Altcoins Talks - Cryptocurrency Forum
Crypto Discussion Forum => Cryptocurrency Trading => Topic started by: Peter90 on September 26, 2019, 12:12:56 PM
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Day Trading Bitcoin: Why 95% of Traders Lose Money and Fail
"Almost all traders are aware of the widely publicized statistic that “95% of traders lose money.” When you drill deeper, research implies that this number is likely higher. The profession chews up and spits out aspiring traders at an astounding rate.
So why are so many intelligent people drawn to a profession with incredibly high odds of failure?
There are the obvious reasons — the appeal of working for yourself, sitting in your underwear on your couch all day making millions. There’s the (false) promise of “easy money” and the draw of independent wealth.
What is “random reinforcement”?
Perhaps a less notable reason that traders fail is the principle of “random reinforcement.” This concept also explains why they often continue trading, even after failing repeatedly.
As defined by Investopedia, “Random Reinforcement” is:
Using arbitrary events to qualify (or disqualify) a hypothesis or idea; attributing skill or lack of skill to an outcome that is unsystematic in nature; finding support for positive or negative behaviors from outcomes that are inconsistent in nature — like the financial markets.
The market has a tendency to reward bad habits, while concurrently punishing positive behaviors, especially with a small sample set.
Bob's example
Bob wants to leave his job and become a crypto trader. He sets aside some starting capital, follows the markets and the “big names” on twitter. He sees them talking about an altcoin, opens the chart and sees that price is rising fast. He buys, goes to take a shower, returns and sells for a quick profit. He does this again before lunch and strings together a few successful trades. Bob starts to feel confident that he is a talented trader.
So what is the problem?
Bob is trading without a system or a plan and is being fooled into believing that a successful outcome on a few random trades is indicative of likely success moving forward. The market has rewarded his bad behavior. We know how this story ends — Bob continues to make impulsive trades and eventually loses his capital.
There is a flip side to this coin.
Let’s say that Bob learns his lesson and spends months developing a trading plan, complete with risk management, proper portfolio allocations and trading rules.
He identifies a trading opportunity that fits, takes the perfect entry and… stops out of his trade. He tries again. And again. He loses 7 times in a row. The market is punishing Bob for his good behavior.
Bob starts to doubt his system and takes a high-risk trade that violates his system — and is successful. To his surprise, he tries this a second time and also makes money. Bob is now back to square one, trading without a system because the market has rewarded his bad behavior.
Through random reinforcement, the market has re-conditioned the way Bob approaches trading by distracting him away from his trading plan. He has allowed himself to be manipulated into an impulsive, high risk, revenge based trading approach.
Everyone was a genius in 2017
The concept of random reinforcement was never more evident than in the crypto bubble of 2017. During this parabolic bull market, it was easy to mistake luck for skill.
Amateur traders were making money hand over foot by simply throwing cash into random altcoins and selling after massive, immediate gains. Everyone was a “genius” in the 2017 crypto market. Then 2018 happened — the bubble popped, and these amateur traders were ill-prepared to deal with the drawdown. They failed to sell their assets and held blindly until they had lost everything.
Understanding that markets are dynamic and in constant flux is key to being profitable. A trader must learn to be able to determine when a certain string of losses or profits can be attributed to their skill and when it is random. This is done by trading with a defined plan over a long period of time.
Every trader should have a well developed and tested (through paper trading) plan, with written rules for entries, exits and stop losses, position sizing and risk. They should NEVER trade outside their plan.
No more than 1% of a trader’s portfolio should be at risk on any single trade — this is the key to sustaining multiple, consecutive losses. They should test and tweak their plan over a long period of time — hundreds of trades. A good system gives a trader an edge over a long time frame because randomness becomes less of a factor with a larger sample.
A good trade should be defined as one where a trader planned their trade, traded their plan and managed their risk — those are all elements they can control. It is NOT defined by the outcome.
A bad trade, on the other hand, is where a trader fails to follow their rules and executes trades against their better judgment. This is always going to be a bad trade even if it happens to be profitable.
By developing a well-tested plan, traders can overcome the pitfalls of random reinforcement, eliminate emotion and impulse, and learn to be profitable. That’s how you become a part of the 5% that make it as traders."
https://cointelegraph.com/news/day-trading-bitcoin-why-95-of-traders-lose-money-and-fail
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I'm not a trader.
I tried once, an amateur who thought that he understood things, and failed miserably.
My story as a trader ended up there.
I've read this article today and wondered, which rules users of this forum follow when they trade.
Some are probably sophisticated traders, others are simple ones.
Some have more discipline and follow their rules through, others are more prone to break with their strategy during the trade, if things turn bad.
Some trade basically according to their guts, others sniff around how the general market is moving and follow the trend ("make the trend be your friend").
Some look at the advice of renowned Internet forums users, bloggers, analysts...
So, how do you behave when you trade?
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I don't call myself as an expert when it come to trading. Day trading has been a stressful experience for me so I switched from buying and holding for some time and selling when I see fit. I don't know if that can be considered as a strategy. I only understand some basics when it comes to TAs and volume is what I usually monitor.
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Bob's example
Bob wants to leave his job and become a crypto trader.
I think it is not a wise decision by leaving the real-life job for being a crypto trader. No need to leave the real-life job, we can trade crypto on spare time. As we know that crypto business is full of risks and uncertainty, so no guarantee there. So, I won't leave my job or put it aside.
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I am not a full time trader, and that’s why I don’t exactly have greatest of strategy to use to trade. I instead prefer to go for alternatives, and this is where I find it so great with Bitcoin Trader (https://bitcoin-trader.se/), a fantastic trading platform that helps us with trading smoothly. With setting up it properly, there is massive potential for one to gain through. As with their average turn-over goes upto $1300 for investors per day. And just to connect with how comfortable it is what makes it amazing.
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Few methods that I know are very important for novice traders, first learn what trading is?
(A) there are several types of trading that I know of, (1) Scalping, (2) daily trading, and (3) long-term trading. One of the most risky is scalping, but also if you can, you will get the bigger than the three methods.
(B) Learn Support and Resistant
(C) Learn about the most important charts namely RSI, MACD, etc.
These three methods are very important that a beginner trader must have, sometimes the beginner traders ignore it,
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I don't call myself as an expert when it come to trading. Day trading has been a stressful experience for me so I switched from buying and holding for some time and selling when I see fit. I don't know if that can be considered as a strategy. I only understand some basics when it comes to TAs and volume is what I usually monitor.
Agreed, intraday can be difficult at times. I also faced the same issue in the beginning.
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For me, trading is a hobby, so I do not come up with any strategies for myself, I trade as I consider it necessary, so to speak, intuitive trading.
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I switched from buying and holding for some time and selling when I see fit. I don't know if that can be considered as a strategy.
For the purpose of this thread, it can :)
I wasn't interested in sophisticated trading behaviour.
Just in behaviour.
I realised what a low level investor I am when I saw that after having bought something, even for the long run, I checked every 5 minutes how it went. :D
Constantly wondering, should I exit or stay in?
Fear of having made a mistake on one side,
greed thinking about how much I could gain on the other side.
Needless to say, I jumped in and out constantly like the classic amateur.
Tons of transactions fees... If the broker had been honest, they had sent me at least a teddy bear for Christmast.
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Bob's example
Bob wants to leave his job and become a crypto trader.
I think it is not a wise decision by leaving the real-life job for being a crypto trader. No need to leave the real-life job, we can trade crypto on spare time. As we know that crypto business is full of risks and uncertainty, so no guarantee there. So, I won't leave my job or put it aside.
You are absolutely right, at least as long as one has not achieved financial independence.
We read here and there about those having become rich through cryptos, but we don't hear about those (probably much more numerous) who went broke.
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I'm always flexible, not always focused on the analysis and techniques that I have. all depends on the situation and market conditions, I sometimes make choices that contradict my analysis, all of which aim only to get profit or reduce losses.
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Now I have strategy. In 2017 I didn't have it and I paid dearly for it.
Set stop loss and accept few percent loss. Similarly other way around. Set up take profit and enjoy even small profit.
It's so simple altogether.
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Set stop loss and accept few percent loss. Similarly other way around. Set up take profit and enjoy even small profit.
Nice strategy. It is good to try by others. We mustn't set a target to get big profits every time. It is a hard thing to get and seems to impose our selves. There are many people depressed because they plan an unrealistic target. This will be suitable to be adopted by them.
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Now I have strategy. In 2017 I didn't have it and I paid dearly for it.
Set stop loss and accept few percent loss. Similarly other way around. Set up take profit and enjoy even small profit.
It's so simple altogether.
I agree that stop loss is one of the most important thing in the trading. But before you start trading, try to test your strategy. Pick some coins, go back in the timeline and try to use your strategy. I did it and I "made" about 200 trades. After that you will know how many trades were succesfull and how many not, also you will find out what is the best RRR (risk-reward-ratio) for you.
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Investigating your own effectiveness is really important.
The trap may be not accepting losses and not closing profitable positions. I did so many times and lost a lot. Sometimes it's not easy to learn even from our mistakes.
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Discipline is the key to success. If there is no discipline, there is no statistics, and if there is no statistics, it is impossible to achieve statistical advantage.
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The strategy gives us inner confidence and thereby an advantage in trading, because with a strategy we know how to act and what our goals are.
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I don't have a certain strategy in trading. I just use a strategy based on the current condition on crypto market. For me, a trading strategy is important but it shouldn't limit us to explore another way. There are various ways to gain easier profits in trading, so we need to learn all of them.
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My strategy is a few points.
- First of all, this is risk management. If you don't know how to calculate risks, if you don't understand this, then you better not start trading until you learn risk management. This is one of the most important things to trade.
- No emotions are allowed in trading. Both positive and negative. Trading is just work, not entertainment. You need to understand that emotions will only confuse you, and you will make the wrong thoughtless action and lose all the money. For some reason, many people forget about it. Therefore, if you have a losing trade - this is normal, look at what the mistake is, think about how to prevent it in the future. In addition, if you have good risk management, then the loss is not terrible for you.
- It is the trading process that is simple, but gained through experience and many many mistakes. Therefore, I don't think that someone who really makes a lot of money from trading will tell you his strategy. Others are taught by those who couldn't profitably trade.
Therefore, be careful.
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The strategy gives us inner confidence and thereby an advantage in trading, because with a strategy we know how to act and what our goals are.
Exactly! A strategy is like a guiding light to your trading actions, we shouldn’t skip it at all. It gives you signals like when to act and when not to.
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Now I have strategy. In 2017 I didn't have it and I paid dearly for it.
Set stop loss and accept few percent loss. Similarly other way around. Set up take profit and enjoy even small profit.
It's so simple altogether.
Yes, little steps.
Little losses and little gains.
I remember on a forum, a professional experienced trader said, he never looked for home runs (big, life changing gains), but rather little gains, in best case several little gains within a day.
"If you lose big time, you'll play catch up forever."
I will never forget this line of him
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I do not have a trading strategy. I trade on the signals that come to my phone in the trading platform. If there is a signal, I open a trade. I set stop loss and take profit. If a return signal comes in, I close the trade and open the reverse trade. Signals are free, profitable. The company is called StormGain. If the signals become paid, I will think about what to do next.
Maybe I need to think about a trading strategy in advance. I analyze these signals, try to understand how it works.
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Yes, one of the most important part of my strategy is always to stay calm and get rid of my emotions, also getting rid of stress is very important if you are a trader. So it is best to find a hobby or a relaxing method to help yourself. Other than that I think technical analysis is my strategy while trading.
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In crypto trade, I don 't use indicators. I usually buy and sell from levels of support and resistance. I use typhrems for at least 1 hour and older.
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I have a strategy, which is take profits and cut losses at +/- 5%. But, it's so difficult to do it with discipline. My greediness doesn't allow me to take profit when the prices are going up far more than 5%. Likewise, my mind keeps telling me that it's gonna recover soon when the prices go down.
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Discipline is a must-do when you are doing trading, a strategy sometimes becomes useless if the time is not favorable and it's kinda boring to wait for the so-called opportunity. base on my case I cant tell that I'm doing it the right thing. I was trading on Binance since 2017 usually I earned but not much because my capital is just a limited amount of BTC. my greatest enemy is my emotion and I don't know how to control it.
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Most of the trading strategies do not works as expected and I have lost a lot of money due to this. That is why I have absolute confidence with KoinPro smart trade panel that ensure I am in profits regardless of market condition.
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I do trade and the only strategy I was doing most of the time is buy low, sell high just simple as that.
Aside from this thing none. And for doing it in 5 years now so far so good it gave me a nice profit anyhow, on which
it gave me help to sustain all the expenses I got monthly aside from the commodities I bought every week
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Yeah i have a strategy for trading both crypto and stock. I have some knowledge about technical analysis. My most of the capital is in KoinPro. KoinPro exchange where i can trade both crypto and stock.
So they have a telegram channel and they provide prediction based on technical analysi, if i see their prediction and my prediction are same than i follow the predoction and earn profit.
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Of course, it's good to read some strategies and make your own one, because every strategy has its own aim and is suited to unic situtation.
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Practice make a man Perfect, I think all exchanges should to include practice account/ training account with dummy balance and let people trade as gain experience like Koinpro and few others helping and encouraging people.
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Even I've been here in crypto trading for 5 years almost. But still, I consider myself a newbie because I know
that continuous learning will bring me to stage of success in the end. And besides, I took it as my stepping stone to achieving big savings in the future, just as simple as that.
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What I did in trading was just very simple and no need to learn a lot deeply about it.
Just only do the basic rules in trading on which buy at a low price then sell at a high price,
very simple, isn't it? I had been doing these things for a couple of years now already.
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Stategy is a technique which is very important for performing any work. Every successful trader has its own stratrgy. But this trading strategy differs from person to person. I always try to apply my own strategy in trade and still I am gainer.
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Trading without strategy is just throw your fund into water. How much successful you will be in trade depends on how much strategy you can apply. You have to know when you should buy, when you should sell, in which coin you should invest, how market trend works and such other thing you have to know. You should have strategy to apply these techniques.
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I worked with 3-4 strategy , first of all I never invest in coin who have low Trading volume . I always buy a coin if it's priced dump 4-7% in market ( with in 24 hour ) , when coin again start pump then I sold That coin and got my profit.