Wednesday, December 10, 2014

The grim truth

There's no getting round it - when you are in a losing run of trades it's not much fun. As Tiger Woods is fond of saying "It is what it is".

Speaking to a few fellow traders over the last couple of weeks, and generally looking around, there are other traders who work using a similar style to my own who have also struggled somewhat, despite the general markets being near their all time highs.

All this highlights is that trading is not easy - if it was, everyone would be raking in millions.

Seeing a lot of people who frequent social media, you would be forgiven for thinking there are people out there who never have losing trades - just a never ending stream of winners. As real traders know, this is not the case. And, in the case of trend followers, it is unusual at the best of times to have a long-term winning percentage much higher than 40%. That is the reality of it.

I talked on this post about how trend followers can go through poor periods lasting several months before everything 'clicks' - this is one of those periods. But Joe Public who suddenly decides he can make a fortune trading doesn't want to believe that...

A trader I know went to a seminar recently and, after the main event, some service providers gave their sales pitch. I was told that, like lemmings, the vast majority of people couldn't sign up for the course quick enough. Given that typically these events have a couple of hundred people attending, and the course they signed up to was an initial £2,000 - well, you do the math...

There was no discussion about risk or psychology in the presentation, just lots of pictures of fast cars and big houses - oh, and a few charts.

Well, what you see posted here is the harsh reality, not some glossy mirage. Lots and lots of losing trades - mercifully, thanks for good risk control (what's that?) these are kept as small as possible. If you want to last in this game, then you better accept that you will lose - often. And that is the only way you will win.

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