Education

# How can 90% fail? Delusional and lacking a pair.

FX:GBPUSD   British Pound / U.S. Dollar
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You might have heard stories of people that were looking for really bad traders so they could do the exact opposite.

There was some guy that had a bot that would look at twitter bets and come up with a rr and wr, he was trying to sell that to a quant fund a few years ago.
There sometimes are some people crying about really awful signal providers, something like .2 RR and 60% winrate.
I just do not understand, they're pretty dense. I hear something like this my first reaction is to run to this guy and "SHUT UP AND TAKE MY MONEY".
You're looking at a 5 RR and 40% winrate! Just take my money man.

Imagine you could find the worse trader in the world, world's biggest twat. You just found the holy grail. Just fingers crossed he doesn't improve.

I keep coming across this story...
A few years ago (Data from a major FX broker* across 15 most traded currency pairs from 3/1/2014 to 3/31/2015) a broker looked at 43 million trades.

What they found really makes you wonder...

On all 15 pairs, their noobs have over 50% winrate, with the lowest AUDJPY with barely over 50% and the highest EURAUD with a little over 60% winrate ( euro pairs had 61% on average).
And you guessed it, all of their losers are significantly bigger than their winners. Eyeballing it I'd say they are all between 50% and 100% bigger.

Their average wins and losses are all something like half a daily ATR, so OF COURSE, the majority of these **** HAD to be daytraders. Go figure.

For example, on the gbpusd , their winrate was 59%, they made an average 43 pip profit on each winner and lost 83 pips on losing trades.
So a rr of 0,518.

You see where this is going :D
Let's flip it! Say that including spread = they lose 45 and make 81. RR = 1,8. And winrate is 41%.

The breakeven point is (as long as the risk is low enough...) 35.7% winrate.
The average day trading loser, well not loser, the average period, is 15% above breakeven.

This is not even the average for losers, it is counting winners. So they are doing even worse/better.

If they weren't such **** and went for bigger timeframes, with everything else kept same (they probably follow some dumb mecanical strategy they found from an internet troll), as so the stats are the same but spreads are insignificant;
Then we would be looking, flipped, at a RR of 84/42 = 2. With 41% WR. 41/33.33 = 23% better. Quite an edge!
They wouldn't even need to make much of an effort. They already have a big edge. Just flipping what they do, no hard research required, no sweat. EASY.

Crazy. No to say bigger winners than losers is the only way to go, but in this case... clearly they could be very profitable just by doing the exact opposite of what they usually do...

Why aren't all these losers becoming winners? I'll tell you why I think it's not happening, other than because they are stupid of course.

1- They are greedy and want to grow fast from day 1, so they blow up and never are in long enough to get any feedback or learn anything.
2- They are lazy and so don't look back on their trades. They just can't be bothered holding a journal, backtesting strategies, nothing.
3- They care what other clowns on twitter and crypto forums think, and need to grow a pair.

So you see, it's pretty much IMPOSSIBLE not to be profitable if you really want to. IMPOSSIBLE.
If you are at breakeven and think "I am almost there" I am sorry but I have bad news for you...
It's easier to go from consistently losing trader (if you are able to do what it takes), than breakeven where there is no edge (unless you just practice self sabotage).

I've heard of absolute clowns, that were surprised when someone threw their own numbers back at them showing that they were losing more than winning.
If I was training someone at a firm or whatever I'd get fired because when I'd see someone that is not even aware he lost money in the past 6 months I'd just slap the ****.

I am actually surprised how big the edge is... Pleasantly surprised, especially by the fact that anyone could make it but they are too lazy and too weak.
Also, it is common to hear that in prop firms, every one gets the same equipement and training and learn the exact same strategies when they start and still 5-10% make it and the rest fails.

Strategies can stop working, and it is worrying, but what makes a difference is YOU, as a person. Your edge is YOU, not your strategy or screens.
That's an investment for life. As long as you get good, and can adapt, you will almost certainly always be able to extract money from markets.
Oct 16
Comment: I think I can link one of the articles that quote this broker results:
https://www.dailyfx.com/forex/fundamenta...

And about Virtue, that disclosed their 99.9% winning days on their hft strats after launching their IPO (public companies do reports where they say these things). Their winrate is 49%, but they never have a losing day.
My personal opinion is that they buy order flow and cheat tbh...

http://www.onestepremoved.com/how-to-be-...

So looking at the average gambler (like it or not it's still gambling), if they really were perseverant and intent on improving, and were able to calm their greed as to not blow up (and then quit or worse try to make it back), they would be holding a journal. It's really the bare minimum. Too lazy to hold a journal does not deserve to make 1 cent. Seriously. It's not that hard.
I can imagine businesses, bars etc, that do not trace anything, completely disorganised, are absent when the delivery truck gets there etc, and thinking "it's ok my business will work out when I learn the secret". Might end up in jail actually.

Now that average loser (ye has to be a loser in this example), if he flips everything, he has a RR of 1.8 and WR of 41%.

Only risking 1% per trade (it's important and I will explain why), say he gets 2 a day, after 1 year (250 trading days let's say) his results would be:
average winner makes 1.8% loser makes -1%, he gets 205 wins and 295 losses.
==> (1.018^205)*(0.99^295) = 2,0.
Up 100%. And that's just from flipping his bad strat on its head.
This is pretty incredible, it is using the average trader result from this broker.
Shows you what is possible!

Why not risk more than 1%?
Let's take an extreme example, risking 20%, making 1.8 times that or 36%
==> (1.36^205)*(0.8^295) = 0.06

You can run that in the calculator by yourself.
By risking too much, a profitable strategy was turned into a losing one.

It's actually pretty intuitive. You start at 100. You lose 1% you are down to 99, you need to make 1.01% to get back there. Your profit only needs to be 1% bigger (1.01 is 1% bigger than 1) to get back there.

But if you lose 50% and drop to 50, you don't need to make 50% or even close to that, but you will need to make 100%, double that 50 to get back to 100.

And the bigger the loss the worse it gets. Down 90%? From 100 to 10.
Getting 90% on that 10 will get you to 19. Lame.
You will need to multiply your money by 10 to get there. Good luck.

So it is not just because of drawdowns (they will happen), not just because if and when what you do stops working and you have to adapt you will get hit hard, but at its core, risking too much eliminates a strategy profitability.

Risking 2% only focussing on the best setups etc, with those stats, the 1 year profit will be:
(1.036^205)*(0.98^295) = 3.6. Up 260%. That's pretty good.

Sure going from \$1000 to a million (risking 1-2%) will take a decade, but it is possible. (If you do not touch the money for that long).
Losing traders prove it is. If you have what it takes and work on yourself.
If you are really commited, there is really no reason not to get there.

One last thing I wanted to add.