Is it worth the effort to learn and keep learning to trade?

[BMP2020]

I've heard that when you make money spread betting or trading it's not yours to keep because sooner or later you will it give it all back to the market (just like in a Casino), it's very hard to walk away with all your profit.

Is this true? and if so what's the point? 

Edited September 16, 2019 by BMP2020
Typo

[Caseynotes]

21 minutes ago, BMP2020 said:

I've heard that when you make money spread betting or trading it's not yours to keep because sooner or later you will it give it all back to the market (just like in a Casino), it's very hard to walk away with all your profit.

Is this true? and if so what's the point? 

if you treat trading like gambling it will be gambling and 90% will just lose quickly, if you treat trading like a professional trader does you have a change, most people do treat trading like gambling.

[dmedin]

30 minutes ago, BMP2020 said:

I've heard that when you make money spread betting or trading it's not yours to keep because sooner or later you will it give it all back to the market (just like in a Casino), it's very hard to walk away with all your profit.

Is this true? and if so what's the point? 

No one can really answer this, and the only reason I can think of is that people are ashamed of the fact that they have lost a lot of money and are worried that it will happen again.  I've yet to see a single 'trader' who didn't quit trading as soon as a more reliable source of income came along.

 

  Hence I am currently extremely doubtful that it can beat a simple buy and hold strategy (buying ETFs in a FTSE 100 or S&P 500 tracker, or investing in a managed fund etc).

Edited September 16, 2019 by dmedin

[dmedin]

Is it worth it to keep learning?  I hope so.  It's not like learning about other professions, where you are reasonably certain that being more knowledgeable about law or medicine or electricity will make you a better doctor, lawyer or electrician and result in an guaranteed income as a practitioner of a valuable trade.  You might learn a lot about markets and trading, but it isn't going to guarantee that you make any money.  It is completely known, a risk not only of your money but more importantly of your time. 

 

The payoff is not only unknowable, but you might not even get a payoff.  I've heard people say that it took them 'five years to become consistently profitable over time' - are you willing to dedicate years of your life to something that might fail and collapse at any minute?

Edited September 16, 2019 by dmedin

[Mercury]

I'm not really sure what the motivation for the question is here: are you looking for a justification (is there hope?) to continue or a reason not to?  I can't offer an answer to the second part of your question, that is personal to each individual, but the answer to the first part yes it is true that unsuccessful traders wind up giving back their profits and then some, which is one key reason they are unsuccessful.  The crux of the matter though, and this is why your motivation is important here, is why the answer is yes and what, if anything, you can do about it.

There are many reasons why traders lose, all traders not just retail.  The literature is literally littered (a little alteration to lighten the mood...) with stories of famous traders that had significant growing pains in the early days.  It rather seem to me that the only sustainable way to learn how to be a trader is to lose; to learn the hard way, and to learn how to lose.  There isn't a short cut to this, although research and book learning is important to start with.  And demo only gets you so far because real trading come with an insane level of psychological factors (just look at the tenor of some of the posts on this forum...)  So while it is vital to have a system or methodology worked out (and ignore the trolls on this because confidence is also important) it is also vital to learn how to lose, because losses are a crucial factor in learning to be successful and in catching a trade with minimised exposure, and even the very best take regular losses accordingly.  The difference between the successful and those destined not to be are many-fold but a few key one that pertain to the first part of your question are as follows:

• Not reconsigning when a trend has come to an end and knowing when to get out to maximise profits.
• Related to the above, holding on to your bias because it has been successful in the past - markets move in waves and sometime they reverse trend and if you don't recognise this when it happens you wind up trading against the trend and giving up all the profits from the previous wave and maybe more as you get more desperate to claw back.
• Not scratching losers quickly when the market turns against your hypothesis AND being reluctant to crystalise a loss at all, thereby holding on in the vain hope than the market will turn back in your favour (it rarely does...).  A lot of retail traders talk about needing just 51% winners but in fact you need far few than than that if you let your winners run and cut losses quickly - lose small, win big.  Failed traders wind up doing the exact reverse such that sometime they actually do win more than the lose but wind up as net losers financially.
• Thinking that trading is logical.  It isn't, it is emotional (greed and fear dominate the markets - otherwise known as sentiment).  That said you need to be in control of your own emotions or you will get sucked into the greed/fear whip saw and get cut to shreds.  If you are not composed you will make bad calls.  Related to this is blaming everything and everyone else for your bad calls.  The markets don't care about you, they don't even know you exist.  Big bad professional traders are not out to get retail traders, they are too busy competing with each other.  The system isn't rigged as such, although manipulation does occur but it does in every market, not just financial markets.  Retail traders, especially those losing, tend to be too preoccupied with these phantom issues instead of focusing on their own method, psychology and trading.
• Revenge trading - when you develop a mindset that a particular market "owes" you - a need to win back on the same market that you took losses on rather than switching to a better set up elsewhere.  After a big loss my approach is to stay out of the market and analyse my loss to ensure I know why it happened and learn to avoid making the same mistakes again.  Alas I often wind up relearning old lessons, which is another factor.
• Creating a "need" to make regular profits, which in turn puts too much pressure on the trader to find traders every day -  the top guys do not trade everyday, they wait for the set up to be ripe.  Additionally this pressure mounts up with each loss because now you need to make back your losses as well as make your regular profit, which makes the trading more reckless and results in more losses.  One reason some successful traders start offering various services such as education; mentoring and tips is to get a regular income so their trading can be on a capital appreciation footing, which is what it needs to be.
• Believing your own BS - when a profitable trade comes off you start to get cocky and feel invulnerable so you take more speculative trades and don't stick rigourlessly to your method - this is about greed
• Over trading, especially after a good win.

I agree with @Caseynotes but in addition, to avoid the issue in the question, a trader needs a firm grip of their emotions; needs to only trade when the set up is strong, not for other reasons; needs to cut losses and take the hit quickly, learn how to lose and need to have a method to get a sense for the rhythms of the market to avoid trading against the trend.  It is about maximising your chances of success and minimising the pain when (not if) you get it wrong. 

There is a difference between trading and analysing (coming up with the premise for your trade) but there isn't much difference between trading and investing in the context of the premise of the question.  In investing punters (and that is what they are) go in for the wrong reasons; at the wrong times and hold on too long when things go against them.  They also, by and large, think they know more than they actually do about how financial markets operate.  The only material difference is that there losses are limited to the stake invested whereas trading on leverage has open-ended downside.

[dmedin]

2 hours ago, BMP2020 said:

if so what's the point? 

 

I forgot to mention: if you can land a job as a professional technical analyst you can get paid to do charts for your clients (traders) which results in a good income without having to commit your own cash.  Same goes for all those 'subscribe to our trading tips/newsletter/secret insider forum' services.

Hell, you can even be consistently wrong (see IG's trade of the week) and still get paid.  Result!

Edited September 16, 2019 by dmedin

[Caseynotes]

4 hours ago, Mercury said:

I'm not really sure what the motivation for the question is here: are you looking for a justification (is there hope?) to continue or a reason not to?  I can't offer an answer to the second part of your question, that is personal to each individual, but the answer to the first part yes it is true that unsuccessful traders wind up giving back their profits and then some, which is one key reason they are unsuccessful.  The crux of the matter though, and this is why your motivation is important here, is why the answer is yes and what, if anything, you can do about it.

There are many reasons why traders lose, all traders not just retail.  The literature is literally littered (a little alteration to lighten the mood...) with stories of famous traders that had significant growing pains in the early days.  It rather seem to me that the only sustainable way to learn how to be a trader is to lose; to learn the hard way, and to learn how to lose.  There isn't a short cut to this, although research and book learning is important to start with.  And demo only gets you so far because real trading come with an insane level of psychological factors (just look at the tenor of some of the posts on this forum...)  So while it is vital to have a system or methodology worked out (and ignore the trolls on this because confidence is also important) it is also vital to learn how to lose, because losses are a crucial factor in learning to be successful and in catching a trade with minimised exposure, and even the very best take regular losses accordingly.  The difference between the successful and those destined not to be are many-fold but a few key one that pertain to the first part of your question are as follows:

• Not reconsigning when a trend has come to an end and knowing when to get out to maximise profits.
• Related to the above, holding on to your bias because it has been successful in the past - markets move in waves and sometime they reverse trend and if you don't recognise this when it happens you wind up trading against the trend and giving up all the profits from the previous wave and maybe more as you get more desperate to claw back.
• Not scratching losers quickly when the market turns against your hypothesis AND being reluctant to crystalise a loss at all, thereby holding on in the vain hope than the market will turn back in your favour (it rarely does...).  A lot of retail traders talk about needing just 51% winners but in fact you need far few than than that if you let your winners run and cut losses quickly - lose small, win big.  Failed traders wind up doing the exact reverse such that sometime they actually do win more than the lose but wind up as net losers financially.
• Thinking that trading is logical.  It isn't, it is emotional (greed and fear dominate the markets - otherwise known as sentiment).  That said you need to be in control of your own emotions or you will get sucked into the greed/fear whip saw and get cut to shreds.  If you are not composed you will make bad calls.  Related to this is blaming everything and everyone else for your bad calls.  The markets don't care about you, they don't even know you exist.  Big bad professional traders are not out to get retail traders, they are too busy competing with each other.  The system isn't rigged as such, although manipulation does occur but it does in every market, not just financial markets.  Retail traders, especially those losing, tend to be too preoccupied with these phantom issues instead of focusing on their own method, psychology and trading.
• Revenge trading - when you develop a mindset that a particular market "owes" you - a need to win back on the same market that you took losses on rather than switching to a better set up elsewhere.  After a big loss my approach is to stay out of the market and analyse my loss to ensure I know why it happened and learn to avoid making the same mistakes again.  Alas I often wind up relearning old lessons, which is another factor.
• Creating a "need" to make regular profits, which in turn puts too much pressure on the trader to find traders every day -  the top guys do not trade everyday, they wait for the set up to be ripe.  Additionally this pressure mounts up with each loss because now you need to make back your losses as well as make your regular profit, which makes the trading more reckless and results in more losses.  One reason some successful traders start offering various services such as education; mentoring and tips is to get a regular income so their trading can be on a capital appreciation footing, which is what it needs to be.
• Believing your own BS - when a profitable trade comes off you start to get cocky and feel invulnerable so you take more speculative trades and don't stick rigourlessly to your method - this is about greed
• Over trading, especially after a good win.

I agree with @Caseynotes but in addition, to avoid the issue in the question, a trader needs a firm grip of their emotions; needs to only trade when the set up is strong, not for other reasons; needs to cut losses and take the hit quickly, learn how to lose and need to have a method to get a sense for the rhythms of the market to avoid trading against the trend.  It is about maximising your chances of success and minimising the pain when (not if) you get it wrong. 

There is a difference between trading and analysing (coming up with the premise for your trade) but there isn't much difference between trading and investing in the context of the premise of the question.  In investing punters (and that is what they are) go in for the wrong reasons; at the wrong times and hold on too long when things go against them.  They also, by and large, think they know more than they actually do about how financial markets operate.  The only material difference is that there losses are limited to the stake invested whereas trading on leverage has open-ended downside.

There you go @BMP2020, a very comprehensive discourse on what actually happens and why the majority will down their first account in quick time. A few do hit it straight off the bat and think they have 'got it' only to be tripped up when the market cycle changes and they give it all back, but most start losing straight away and continue so until their account disappears.

If you are constantly trying to second guess changes of direction in market price you will lose, if you have a tried and tested rules based strategy that automatically governs your every action at set situations you will have a chance, it takes time and loses before you can recognise the need for it. It doesn't need to be brilliant, just needs to keep you out of bad trades and in good ones.

[dmedin]

lol, be aware that the vast majority of the business world and the entirety of academia regard TA as little better than palm-reading and astrology.

Always be sceptical and don't let yourself be bullsh!tted.

As I say, check out IG's trade of the week and see how well IG's best analysts perform. LOL!

Edited September 16, 2019 by dmedin

[dmedin]

https://www.amazon.co.uk/Five-Waves-Financial-Freedom-Analysis-ebook/dp/B005JC5WWU/ref=pd_cp_351_2/258-0480838-1691303?_encoding=UTF8&pd_rd_i=B005JC5WWU&pd_rd_r=165d7444-d804-4850-b268-71bd4e5879f6&pd_rd_w=oFamc&pd_rd_wg=8mvvk&pf_rd_p=01704ebe-a86a-4b47-8c36-0f9f5bbc2882&pf_rd_r=2945F6DCXDGH2W1BD9GS&psc=1&refRID=2945F6DCXDGH2W1BD9GS#reader_B005JC5WWU

 

Check out the preface, the guy makes some pretty wild claims about himself including a defunct link that was supposed to be Forbes calling him one of the top three EWT theoreticians in the world lol!

I know that everyone has to bullsh!t these days - not just to sell books but even just to get an ordinary job - but if he was able to call markets that perfectly would he really be spending his days writing books on it? 

[dmedin]

I'm very tempted to buy that book, because Elliot and Prechter's is really out of date and written in a strange, disorderly manner. 

[BMP2020]

Thank you all that have answered this question. The reason I asked this question is simple I really enjoy watching the share prices, indexes and how they move so quickly. It's really fascinating I have tried and flopped at spread betting made a big loss on Forex but it was money I could afford to lose and I learn't a tremendous amount from that mistake. 

My apologies I can't see any options here for responding to individual comments but I am really very very grateful indeed to you all for responding to my question. I guess the point is to to make money but what worries me or rather concerns me most about trading is this quote...

Be careful of what you want in life, because what you become when you get what you want is far more important and valuable than what you get.

I have met a three day traders at my gym they all look quite serious and sad, in another gym I have met mini cab drivers and they are always so happy and cheerful. I don't know if it's the stress of trading or not but the three people I mention all make money day trading but I have never seen them look happy even in a Jacquzzi!

So if it can lead to unhappiness in life albeit by making one serious, than what's the point of making money doing it?  

It would be great to hear your views on the emotional aspect of trading, does it change your personality? Thank you!

[psycho]

On 16/09/2019 at 13:43, BMP2020 said:

Is this true? and if so what's the point? 

This is a 6 million dollar question and many excellent points made!  To add even more confusion, here are two articles

The hedge funds split over following market trends - timely as it's just been published today

The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs 

If people in the articles can't agree, I think the question is probably a 6 billion dollar one!  I would be interested in comments and opinions from the collective on the above articles.

There is also the issue of whether your work builds something and contributes to society or not.  When I discussed the equity market with my father, he would always say he'd rather put the money into his own business as he was in control of the money there and his success relied on his efforts.

Another point to note is capitalisation and if you are doing it as a full time job.  Warren Buffett (widely accepted as the most successful investor) aims for 15% on average.  If you only have 100k in your account and even if you are good enough to match Warren, then you make 15k per year (a clerk's salary and the clerk with a job has little or no risk of losing money from his work?!).

[Mercury]

Short answer is yes if you let it @BMP2020

However your gym story could have substituted any career or job type and still it would have rung true.  You are really asking what makes people disillusioned with the life, and work, they choose.  A subject for a psychology forum rather than a trading one.  Still a few things to consider to avoid negative psychological changes might include:

• Finding the right trading approach, one that suits your lifestyle aspirations and personality - day trading is not right for everyone, not right for most people I might argue, based on the failure rates...  But there is more than one way to trade.  Most people are unhappy with work that doesn't suit them in a fundamental way.  We tend to spend most of our working life acting the part by adapting our personality to what we think is required rather than being ourselves.  With personal trading, with no boss, the least we can expect of ourselves is to be true to ourselves yet humans are masters at lying to themselves and lacking self awareness.
• As said before, learning how to lose; how to be wrong and what to do when we are is vital for your confidence and well being as well as your success.  It helps if you do not make unrealistic and naive demands of your trading results.  Expect to make losses to start with and to take a long time to sort things out.  Only risk what you can afford to lose.
• Compartmentalisation is key.  You have to be able to close the book on your trading at the end of the day and especially at the end of the week and shake off any bad feelings.  That way you avoid taking those bad feelings with you into family and friendship interactions.  You need to remain calm and composed at all times.  When you are not, do not trade.
• One stratagem is to deal with losing trades quickly.  If you avoid holding precarious positions overnight and over the weekends you will sleep better and be more composed.
• Oh and make sure you stay fit and healthy, get plenty of sleep and get out and about - enjoy the fine weather when it is available.

[tehka]

Do you enjoy trading? Like a regular job, if you don't like your job you are not likely to stick around for long. On the other hand, if charts make you high, you will continue doing it whether it is worth it or not.