeed

BarroMetrics Views: Learning To Succeed

The oft repeated statement is 80% to 90% of retail traders fail. How true is this? There is some evidence (see e.g. Interbank FX Reveal Most Traders Lose Money).

The question why this is so has bedeviled me for sometime.

Part of the reason is because many, perhaps too many, come to the markets with unrealistic expectations: coming in undercapitalised, expecting to become rich without knowledge or effort. It doesn’t help that much of what passes for education panders to these unrealistic expectations.

But, I don’t believe this is the whole story.

I have met many who diligently seek an education, apply the teachings and struggle to make the grade. The advances in neurology have now provided an answer to this vexing question.

Let’s take a gander at the usual training a dedicated retail trader acquires. He’ll read  books, go to seminars, perhaps try a chat room or two, and learn through a process of trial and error. In the East we are more fortunate than US traders in that we have access to CFDs and can reduce our position sizing so as to reduce our learning risk.

Unfortunately, it is this process of education that is partially responsible for the high failure rate. As a result of the process, only a very few manage to succeed despite the herculean efforts of many.

Thanks to advances in learning theory, we have now know the educational process needed to raise the level of success. While the process will not help those unwilling to commit to their own success (there will always be the dabblers who seek to win without the necessary effort), there is at least ray of sunshine for those who have done the work and are still struggling.

Next week I’ll look at this topic in detail.

4 thoughts on “Learning To Succeed”

  1. Geoff wrote:

    “I was reading your blog today re: your AUDUSD trading process, you said that your first step was to work out the probabilities. How do you work out the probabilities in the first place, secondly, how do you know your probabilities are objective. For example, how do you know that the following : a 40% probability that the AUDUSD would go to above .9409 a 90% probability that it would go to .9343 and a 40% probability that it would go to .9290 are objective. If these are not objective, the following decision making steps are still irrational even if you write it down in your journal.”

  2. Hi Geoff

    Thanks for the question. Best next time if you post on the blog rather than send me a post. All questions will now be answered here. (If you wish to remain anonymous, please let me know and I’ll not post your name).

    Turning to your question….

    I am not sure if your question is not actually asking whether my probs calculations are objective.

    If that is the question, then ‘no’. Trading probs are not objective in the sense that,in a 6-figure dice, the probs rolling ‘1’ is 1/6.

    With the markets we are dealing with uncertainty. That being the case, the probs are at best subjective probs backed by historical occurrence.

    By historical occurrence I mean, based on what has happened in the past, we can assess the probs of the likelihood of it happening now. (Answer to your first question).

    Turning to the blog….using pattern recognition

    The pattern that was showing up showed that there was a 96% prob that the AUDUSD would decline from the highs formed at .9385 on 11/14.

    There was a 92% prob that the decline would take the shape of what I call a complex correction.

    Now a complex correction can take many forms, Sideways (the one apparently in force), triangle, running etc.

    All of these complex corrections had a meeting point at .9338 to .9343 zone i.e. if a complex correction did form, then you could expect to see .9343.

    Hence my subjective prob of 90%.

    Similarly, if a sideways pattern did form, then the top of the minimum target zone would be .9409.

    In the same way, I assess that there is a 90% prob that the AUDUSD will now reach .9379 to .9387. (Ideally I’d like to see a slight move above .9387).

    Once there, I can then assess the likelihood of the AUDUSD continuing north or returning to congestion….etc…

    How do I keep track of the occurrences?

    First, you need to have a theory that defines the context where within a trend the patterns occur. Then you have the patterns themselves.

    By keeping track of the patterns you trade and the results, you are then able to create a prob data base.

    Trust this helps.

  3. Hello

    I believe Ray’s methology is working. However, I also believe psychology is the key.

    I could not follow Ray’s methology. I always deviate from it and make emotional trade which
    always ends with a loss. For instance, I could not wait until markets move to the required zone.

    We need consistant losses to understand one by one. We need loss to convince us.

  4. Hi Quxuexuan

    Agreed without ‘Mind”, Money and Method won’t bring success.

    BTW if you are a CMC (Singapore) client, I’ll be giving a presentation that addresses the Mind issue, Dec 7, 10:00 am to 11:30 am.

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