There's a very old saying in the futures industry: the big money in the pits is controlled by the lucky few.
I happened to ask a broker why he will never consider being a full-time independent trader, he told me this: ''almost all my clients got busted and for the few who made it past the first few years, they went into the reds and stopped trading.''
The only guys who are sucessful in day trading are pit locals, or scalp beggars, some call them. They buy the bid and sell the offer all day long, it's a blue collar job but a white collar pay. They had to endure the sweat, smell and insults from brokers and they try to get tough in the process. The richest and most sucessful pit scalpers came from the bond pit in CBOT. Pit trading is dead now, courtesy to the good old computer.
98% of the traders are scalpers or day traders, 98% failed in the long run, see the correlation? But it is the very sexy lure of being a day trader that attracts people to trade and there are always conman ready to pounce on their prey.
Now why majority of the traders lose? Firstly, when you enter a futures/stock/forex trade you're already a loser! You just bought the offer or sold the bid(you fools), your market maker had just pocketed the spread. There is also another thing you have to pay call the commission and there is 7% tax on top of that in Singapore. In Singapore we have one of the highest commission rates in the world!
Apart from commission, you probably had to wait whole day for market to move. Markets don't move all the time, don't get fools by those trainers. So day traders had to choose markets that move quite a bit in a days' range. Trading SGX contracts is a sure fire way to deplete you account in weeks and your broker will like you so much because you make them rich in just a few weeks time.
There is also a natural born enemy inside each and every traders: greed. Unless you can get absolutely unemotional in your trades, you'll never make it. Those who bitch about how many screens you need or how fast you need to be in an arcarde are just salemans trying to get you to buy their products or attend their courses.
Well, because the 2% will take all the gain. It's a zero-sum game. Someone has to make losses for the other to make gain.
ReplyDeleteI think trading with many screens is unnecessary. I use one screen and still ok. Perhaps they're just intimidating other traders :o)
I didn't know that you have to pay 7% tax. I am considerng to move to Singapore to trade because of the low corporate tax of only 17%. We pay 30% for company tax in Aussie.
Totally agree with you. I tried day trading; monitoring the screen during US/London open. I just find that too taxing. I always believe using entry order, stop and limit to counter emotional fear and greed. It all about risk ratio to win in the long run.
ReplyDeleteBTW the 7% tax (GST if i'm not wrong) is on the commission itself not on the trade amount.