Why Most Systems Fail....
If you are a shrewd day trader you will know this. If you are an options trader you will know this. If you are trading with leverage you will know this.
Systems fail these days because they can't possibly take into account all the different variables the markets present daily. On top of that you have no idea when a system is going to revert to its mean or when a system is going to outright fail.
The simple reason is when you give your information to the algo's or funds trading on the markets which include market makers and liquidity providers they generally hand you your head on a silver platter. You are going to say, "well that is the reason for stops" right.
I disagree.
I have watched price action for so long that I see clearly when the markets are setting up traders. How do they do that? They do it by getting the most people they can going in one direction before they turn the market on them and take their hard earned money.
If you use tight stops it simply means it will take longer for them to run your account and you will miss the majority of moves where the market turns your way for the simple reason that you have not allowed volatility around the turn areas to run their course. Does anyone ever let the market run its course. Well you can't because you don't know where that is especially if you are using leverage. You shit your pants with every drawdown right? Of course. Who wouldn't.
No one ever expects the markets to run as far as they seem to do when you are in a negative position do they? I have watched pros get into this dilema, fund managers, large speculators and of course retail traders.
Its a sickening feeling watching price run against you especially when you have a small account and lots of leverage on the line. I know, I've been there before.
There are many reasons for the set ups and they happen every day all day with the exception of when the large funds are buying stocks or currency or commodity. That is the only time you can buy the dips or sell the rises. They happen about one time in fifty trading days. There are two hundred and forty trading days in the year. You do the math.
So anyone telling you that you can trade the markets profitably over a period of time using a small account and leverage is generally delusional. You might get really lucky but probabilities state you will fall into the blown out account category. Please remember this next time someone comes touting some holy grail or consistent profits system. Ask them their parameters.
Systems fail these days because they can't possibly take into account all the different variables the markets present daily. On top of that you have no idea when a system is going to revert to its mean or when a system is going to outright fail.
The simple reason is when you give your information to the algo's or funds trading on the markets which include market makers and liquidity providers they generally hand you your head on a silver platter. You are going to say, "well that is the reason for stops" right.
I disagree.
I have watched price action for so long that I see clearly when the markets are setting up traders. How do they do that? They do it by getting the most people they can going in one direction before they turn the market on them and take their hard earned money.
If you use tight stops it simply means it will take longer for them to run your account and you will miss the majority of moves where the market turns your way for the simple reason that you have not allowed volatility around the turn areas to run their course. Does anyone ever let the market run its course. Well you can't because you don't know where that is especially if you are using leverage. You shit your pants with every drawdown right? Of course. Who wouldn't.
No one ever expects the markets to run as far as they seem to do when you are in a negative position do they? I have watched pros get into this dilema, fund managers, large speculators and of course retail traders.
Its a sickening feeling watching price run against you especially when you have a small account and lots of leverage on the line. I know, I've been there before.
There are many reasons for the set ups and they happen every day all day with the exception of when the large funds are buying stocks or currency or commodity. That is the only time you can buy the dips or sell the rises. They happen about one time in fifty trading days. There are two hundred and forty trading days in the year. You do the math.
So anyone telling you that you can trade the markets profitably over a period of time using a small account and leverage is generally delusional. You might get really lucky but probabilities state you will fall into the blown out account category. Please remember this next time someone comes touting some holy grail or consistent profits system. Ask them their parameters.
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