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Trading is NOT a business


It is amazing how many people fall into this trap of trading month after month. I have been back testing and forward testing numerous different trading systems and strategies for more than two years. My focus however was on index futures and currency futures. Spending more than 6,000 hours with analysis for this venture, I did not find anything that would nearly be reasonable to call a somewhat viable solution.

Her are just a few systems and indicators of my testing including any possible combination of them:
- MACD
- Stochastics (fast and slow)
- CCI
- Woodies CCI (incl. Woodies trading patterns)
- Moving Averages (SMA, EMA, WMA, TMA, HMA)
- Opening Range Breakout
- 1-2-3 Reversal patterns
- Trader Vic's 2B method
- different price action patterns with and without any indicator
- classic trendline/trendline breaks
- etc., etc.
None of the systems actually generated more profits than losses over time, even by reversing buy and sell orders against the signal/pattern. I have become suspicious that this is nothing but a monkey business, because trading systems strangely seem to be profitable only when paper/simulated trading instead of actual money.

Finally, I have come to the conclusion that one cannot generate any profits by trading. This is an expensive and very time consuming hobby which comes with a daily agony. I do admire the industry and its marketing machinery, as it continues to lure people into this fruitless business for a sheer endless money supply.

Greetings,
TF Trader
AGREED...I came to the exact same conclusion after studying electricity.

After wasting countless hours trying to understand this phenomena I finally decided that it just CAN'T work!

I have since reverted back to oil lamps, wood burning stoves and the horse and buggy.

GOOD RIDDANCE ELECTRICITY!!!
Don't we have two other topics already devoted to this, with hundreds and hundreds of posts? Shouldn't we just divert the ongoing discussion back to already existing topics?

http://www.mypivots.com/board/topic/2300/1/does-anyone-really-make-money-trading-futures

http://www.mypivots.com/board/topic/4513/1/impossible-to-make-a-successful-career-trading
HUSH Jim....I'm getting voted up
..lol

Besides I plan to respond to this post in a serious
manner over the weekend and wouldn't want it mixed in
with mmartinezs melodrama.
This person started the same thread on Elite...so does the internet need the same thread in different places ? I don't think this one has enough importance..especially since we already have some like this on the forum..my vote is to delete this thread entirely...
richphxaz;

I hope we can make a business out of it cuz its all I got.

BTW why is your greeting @ the end of your post and are you
TF trader as well..
MM were are you when we need you?
None of the systems actually generated more profits than losses over time... because trading systems strangely seem to be profitable only when paper/simulated trading instead of actual money.


You just contradicted yourself.

The last half of that statement is the truth of the matter for 99% of individual's who try systematic trading for the first time. For this reason, I tell the traders I interact with, apply an 80% reduction factor to your sim trading results when going live for the first time. (Often times this turns out to be overly generous on my part.)

So, in this 99% of the time case: is the root cause of the problem the trading system, the technical analysis technique / TA indicators, or the trader ?

This leads directly to the next point of debate: does focusing on, or somehow improving, trader psychology lead to any better outcome ? My anecdotal answer is not much.

I think no matter the path taken, the majority of traders end up right back where they started. Which I assume is where the original author of this thread is stuck after two years of futility and frustration.
heh ... just now coming off a 2 day drunk

hasn't this subject been kicked around and beat to death all over the internet already ... makes my head hurt ... cracking another beer now
Originally posted by leob

MM were are you when we need you?
Originally posted by MonkeyMeat

heh ... just now coming off a 2 day drunk

hasn't this subject been kicked around and beat to death all over the internet already ... makes my head hurt ... cracking another beer now
Originally posted by leob

MM were are you when we need you?



======================================================================

MM,
Not healthy to drink just beer...so mix V8 or tomato juice with it,and on that note lets change this topic to a food and drink topic...
I think that this topic differs from mmartinez in that this trader has not been profitable where mmartinez claims that even if one was profitable they would give it all back eventually at least that's what his math model proved to him.

richphxaz is discouraged because after two years of testing and back testing he can not find a system that will reliably provide a profit and that the "game" must be rigged because he suffers different results when switching from sim trading to real money.

The one thing that richphxaz is failing to realize or allowing himself to consider is that there may be more to trading than just finding the correct combination of indicators or the right system. Unfortunately all new traders seem to have to go through this phase of realization it wouldn't do any good to try and save them some anguish by telling them "listen richphxaz you're wasting your time trying out all these different techniques in order to beat the market. It didn't work for King Arthur and it won't work for you. You need to spend your time focusing on Trading Psychology instead." They simply wouldn't believe you.

If you were to ask how much time the new trader spent on other aspects of trading say money management, trade management, trading psychology etc they would answer very little time because all of their focus was on trade setups, systems, strategies because that's what they thought the answer was to becoming a profitable and successful trader. Trying to convince them otherwise is almost foolhardy. Their attempt to find the perfect setup is so strong that they will even convince themselves that it is the correct approach.

Let me explain what I mean. Rich spent two years testing and back testing different methods finding out that no matter what he tried he kept coming up with the same results. Why did it take two years? Why did he not come his conclusion after say one year? And why did his conclusion convince him that is all a scam and just can't work? Instead of concluding that he must be taking the wrong approach or that there is something else to trading that he is not aware of yet?

He also mentioned the numerous different methodologies he tried while trying to find the one that worked and yet found none that did. Why did he not ask himself the question "if there is a method out there that works why are there so many to choose from?" If a method worked wouldn't there only need to be one? This type of rationale seems to elude all new traders scope of perception while questing for their Grail.

The truth is there is much more to trading than just the setup, edge or system. In my opinion the setup (although important) is the least important aspect of trading successfully. In my mind the important factors for trading would be this: Setup-Money Management(10x more important than Setup)-Psychology(10x more important than Money Management) By this we can see that Psychology is 100x more important than the setup. I will explain why later but for now if this is true then shouldn't our new trader be spending 100x more time on this aspect than on testing and back testing strategies or at the very least the same amount of time? Sadly they will not.

In an effort to save time I will skip over Money Management and discuss the importance of psychology.

For most new traders the transition from sim trading to real money is an eye opening event to say the least. What used to work so well for them in sim somehow has mysteriously gone away. With all things being equal (and for the most part with today's sim accounts that replicate the real market fairly accurately they are) what has changed? The only thing that changed was the introduction of the traders emotions into the equation. Whether that be fear or greed it has now altered the results that were working fine in sim mode. With the introduction of emotions we now have created mistakes that weren't there before such as missed trades due to failure to pull trigger, early trade exiting due to anxiety, staying in a trade too long due to greed, trying get revenge on the market after a loss etc...the list is a long one.

Lets now look at the importance of Psychology in a purely logical manner when applying it to trading.

Psychology would rank higher in importance than the setup or system due to its ability to affect the outcome of our trading results where the others could not. If you were to use an automated trading system you could remove the affects of psychology completely from your trading but then you would be left with what ever results your system delivered which in most cases would be less than satisfactory to you. Less than desirable results could affect your Psychology but not in relating to trading since the automation has removed you from the equation.

If you were to trade using your own skill then now Psychology can come into to play and either help or hinder your desired results. So now we have two conditions that can affect our outcome instead of just one in the previous example.

We briefly discussed some of the negative effects that Psychology can play a role in our trading but how about the positive ones. To illustrate this I would like to steal a concept from Mark Douglas called Trading in the Zone. If you have been trading for any amount of time you most probably have experienced the feeling of trading in the zone. The feeling of almost being one with the market, knowing what the market is going to do before it does it, making trades effortlessly without anxiety or apprehension, entering at just the right moment and exiting at just the right time. The feeling of complete control over your actions decisions and on top of that the experience was not only profitable but fun. You probably had one of your best days ever trading too. Now if I asked you right after one of those moments if you thought that you could be a successful trader if everyday was just like this one your answer would be a resounding yes! So can we then from this identify that being in the zone was profitable to our trading the answer would be yes. I have a lot more to say on this but gonna have to skip it for now but I will tie it in with the context of this article and say wouldn't the new trader benefit from spending more time learning on how to "Trade in the Zone"

One last point on the importance of Psychology and why more time should be spent on it.

There is a limited number of things that one will have to learn to any trade system but an unlimited number when it comes to Psychology. The main fact that it is more complicated dictates that it should deserve more attention. You may be aware of things that might be affecting you adversely but there are many things you may not be aware of that could be sabotaging you or hindering your performance. A trade setup either worked or it didn't not so simple when it comes a behavior that may have been temporarily altered in your psyche due to having a bad dream you weren't even aware you had.

Anyway there was much more I wanted to say on the subject including the role of the subconscious mind in our trading and how we inadvertently can train this against us but I've run out of time.

No time for spell ck sry.
I make a reasonable amount of money in the currency business. I usually don't go for big investments. I use this field as a secondary money source. I too think tof Forex as an unreliable income source. But it is not a fake system too. It is risky as hell though.