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Digg it UP - Online FOREX Brokers – A Brokers View Of Why Novice Clients Lose
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They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients
Like most phenomena associated with computing, internet access generally continues to increase year on year across the globe. PC ownership and modem ownership, in particular, have both continued to grow and penetration of the internet is now higher at home than at work in countries with the highest overall access.There is no better time to get your business online, as e-commerce continues to grow in importance. Even as far back as 1999, findings by MORI in a survey conducted for Intentia
I dealt with several thousand traders over 8 years and here are my observations.
This was the late eighties and early nineties and online FOREX brokers of course did not exist, clients behave no differently today as they did then.
Here are the top reasons traders lose with any FOREX broker and that includes online FOREX brokers
1. Methods traded were illogical
The first reason was simply methods did not work as logic they were based upon was not relevant to market movement.
Today, day trading is more popular than ever with online FOREX brokers, but it was around 20 years ago and the same results were obtained which were:
A wipe out of equity in a short time.
Day trading did not work then and it doesn’t work now- Volatility is random in short time frames.
Any support and resistance seen in a daily time frame therefore is useless for trading purposes.
Online FOREX traders just like we did must love day traders lots of commission generated!
As a broker your balance sheet is based upon commission to equity.
You generally assume all clients lose anyway, so if they pay lots of commission while losing all the better.
There were other methods that lost especially the ones that clients bought that promised regular money or an income from trading.
These methods were normally bought tested in hindsight and the trader threw in the towel after a few losses, or was wiped out.
Another group that lost were the ones with complicated methods.
They figured the more complicated a method was the more likely it was to succeed, this of course is totally wrong.
Simple systems work best as there are fewer elements to break.
We had one trader who bought a system which he proudly boasted was based on artificial intelligence and the same technology used by NASA to put a man on the moon
Unfortunately, it did not help him in the market!
2. Discipline
What always struck me was how few clients could trade in a disciplined fashion.
They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients
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1. Methods traded were illogical
The first reason was simply methods did not work as logic they were based upon was not relevant to market movement.
Today, day trading is more popular than ever with online FOREX brokers, but it was around 20 years ago and the same results were obtained which were:
A wipe out of equity in a short time.
Day trading did not work then and it doesn’t work now- Volatility is random in short time frames.
Any support and resistance seen in a daily time frame therefore is useless for trading purposes.
Online FOREX traders just like we did must love day traders lots of commission generated!
As a broker your balance sheet is based upon commission to equity.
You generally assume all clients lose anyway, so if they pay lots of commission while losing all the better.
There were other methods that lost especially the ones that clients bought that promised regular money or an income from trading.
These methods were normally bought tested in hindsight and the trader threw in the towel after a few losses, or was wiped out.
Another group that lost were the ones with complicated methods.
They figured the more complicated a method was the more likely it was to succeed, this of course is totally wrong.
Simple systems work best as there are fewer elements to break.
We had one trader who bought a system which he proudly boasted was based on artificial intelligence and the same technology used by NASA to put a man on the moon
Unfortunately, it did not help him in the market!
2. Discipline
What always struck me was how few clients could trade in a disciplined fashion.
They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients
A business may be small, but the efforts of operating it is not. Small business owners often wear many hats - financing, product development, marketing, sales and customer support. While major corporations have sufficient resources to kick off a thoroughly planned marketing campaign, small business marketing is often on a budget. Marketing a small business should not be limited to a single channel because of the size of your business. Customers will always go through the three phases of a purc
Online FOREX traders just like we did must love day traders lots of commission generated!
As a broker your balance sheet is based upon commission to equity.
You generally assume all clients lose anyway, so if they pay lots of commission while losing all the better.
There were other methods that lost especially the ones that clients bought that promised regular money or an income from trading.
These methods were normally bought tested in hindsight and the trader threw in the towel after a few losses, or was wiped out.
Another group that lost were the ones with complicated methods.
They figured the more complicated a method was the more likely it was to succeed, this of course is totally wrong.
Simple systems work best as there are fewer elements to break.
We had one trader who bought a system which he proudly boasted was based on artificial intelligence and the same technology used by NASA to put a man on the moon
Unfortunately, it did not help him in the market!
2. Discipline
What always struck me was how few clients could trade in a disciplined fashion.
They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients
Email marketing is proving one of the most effective ways of making money online. But to be able to make money with email marketing you need to be on the look out for constantly building on your opt-in email list. You would need to submit articles to some of the more popular article directories to direct the readers to your webpage. There they would have to give their name and email address to subscribe for some free report or newsletter.As the saying goes, content is the king on interne
Another group that lost were the ones with complicated methods.
They figured the more complicated a method was the more likely it was to succeed, this of course is totally wrong.
Simple systems work best as there are fewer elements to break.
We had one trader who bought a system which he proudly boasted was based on artificial intelligence and the same technology used by NASA to put a man on the moon
Unfortunately, it did not help him in the market!
2. Discipline
What always struck me was how few clients could trade in a disciplined fashion.
They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients
You know, where you do something positive about the behaviors of those outside audiences that MOST affect your organization? And where you do so by persuading those important external folks to your way of thinking, then move them to take actions that help your department, division or subsidiary succeed?Yes, that’s right, it’s where you use the fundamental premise of public relations to produce external stakeholder behavior change – the kind that leads directly to achieving your manageria
They had jobs where they had to be disciplined everyday, yet in the markets they simply behaved irrationally as soon as a few losses came along.
- They would chop and change methods looking for the perfect one. - They would revenge trade to catch up losses. - They would blame the markets and call them stupid
When money is on the line we all know it’s hard to be disciplined, but the emotions that we saw ranged from crying to total despair, including one suicide.
3. Money management
Many clients were good at picking market direction but could never make any money due to poor money management.
This was problem for them not only in cutting loses ( they very often removed stops or never placed them) of course, a small loss soon becomes a big loss, the trader cant take that, then he was handed a loss he had to take.
He would have been better of taking the small loss in the first place.
What surprised me was how few traders could accept big profits.
The bigger the profit became the more they wanted to take it even if their system indicated further gains.
The argument given was:
“you don’t go broke taking a profit”
Of course you do, if profits don’t exceed your inevitable losses.
This was perhaps more important than taking small losses.
Traders I saw could not allow trades run to $10,000 or more, a couple of thousand and they banked.
There are more reasons but they above are the ones that caused most losses and of all the traders I traded less than 1% made money longer term.
In part 2 of this article we will look at different personalities we traded, who won, who lost and the traits of the traders who won.
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