How to Fail As a Trader in 10 Easy Steps

via Trader’s Narrative comes this look at surefire ays to lose money as a trader:


How to Fail As a Trader in 10 Easy Steps

There is so much ink and pixels spilled on how to succeed in trading. So I thought, being a contrarian, I would zag instead of zig and outline how to fail as a trader. Without further ado, the 10 vital steps you must take in order to fail in trading:

1. Start out undercapitalized
2. Ignore risk management
3. Compare yourself to other traders, not yourself
4. Look for the right system
5. Don’t keep a journal
6. Be secretive
7. Be casual
8. Fill your charts with as many indicators as possible
9. Trade with your emotions
10. Be inconsistent

All the details for each bullet point are over at the Trader’s Narrative site.

Great stuff!

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Winston Munn commented on May 13

    11. Extract MEW, place into trading account, and attempt to make enough monthly to pay your ARM reset.

  2. V L commented on May 13

    “6 Be secretive
    If you stumble on an idea or insight, keep it to yourself. Never ever share it with other traders or ask their input on it.”

    I strongly disagree with number six!

    On the contrarily, in this business you need to be selectively secretive (key word selectively); especially if you have found a good successful system that works and makes you money above the average.

    Unfortunately, if you let everyone know about it and many traders start using it, the system will not work anymore.

    In this game you compete with other traders (basically you outsmart them out of their money so the funds flow from their accounts to yours); therefore, letting them know about how you are going to do it is not wise at all.

  3. V L commented on May 13

    Ask James Simons (Renaissance Technologies Corp., extremely secretive and the most consistently successful hedge fund) about number six on the list. You can get more information from CIA and KGB than from James Simons.

    Do you think that if he shared his ideas with other hedge funds, he would still be in business of making money?

    http://en.wikipedia.org/wiki/Renaissance_Technologies

  4. will rahal commented on May 13

    The hardest thing in trading, is selecting from a myriad of contradicting indicators.
    So the number one thing to do, is to look at the least number of indicators.
    I believe that for the shor-term tarder buying low and selling is the best advice,
    ie, buy support, sell resistance. After many years I have finally norrowed my indicators to three.
    (1)A 5-day momentum indicator of intraday “behavior” vs price momentum.
    (2) A technique for providing support /resistance with a likely typical move.
    (3) An Up/Down daily indicator that is 60% accurate providing me the bias for the market.
    You can check this at:
    http://wrahal.blogspot.com/

  5. gorobei commented on May 13

    VL,

    Obviously, secrecy is important at some level. You may have a nice arbitrage hack and should stay quiet. Most of the time though, you don’t. I’ve saved serious dollars by explaining (in broad terms) my strategies to other traders. Often, someone points out a hidden problem that makes you reevaluate the whole strategy.

    The best point is #10. Be consistent. Bet your view. Observe gains and loses.

    Then use point #5. Refine the strategy. Repeat. You should be able to look at any trade you ever made and know why you did it, and if you would have done it today knowing what you know now.

  6. noname commented on May 13

    oh, forgot this gem of a quote from the article….

    “”We hear that before 2008, the government won’t let prices fall,” said Ding’s sister, Ding Jingxian. “We’re not afraid.”

  7. noname commented on May 13

    oh, and that quote was from a woman name “Ding”

    ….sweet sweet poetic irony. love it.

  8. Winston Munn commented on May 13

    “”We hear that before 2008, the government won’t let prices fall,” said Ding’s sister, Ding Jingxian. “We’re not afraid.”

    So that’s why Paulsen has made so many recent trips to China – teach them how the Plunge Protection Team works its magic.

  9. toon commented on May 13

    The biggest secret about trading is that there is no secret. sorry.

  10. Irving commented on May 13

    The traders I know who are the most successful are the ones who pry around and get information that others do not know. Secrecy is therefore a must. One has to find ways to improve the odds on your own trades.

  11. V L commented on May 13

    gorobei,

    Why would you need the opinion of other traders when you can ask the master – the market?

    Just test it first using small amounts. (Only a fool tests the depth of the water with both feet). You would have to test it anyway no matter what advice you get from other traders.

    Actually, all the great
    discoveries/inventions were made when people did not listen to the opinions/advice of other experts. For example, in 1876 when G. G. Hubbard learned of his future son-in-law’s invention, he called it “only a toy.” (His daughter was engaged to a young man named Alexander Graham Bell.) . Another example, “… after a few more flashes in the pan, we shall hear very little more of Edison or his electric lamp. Every claim he makes has been tested and proved impracticable.” – New York Times, January 16, 1880

    I think the most important is to have a plan/system. Even more important to have multiple plans and to be ready to adapt and change quickly.

    If you have a great system/idea that gives you an advantage over other traders, you need to be extremely secretive about it. (Unfortunately, often sharing it only with your best friends eventually becomes equivalent to sharing it with the rest of the world)

    I have never seen anybody winning a war (making high profitable trades) by asking for an advice from the enemies (other traders).

    General Patton: “No one ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country.”

  12. gorobei commented on May 14

    V.L,

    I started asking other traders when the market started giving me lots of money. My reasoning was pretty simple:

    I’ve got a system kicking out serious excess returns. If the market is efficient, I’m probably taking a risk I’m not aware of.

    I could be secretive, and pull a LTCM when things blow up in my face, or I could talk to some other experts in my field and exchange a little money for information (which is all trading really is.)

    So, we grab a beer or two, and talk about ARIMA models, survivorship bias, credit squeezes, smile evolution, or whatever else seems to make sense. The enemy/friend thing really doesn’t apply: both sides win versus the general market more than we lose from talking to each other.

    As for all great discoveries coming from those who didn’t listen to other experts. That’s just silly on the face of it. Yes, there are a few anecdotal cases, but most great discoveries come from standing on the shoulders of giants.

    Then again, I did arb for many years, not pit trading, so perhaps my views are a bit louche.

Read this next.

Posted Under