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Why You Fail As Traders
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Why You Fail As Traders

by The MoleMay 29, 2015

As you know by now I’m currently moving forward with a LAMM based signal service and as planned six or seven people have been selected as the first to get started. One question that keeps coming up is which system to choose – CrazyIvan or Thor? One intrepid sub is currently opening accounts with Vankar and he emailed me the following today:

I’m getting to the point where I’m about set up. Brokers take their sweet time, apparently.

After reading your writeup on Crazy Ivan – which seems to be kicking ass – I’m still not sure of which system I should choose. I was leaning toward Thor based on the SQN and higher expectantcy in your backtesting but I can’t really tell from your published result how the system is actually performing. Is 7.5R in 7-8 months inline with your expectations? Crazy Ivan seems to be doing a lot better but I’m weary of the time committment – not to mention chasing the form horse – for someone who is still too much of a control freak to play handoff to Vankar at this point.

What are you words of wisdom?

This was my response to him:

Words of wisdom I cannot offer in that department. However let me try to help you make up your mind another way. You looked at CrazyIvan and you liked the equity curve. I started with around 40 subs back in late 2013 when I introduced it. Guess how many are left today?

Four.

Yup, you read that right. Four subs remain for a system that would have more than doubled your account by now. At least half washed out after that summer 2014 draw down. The rest kind of dropped off one by one over the past year. Of course all of them had very plausible reasons – at least on the surface. But deep down inside I know that most people are incapable of abiding by even the most successful of systems. Now that said – CrazyIvan is a very tough system to be trading manually. But none of them ever came to me saying- “hey, if you offer it for auto trade I’ll be back”. I know that for a fact because none of them have returned after I announced my new LAMM signal service. It seems primarily existing subs and a few non-subs are interested. Interesting… isn’t it?

Right now you look at Thor and you think – hey, it only made 7.5R in seven months. It must be crap, right? Recency bias afflicts us all – even the most mentally disciplined. The problem with trading systems is that you cannot ever predict the future. For me Thor is a raving success right now. It’s been extremely tough tape and it actually managed to eek out a profit during a period that has not favored trending systems. CrazyIvan seems to love this market period and perhaps next year it’ll crap itself. But long term it really doesn’t matter. I personally would trade both systems – many would not want to pay both subscription fees unless I perhaps agree to offer a combo rate. But honestly – Scott already bitched at me that I’m selling my systems way too cheap. I mean – even with the worst spreads and commissions one would have at least doubled one’s account in the past 17 months. See my pertinent post. By the way it’s up to 150R now 😉

Alright, so how many people on this blog have doubled their accounts since 1/1/2014? Exactly – zero most likely – please raise your virtual hands if you did and you’ll be instantly invited to become an Evil Speculator guest author. And even if CI only would have made 30% in that time it would have been worth sticking with it.  However if it had I bet you that the number of remaining subs would be zero today.

It all boils down to unrealistic expectations mixed with ignorance and something they call the Dunning-Kruger effect – in essence people vastly over estimate their competence. Add to that a lack of discipline and an unawareness of the power of compounding. They want to sign up for $49/month and double their accounts every three months. Without any effort and following some magic super system. And we all know that doesn’t exist – it cannot exist because everyone would sign up for that one and it would stop working quickly. That doesn’t keep people from moving from one system to the other however. Just to switch to the next one as soon as the one they are trading experiences a draw down. Remember the ongoing theme in the Nick Rage video? The pain just has become too much.

CrazyIvan is a grinder and it can experience tough draw downs – don’t let the current period deceive you. Thor seems lighter on the draw down side – although it would have had a tough year in 2010 – see the back tests I posted. In the end YOU have to decide what characteristics in a system suit you the best. Because if you sign up with me I would want you to be trading it for a few years, not three months. I cannot guarantee profits in six months – NOBODY can. Systems go through cycles – all of them do. Why? Because markets go through cycles. The system that works in today’s market environment may go through a draw down when the market conditions that favor it change. Which is why I endeavor to provide a range of systems instead of focusing on just one. That’s after all what the pros do. Do you think GS trades only one or two systems? Of course not – they have hundreds of them and they keep improving them on an ongoing basis.

So in a nutshell it doesn’t really matter which one you sign up for.  If you can afford it and if you have enough skin in the game sign up for both. Otherwise choose one that best represents a system you would want to trade manually. Letting others do the trading for you does not shield you from being emotionally tied to the outcome. So detach yourself from the outcome – at least on a short term basis 😉

So now you know why most people fail at trading – they really do. Just go back a few years and read some of my old posts from June 2010 or even June 2012. Look at all these people’s disqus history – they all stopped posting years ago, not just here on Evil Speculator but ALTOGETHER. They are gone. Wiped out. Back to their day jobs as it were. So when I say these things I’m not trying to be an asshole just for shits and giggles if you will. I’m not the Fly – I wish I had his linguistic acuity and his wit, and if nothing else I respect him for his evil intent. But frankly, despite my rather exotic online persona Evil Speculator’s prime directive always has and always will be to help retail traders survive and even thrive in the market. When I say these things I am trying to help you realize what are up against and if possible learn from the failure of others.

Scott always points out that in order to survive as a trader you have to be in the top 1%. Everyone else loses over the long term. Guaranteed. So work your ass off and do whatever it takes. If that entails letting someone else trade a portion of your assets, then why not? Or develop your own but realize that one system alone will most likely encounter periods in which it doesn’t work. Which is fine – there always is a system that matches a particular market period. The problem is – you never know which one you are really in until it’s almost over 😉

 


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Bill

    These bitch slaps of truth are a great free service. I am not being a jerk, I am serious BTW.

  • strider

    I stopped trading CI early this year. Sometimes things come along in life that make trading difficult and prone to mistakes. I originally thought I would miss it but I didn’t. I sleep 8pm-4am and found myself waking up and wondering about the 11pm alerts. Looking back, my account was too small (15K) and believe Mole has the 50K min correct. Every 38 round turn trades was 1R for me.
    With things returning to normal for me, the matter of money is what prevents me from the auto service. In jargon that only Capt Boom would understand, I have lots of OT coming with starting up one new unit and refueling outage on another. My goal is to be able to get aboard the Crazy Ivan LAMM train.

  • OzarkHillBilly

    Dude, I love what you’re doing here, day in and day out. I don’t remember how I first came across the site but I knew from the beginning that it was the real deal.

  • HeadNShoulder

    again, truthful post without “hey I am the holy-grail” type of title, outstanding site compare to other 99.99% out there which lays out crap post like: according to whatever shit statistics, out of 10 of the 1st June season, 4 of them are down or whatever shit up..or Sell in may and go away and die type of posts. English is not my mother tongue clearly and I don’t care, just want to say what I felt about Sir Mole’s post.

  • http://evilspeculator.com molecool

    And I’m glad we now have our resident hillbilly :-)

    https://www.youtube.com/watch?v=h6_rx0FmfV8

  • http://evilspeculator.com molecool

    World’s most accurate pie chart:

  • Skynard

    She’s got legs, /NKD ST target now on the hourly 20350.

  • http://evilspeculator.com molecool

    Oh sorry – I thought you meant CL – like in crude, Never mind… And yes, perhaps a $15k account is rough unless you only take the forex entries.

  • Ronebadger
  • http://evilspeculator.com molecool

    Happy to dish ’em out – hehe… most people don’t want to hear it though. On the contrary – most suffer from the Lake Wobegon effect: http://psychology.wikia.com/wiki/Lake_Wobegon_effect

    “The Lake Wobegon effect is the human tendency to overestimate one’s achievements and capabilities in relation to others. It is named for the fictional town of Lake Wobegon from the radio series A Prairie Home Companion, where, according to Garrison Keillor, “all the children are above average”. In a similar way, a large majority of people claim to be above average; this phenomenon has been observed among drivers, CEOs, stock market analysts, college students, and state education officials, among others. Experiments and surveys have repeatedly shown that most people believe that they possess attributes that are better or more desirable than average.”

  • http://evilspeculator.com molecool

    I call that pie chart – optimistic 😉

  • http://evilspeculator.com molecool

    Meanwhile Skynard just keeps on running…

    https://www.youtube.com/watch?v=qiFQsxGUQOI

  • OzarkHillBilly

    I’d take that John Deere motorcycle any day.

    I’ll send you a pic of the project(s) in my garage that I have to complete in order to raise capital and get back to a serious level of trading. All part of the plan. But I won’t be selling my guns.

  • mugabe

    I take my hat off the four people who have traded CI right thu. Not for the profits, but for the incredible dedication the system requires.

  • Skynard

    Keep those machines on:)

  • mugabe

    so you can have your cake and eat it?

  • Scott Phillips

    It’s incredibly hard. In 2011 I traded it in 6hr charts and the physical fatigue and emotional toll involved was HARD. Of course I wasn’t the trader I am now, but even so I would doubt many here are up to the task.

    Dudeplunger has also traded it, more than me actually

  • http://evilspeculator.com molecool

    Agreed – a handful have stuck with it and are reaping the benefits now.

  • Bill

    Having that thought bias would be terrible. I’m glad I actually am above average and modest too. 😉

  • mugabe

    yeah, me too :)

  • David Hill

    As one of the nitwits whose tried to trade it, I can vouch for its difficulty, and the need for consistency for it to work. Has my account doubled? No. Have I screwed up my trading from time-to-time? Absolutely. My sense with CI is that when it hits for a lot of green, it does so quickly and in bunches, and if you’re not trading in that time period (vacation, extra day off, overslept), you can miss it. A great example was last Friday, just before Memorial Day. Everyone’s taking the day off, but a little 12 pip USD/JPY trade signaled, which meant you were supposed to load up on position size (because of the small risk), and boom, it goes for 8.3R into the holiday weekend. I caught the trade, but when I looked back I realized I lowered my R value (because a small pip risk sometimes whipsaws and quickly ends up as -2R). So I won but still screwed up and left R at the table because of it. Having said all that, if you can get into a routine, it’s not a total killer to trade from the Eastern US. I put the 7 am trades in after I wake up the kids, put the 11 pm trades in before I go to sleep, and can usually get the 3 pm trades entered at or close to 3 pm. Doing CI via automation would make life easier — but I’m trying the LAMM with Thor (I’m going to work to trade CI manually and profitably until it kills me).

  • mugabe

    well done, sir!

  • Scott Phillips

    There ARE no days off. No “sleep in” no vacations no NOTHING. You absolutely have to commit to being at the helm every rollover. It’s 5 minutes 3 times a day. If you can’t summon that level of dedication you can’t play.

    And our brains remember the last thing that happened, and are incredibly bad at calculating objective truth. Those small pip ranges have more whipsaws but overall are a better edge – modifying your system in the middle of the week is a clear mistake. If you make more than one mistake every 50 trades you are completely fucked with this system.

  • Scott Phillips

    Assuming they trade mistake free with an exemplary broker

  • David Hill

    I don’t disagree with you on any of your points, especially the “last thing that happened” comment. With the UK election approaching and the GBP/USD volatility, you could predict that those 11 pm either-way GBP/USD trades were going to whipsaw out every night. And most nights they did just that — and I can’t even say that when cable finally picked a direction that the CI trade made it all back. It’s remarkably difficult to enter a trade where you think you’ve got a high probability of being burned — it’s like putting your hand into the fireplace and hoping the fire will somehow miss it.

    That all said, with my mistakes, infrequent vacations, the occasional falling asleep before 11 pm, I’m still here, with no blown up accounts, some profit, and me being objectively a better trader than I was 2 years ago (or even 1 year ago).

  • http://evilspeculator.com molecool

    Yup, all these reasons contributed to me looking for an automated signal platform. Hat tip for sticking with it so long – three roll overs per day is extremely rough.

  • http://evilspeculator.com molecool

    “And our brains remember the last thing that happened, and are incredibly bad at calculating objective truth.”

    This.

  • http://evilspeculator.com molecool

    Don’t beat yourself up too much – it’s easy to make mistakes and CI is a grinder.

  • http://evilspeculator.com molecool

    Jeje – lo has clavado.

  • http://evilspeculator.com molecool

    https://www.youtube.com/watch?v=5ju4Gla2odw

    I miss the old buzzard… sure had a way with words.

  • Scott Phillips

    Objectively, it is an average system (expectancy is not that great) but as a training ground for future greatness it is superlative

  • mugabe

    It’s precisely because it’s expectation is (so) low that it needs a v high frequency of trades to make it a decent system in terms of generating profit

  • phylum

    “You’re determined. So what? You haven’t been racing naked through shark-infested waters yet. Will you be just as determined when you wash up on some deserted island, disoriented and bloody and ragged and beaten and staring into the horizon with no sign of rescue?

    We live in a culture that celebrates determination and hard work, but understand: these are the qualities that keep you in the game after most everybody else has left, or until somebody bigger and stronger picks you up and hurls you back out to sea. Determination and hard work are necessary, yes, but they are the minimum requirements. As in: the bare minimum.”…..

  • hellbent

    Yeah she’s full of piss and vinagar: “The color of passion is the color of blood. It marks the lovers and the rebels. It steps out of culture, jumps class, overturns tradition. It puts your house at risk.”

    And my favourite: – “Passion won’t listen to reason. It transforms. It is HELLBENT.”

    (http://justinemusk.com/, 2015) :-)

  • mugabe

    you sound like the drill sergeant in Full Metal Jacket:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    What a compliment for Phylum … risk-taking on a constant basis … aka trading (especially leveraged instruments … where counter-party risk is largely ignored) … can be likened to a full on contact sport / engagement / war … the pain largely coming not just from the financial aspect.

    Beyond just ‘determination and hard work’ other factors also loom large.

  • http://www.ProfitFromPatterns.com/ Ivan K

    A great insight can be gained by looking at the results based on the individual rollovers … some are more important / significant than others … missing one ‘should’ not have the EqC going straight down versus up … in other words transforming the end R result from being positive to negative … certainly in a ‘perfect’ scenario one ‘must’ attend all rollovers … and perform perfectly … as must the pc / software / broker / counter-party etc … the same concept applies to missing an entire day … as long as stops are at break even of better … there are no active positions at all.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Eight hour decision points are far less critical than say 10 minute decision points … rarely does a market break a previous low having closed at the high of an 8 hr bar in a nano second … equally, yes it does happen … again one ‘missed’ decision point ought not to be a deal-breaker … a week thereof certainly may dramatically affect both the EqC and the end R.

  • mugabe

    scattergram of CI returns

  • mugabe

    Having looked at the CI distribution when it was on 132.86 R total profit:
    Trades falling with 1 SD of mean profit per trade (68.2% of total trades) generated a total R of 27.09R
    The other trades (31.8% of all trades ie the most deviated from the mean in either direction) generated 105.77R!

  • Billabong

    “We live in a culture that celebrates determination and hard work” … And the passion of youth, but not so much the wisdom of age.

  • fearful_syymmetry

    Nice data analysis, Mugabe. I tried to look at the Google Docs results data for CI and it looks like it needs a tickle from Mole (Thor data is retrievable). I suspect those lower boundary flyers in the N < 500 group were probably prior to the implementation of the equity curve. If you are so inclined to run the SD stats again to only look at data after the EC was applied, it would be interesting.

  • mugabe

    Unfortunately I haven’t got the dates in Excel. We’ll need to wait until the spreadsheet is up again. And it would be good to know when the eq filter was applied from: it looks like it was end April 2014, but would be good to get confirmation.

  • BobbyLow

    Scott, replying from the last thread:

    I got to chat with DudePlunger a few times over the past few days and it was cool how often we were on the same page even though we got there in different ways. He actually (indirectly) turned me on to the AUDNZD by accident when he entered a NZDUSD trade. We also chatted briefly about the Euro and I now realize that my negative bias toward the type of price action of previous trades within the Euro has resulted in lost opportunities for me.

    The prevalent type of Price action of any given instrument is not going to change but I certainly can attempt to adapt to it. :)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Mugabe – Monte Carlo simulations of the results can be an interesting road to travel down … naturally this assumes that randomness is real.

  • Scott Phillips

    He is a very good trader, strong in the areas I am weak, and we make a good team :-) He is very strong on trade documentation and reliable execution

  • fearful_syymmetry

    I dug up an old copy…looks like the first time the EC filter was applied was at data point #486 (4/25/2014).

  • SirDagonet

    “Those small pip ranges… overall are a better edge”

    Hmmm… Would that imply the system could be *effectively and profitably* altered by only taking small pip range trades?

    I’m assuming you and Mole considered this when you designed the system…

  • OzarkHillBilly

    I’ll be going on the forced annual vacation in a few days with my girlfriend’s family to the Redneck Riviera. All expenses paid by her father, house on the beach, the best restaurants, etc. Poor me, right? I don’t expect much sympathy from any of you while I am forced to sit on the beach for a week, but I’d rather stay focused on my goals right now.

    I’ve already got a list of books that have been recommended here, but I thought it wouldn’t hurt to solicit everyone’s opinion one more time before I hit the Amazon order button. What books or other info really caused that light bulb to flash over your head? What was the source of any particular epiphany you had regarding your trading? What helped your evolution the most as a trader?

  • Skidmarkalot

    Enjoy your trip to Branson…. Cough, cough

  • http://evilspeculator.com molecool

    “it looks like it needs a tickle from Mole”

    When Google converted the sheet to their new version they screwed something up. I’ll take a look at it tomorrow.

  • http://evilspeculator.com molecool
  • trader wantabee

    Letters to Penthouse XXXXIX: Sinful Sexxxploits https://www.amazon.com/dp/0446583685/ref=cm_sw_r_awd_Mc6Avb1G1V9G5

  • OzarkHillBilly

    My gf likes to read, maybe this isn’t such a bad idea.

  • OzarkHillBilly

    Hey I’ll take Silver Dollar City anytime.

  • OzarkHillBilly

    I’d actually like to hit Gulf Shores, but my gf’s parents go to the same place in Florida every year, without question. I just don’t understand why anyone would want to go to the same place every year, over and over again, when life is so short and there’s so much to see and do in the world.

    Regardless, I’ll be bringing my loudest Hawaiian shirts.

  • Skynard

    NEW POST

    Warning – Extreme trade, get a look quickly.

  • Skidmarkalot

    Sorry, don’t mean to knock it. I can remember the half dozen attractions as a 8 year old. Mom and Dad took us there several times a year growing up. Its to crowded for me now.

  • OzarkHillBilly

    Too crowded for me as well; IMO the best time to go is when they open it up for Christmas and you can hit the rollercoasters at night. I also vaguely remember going as a child; my mom probably made my dad do it.

  • Billabong

    If you’re looking for trading psychology books – Mark Douglas, Van Tharp, Brett Steenbarger (sp?) and Dr. Elder.

  • OzarkHillBilly

    Van Tharp seems to be the #1 recommended guy here, at least when the subject has come up lately. I already have Dr Elder’s seminal work and I’ll be taking it with me as well since I obviously didn’t pay enough attention to it the first time around.