Author Topic: Failing Trader  (Read 4455 times)

TripleM

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Failing Trader
« on: July 02, 2018, 02:30:29 PM »
I have been trading stocks, options and forex for the past 10 years and have accumulated a total loss of about $80k.  Usually when I am up, I get over-confident, and then quickly start making bad trade after bad trade until the account blows up. I make around $120k at my full-time job in technology, so I am not as upset about the overall losses, but the repeated failures have proven to be quite a load to carry. I have tried many different chart pattern strategies and the main reason for my failure has usually been my own psychological errors, aka my emotions get the best of me every time.

Has anyone on here gone through any type of failure or loss of similar magnitude in real estate, trading or another endeavor and stuck with it long enough to come out ahead on the other side? I am curious, how did you get through the discouragement that came with the failure?

To be a successful trader, I will need to some how gain confidence, but it is tough to get to a place of confidence when the repeated failures have left me fearful and discouraged and ready to give up on trading entirely.

Part of what I need to do is simply go back to trading my strategies on paper (fake money) until it is proven for 3-6 months and then once proven, using real capital, but it is hard to put any more time into this knowing what the outcome usually is.

Can anyone relate?

Eric

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Re: Failing Trader
« Reply #1 on: July 02, 2018, 02:54:39 PM »
Have you considered that it's not confidence that you lack, but instead a workable investing plan?  You do need a new strategy, but not one that works for 3-6 months.  You need one that works for 30-60 years.  The only one that I'm aware of is long term buy and hold of broad market funds.  It has the side benefit of allowing you to stop trying to find the next get rich quick trading strategy and start living your life.

marty998

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Re: Failing Trader
« Reply #2 on: July 02, 2018, 03:17:51 PM »
I lost a similar amount, over a much shorter period. Granted in 2008/09 I would have lost 3/4 of that amount simply holding a broad index fund but it kinda hit me harder when I had to physically sell the specific stocks that I had selected as being "good ones".

I recognised that trading was not the way to go. You need to do the same. You recognise that emotions get the better of you, and put plainly this means trading is not for you.

Frankies Girl

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Re: Failing Trader
« Reply #3 on: July 02, 2018, 03:37:35 PM »
Not sure why you are posting this here? MMM forum is pretty strongly for Bogleheads investing approach. There are a few active trader folks but they're in a small minority.

You sound like you are very bad at trading and still don't understand the basics. If you've been doing this over a decade and still suck at it, then cut your losses and stop.

The definition of insanity applies here.

Telecaster

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Re: Failing Trader
« Reply #4 on: July 02, 2018, 03:44:25 PM »

To be a successful trader, I will need to some how gain confidence, but it is tough to get to a place of confidence when the repeated failures have left me fearful and discouraged and ready to give up on trading entirely.


Wrong. Confidence and $4 gets you a latte'.   In order to be a successful trader you need skills.  First skill is to recognize that chart reading is for suckers.  If it  worked then everyone would do it, but if everyone did it, then it wouldn't work.  See the problem?   Until you decide to learn skills, then you might as well take a blow torch to your money.   It will be just as expensive, but a lot more enjoyable. 

Scortius

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Re: Failing Trader
« Reply #5 on: July 02, 2018, 03:52:16 PM »
I think you're making a horrible assumption when you attempt to put any confidence into a model that's backtested for less than a year. Hell, by the time any short-term trading model has enough data to be verifiable, the dynamics of the market will have shifted, making your new strategy a potential loser. The stock market is not patterned chaos, it is a Complex Adaptive System: https://en.wikipedia.org/wiki/Complex_adaptive_system.

Complex Adaptive Systems are defined by bounded ranges of stability that make it look patterned, but are dominated by nonlinear feedback behaviors that alter the dynamics out of nowhere. You can follow a particle in the Lorenz Attractor (https://en.wikipedia.org/wiki/Lorenz_system) to the point where you think you have it figured out, only to see it switch trajectories on a dime. If a simple system of three non-linear differential equations can create such unpredictable behavior, imagine what the full complexity of the stock market inputs can do.

Understand that the stock market's short term behavior is governed by adaptive agents (human traders) that are learning and adapting to past performance just like you are. What looks like stable behavior at any time can evaporate instantaneously. Thousands of full time math geniuses work 80 hours or more a week trying to do what you're doing and a vast majority of them fail. You work a full time job in tech and likely have little formal training in the knowledge needed to be a quant, yet you are trying to play the same game as them, even against them.

Complex Adaptive Systems are fundamentally unpredicatable in the short term, but do exhibit stable bounded behavior over the long term.

The only winning move is not to play.

ysette9

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Re: Failing Trader
« Reply #6 on: July 02, 2018, 04:36:46 PM »
You are a poster child for why Warren Buffet says that low-cost index investing is the best move for almost everyone. Just go buy yourself some Vanguard and go live your life, like someone else said.

JAYSLOL

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Re: Failing Trader
« Reply #7 on: July 02, 2018, 07:44:48 PM »
You are a poster child for why Warren Buffet says that low-cost index investing is the best move for almost everyone. Just go buy yourself some Vanguard and go live your life, like someone else said.

+1

If you enjoy trading, treat it as a hobby with a couple % of your portfolio.  Go nuts, win some loose some and have a laugh along the way.  If you don't enjoy it (or if you "enjoy it" only when you are winning) and still feel compelled to trade more than a few % of your money, it's now a gambling addiction, and should be treated as such. 

lhamo

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Re: Failing Trader
« Reply #8 on: July 02, 2018, 11:25:57 PM »
I hate to burst your bubble but you are not down just 80k. You are down 80k plus whatever the initial capital you started with would have grown to if you had just thrown it in an index fund ten years ago. Please stop day trading. It's a risky business and you suck at it.

mjones1234

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Re: Failing Trader
« Reply #9 on: July 03, 2018, 05:46:31 AM »
Since when are there rules about what constitutes appropriate subjects on this board? Perhaps I find it offensive that you use this forum as a place to advertise. This person has legitimately asked for help. Let's see if we can help adjust the trajectory.



Not sure why you are posting this here? MMM forum is pretty strongly for Bogleheads investing approach. There are a few active trader folks but they're in a small minority.

You sound like you are very bad at trading and still don't understand the basics. If you've been doing this over a decade and still suck at it, then cut your losses and stop.

The definition of insanity applies here.

Retire-Canada

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Re: Failing Trader
« Reply #10 on: July 03, 2018, 06:53:44 AM »
Can anyone relate?

Sorry no.  You spent 10 years in an amazing bull market losing $80K with a high salary and you want to go back and try the same failed strategy? That sounds crazy. You should be sitting on a nice fat portfolio just from average market returns over that period.

sokoloff

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Re: Failing Trader
« Reply #11 on: July 03, 2018, 07:06:31 AM »
For context, I'm a somewhat active trader (100+ trades per quarter). I went broke investment-wise in the Nasdaq crash in 2000. I took a bad beating along with many others in the 2008 crash. Since then, it's been nearly straight up and with my tech company salary, I have an easily FI 7-figure sum in my investment accounts. I've kept my active investing to less than half my net worth, with the balance in low-cost funds, mostly Vanguard.

If you've taken consistent losses over the last decade (the greatest bull market anyone alive has ever seen), either you have a negatively biased trading strategy or you may need to face the facts that you are (currently) terrible at trading.

What's your (perceived) edge? What makes you think that you're better than the hundreds of thousands of smart, dedicated, full-time market participants who are trying to steal your lunch money? (And seemingly succeeding.) Your edge is never going to be confidence.

Frankies Girl

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Re: Failing Trader
« Reply #12 on: July 03, 2018, 08:31:15 AM »
Wow, did you ever read that with a chip on your shoulder or something? Cause that wasn't a criticism it was a genuine question at what led a person to post this here since it is the equivalent of coming into a Dallas Cowboys forum and posting about how much they love a team that is not the Cowboys. Sure there might be a bit of crossover in the fan base, but you have to wonder why someone seeks out help in a place unlikely to provide super positive support for them continuing to peruse their (failing, his words) path.

Like I stated, MMM is based off of things like Bogleheads/index investing being the "one true path" and even MMM himself calls this place a cult, and the active traders tend to be a very small group here. So why seek help here, when OP could have gone to the dozens of active trader sites and asked this same question and likely gotten tons of support to keep on trucking with the trading and tips for tilts and all that jazz? I asked because I think maybe OP is deep down aware that they're on the wrong path and need to have it plainly laid out, despite all of the reasons and justifications they made in their post.

I like picking out the underlying and subconscious stuff. This stuff usually drives our choices and unfortunately lots of folks don't realize it until it's actually pointed out. That's why I asked the question - because I was mystified, but also wondering if it was the OP's subconscious wanting someone to tell them it is okay to stop because they are not good at it.

You are the one that took offense on behalf of the OP for some very weird reason.

What I have in my signature line is allowed per the forum rules, and attacking me over it is completely off subject of this thread, (and again, really, really odd) and also happens to be an ad hominem attack according to the chart over in the forum rules.


Since when are there rules about what constitutes appropriate subjects on this board? Perhaps I find it offensive that you use this forum as a place to advertise. This person has legitimately asked for help. Let's see if we can help adjust the trajectory.



Not sure why you are posting this here? MMM forum is pretty strongly for Bogleheads investing approach. There are a few active trader folks but they're in a small minority.

You sound like you are very bad at trading and still don't understand the basics. If you've been doing this over a decade and still suck at it, then cut your losses and stop.

The definition of insanity applies here.
« Last Edit: July 03, 2018, 10:06:13 AM by Frankies Girl »

FIRE@50

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Re: Failing Trader
« Reply #13 on: July 03, 2018, 08:39:07 AM »
You need to have a plan(for your overall trading as well as each individual trade) and stick to it no matter what. This will take the emotion out of it.

Also, you need to treat this like a full time job. It cannot be a side gig if you want it to be successful.

Good luck.

MustacheAndaHalf

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Re: Failing Trader
« Reply #14 on: July 03, 2018, 09:11:16 AM »
Traders have a phrase "the trend is your friend", and even academic studies find some truth to the "momentum factor" in markets.  In another thread I started with under 1% of my portfolio and tried applying 1 year momentum to Vanguard ETFs (which cost $0/trade).  It's been going better in 2018 than in prior years, but it's still down about -10% over ~2.3 years.

If you pick 3-fund indexed approach, or keep trading, I'd urge you to keep it simple.  Your pick of books: "The Complete Turtle Trader" or "A Random Walk Down Wall Street".


This person has legitimately asked for help. Let's see if we can help adjust the trajectory.
If your complaint is that someone isn't helping, why didn't you provide any help in your post?

ysette9

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Re: Failing Trader
« Reply #15 on: July 03, 2018, 09:46:32 AM »
For the record, I didn’t find Frankie’s tone to be offensive. She brings up a legitimate point that the OP isn’t going to find a lot of people in this forum who will provide investing advice on how to day trade/stock pick/time the market. We just aren’t that flavor of people here.

Financial.Velociraptor

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Re: Failing Trader
« Reply #16 on: July 03, 2018, 11:39:41 AM »
I'm a trader.  I wouldn't keep doing it if my long term track record was negative.  I wouldn't keep doing it if my long term track record was positive but less than the dividend reinvested return on the S&P 500.  You are expending a lot of effort and going backwards. 

Recommend 2-5 years of indexing while you do some more research and "paper trade" new ideas on the side.  When you can beat the index over a rolling 3 year period, you can think about dipping your toes back in the water.

wenchsenior

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Re: Failing Trader
« Reply #17 on: July 03, 2018, 11:54:35 AM »
Most members of this board don't actively trade. 

That's one of the reasons we have assets.


Dances With Fire

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Re: Failing Trader
« Reply #18 on: July 03, 2018, 12:40:23 PM »
I hate to burst your bubble but you are not down just 80k. You are down 80k plus whatever the initial capital you started with would have grown to if you had just thrown it in an index fund ten years ago. Please stop day trading. It's a risky business and you suck at it.

Yep, you are down 160k +/- not (just) 80k. (Ouch. And I thought my Worldcom stock hurt.)

But seriously, as a former stock trader I would encourage you to stick with mutual funds and pick an asset allocation that you can stick with long term. Boring I know, but it works.

FIRE@50

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Re: Failing Trader
« Reply #19 on: July 03, 2018, 12:43:49 PM »
I hate to burst your bubble but you are not down just 80k. You are down 80k plus whatever the initial capital you started with would have grown to if you had just thrown it in an index fund ten years ago. Please stop day trading. It's a risky business and you suck at it.

Yep, you are down 160k +/- not (just) 80k. (Ouch. And I thought my Worldcom stock hurt.)

But seriously, as a former stock trader I would encourage you to stick with mutual funds and pick an asset allocation that you can stick with long term. Boring I know, but it works.
How did you arrive at 160k?

Kierun

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Re: Failing Trader
« Reply #20 on: July 03, 2018, 01:10:31 PM »
I hate to burst your bubble but you are not down just 80k. You are down 80k plus whatever the initial capital you started with would have grown to if you had just thrown it in an index fund ten years ago. Please stop day trading. It's a risky business and you suck at it.

Yep, you are down 160k +/- not (just) 80k. (Ouch. And I thought my Worldcom stock hurt.)

But seriously, as a former stock trader I would encourage you to stick with mutual funds and pick an asset allocation that you can stick with long term. Boring I know, but it works.
How did you arrive at 160k?
80k invested 10 years ago with ~7% returns reinvested would be about ~160k now

CorpRaider

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Re: Failing Trader
« Reply #21 on: July 03, 2018, 01:21:59 PM »
96% chance this is a troll post.

jjcamembert

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Re: Failing Trader
« Reply #22 on: July 03, 2018, 01:50:48 PM »
I actively trade but have never blown an account, and don't plan to because I manage my risk. Being completely honest I don't think the time and energy I've invested into learning and practicing trading have been financially worthwhile, but I do it because I have enjoyed the journey and the knowledge that I've gained about markets.

It's good that you have realized that your losses are mostly from emotional trading. Every trader struggles with this and even veterans slip now and again. You HAVE to get your emotions under control if you want to trade, and this includes knowing when NOT to trade.

I can't really answer whether you're going to eventually learn to trade successfully: it's up to you how much time and money you want to risk. Clearly what you're doing is not working, so the first step might be forgetting everything you learned. I can offer a few pointers that I've picked up over time though:

  • Do not trade with your full account. Only trade with money you can afford to lose. If you blow up a $10k account you have a chance to play again, assuming $10k isn't that much to you. It's all relative to your NW of course.
  • Always hedge. You will be wrong (a lot) and you need a plan for when you're wrong.
  • Keep learning. You will never be able to learn everything.
  • Use everything, not just chart patterns. Chart patterns can be useful but only when combined with a solid thesis. That thesis is only useful if you have good tactics (using portfolio greeks, stop-losses, only using x% per trade, etc).
  • Nobody knows anything. Don't follow trades from other people. There are no experts. Don't try to trade news. Don't pretend anyone (including yourself) knows the future.
  • Do not gamble. Trading is about being on the right side of probabilities and choosing a risk/reward balance that mathematically will be profitable over many occurrences. It is not about finding the next hot stock, or finding that one secret strategy that always works. All of the strategies work in the right environment; it's the trader's job to use judgement to assess the environment.

I doubt this advice is new to anyone who's been trading for 10 years, so just be sure to set your own standard rules and follow them.

Another forum where you may find advice more suited to active trading:
https://www.reddit.com/r/thewallstreet/


montgomery212

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Re: Failing Trader
« Reply #23 on: July 03, 2018, 02:20:17 PM »
What exactly are you doing? Like how are you deciding when to buy and then sell a stock? Are you holding stocks for hours/days/months??

This board definitely leans mostly towards auto investments to index funds. That's most of what I do as well, but I do pick individual stocks -- before ppl criticize no more than 20% of my brokerage account is individual stocks and the rest is indexed; my entire retirement account is indexed. However when I pick stocks, I never look for stocks I can buy today and sell in the next hr or the next day; I assume the actual traders have way more knowledge in that area; after taxes the gains aren't worth the stress; and frankly I don't have that kind of time to watch the market 24 hrs a day given that I'm a lawyer. So I'm looking for stocks that I plan to hold for 6-18 mos. Typically for me I look for companies with solid earnings, cash, and growth possibilities that hit a rough earnings season for some reason other than business going down (often it's bc they acquired another co. that'll make them more profitable later but in the quarter in which they closed the deals and spend money to integrate the company's operations, the income statement takes a hit and the street makes them pay for that). I of course check moving averages etc. but tech analysis is not my #1 strategy. Are you ONLY doing tech analysis?

Retire-Canada

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Re: Failing Trader
« Reply #24 on: July 03, 2018, 02:28:35 PM »
96% chance this is a troll post.

95.99% chance I agree with you. ;)

trollwithamustache

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Re: Failing Trader
« Reply #25 on: July 03, 2018, 02:42:44 PM »
Chart Patterns are a sucka's game.

All the trading books say you need an edge. And its true you do. There is no edge in publicly available info on chart patterns.

hodedofome

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FIRE@50

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Re: Failing Trader
« Reply #27 on: July 05, 2018, 11:09:36 AM »
I hate to burst your bubble but you are not down just 80k. You are down 80k plus whatever the initial capital you started with would have grown to if you had just thrown it in an index fund ten years ago. Please stop day trading. It's a risky business and you suck at it.

Yep, you are down 160k +/- not (just) 80k. (Ouch. And I thought my Worldcom stock hurt.)

But seriously, as a former stock trader I would encourage you to stick with mutual funds and pick an asset allocation that you can stick with long term. Boring I know, but it works.
How did you arrive at 160k?
80k invested 10 years ago with ~7% returns reinvested would be about ~160k now
He said that he lost 80k, but he didn't say what he started with. If he started with 80k, then your math would be correct. If he started with a billion dollars and lost 80k, then your math would be way off.

TripleM

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Re: Failing Trader
« Reply #28 on: July 06, 2018, 10:45:53 AM »
In hind sight I could have put more thought into my post and at least acknowledged that this is not the best place to ask for advice on this sort of thing. I apologize for that.

My main purpose was to reach out in group therapy format and hopefully find others who have pursued an entrepreneurial endeavor and struggled along the way, maybe even made mistakes due to emotional decisions. I was just looking for some help or encouragement to either continue along or perhaps get a reality check and move onto another endeavor. I have approached trading from a business perspective as much as I can within my current mental framework, but my own emotional disconnect has caused me to deviate from my strategy significantly.

As a few of you have mentioned, I really just need to revert back to:
1. Stop using real money immediately
2. Backtesting my system from scratch again and refining it
3. Forward testing through paper trading
4. Re-writing the business plan and strategy
5. Continue to work on developing the skill set needed to implement the strategy flawlessly via paper trading.

Looking back on my performance in my very active trading accounts, what has happened is my aspirational "FIRE" craving self has been consistently misaligned with the reality of my current skill set, which causes me to use position sizes way outside my emotional tolerance. Trying to “get rich quick” as many of you pointed out.

The $80k in losses was really weighted much more towards the earlier years of this 10-year endeavor. The past 2 years have totaled more towards $2500 of that larger amount.

I returned 32% in my retirement accounts in 2017, but that was a very different strategy than my more active trading accounts strategy and I naturally kept the size down which allowed me to take emotions out of it. One year of performance is good for about nothing, but I do know the smaller size made a big difference in the outcome.

I became debt free as of early last year, have annual expenditures of $16k, and a savings rate close to 75% ex 401k contributions, all thanks to reading MMM’s blog, so that is also why I thought this forum may be of some help in this area. However, I can see now how active trading will always be a highly controversial topic.

The reason I am pursuing trading is the same reason we all read MMM, FIRE and/or the life benefits associated with simplicity/rationality/minimalism. Trading has always seemed like one of the most flexible business options out there, but as I am finding out very painfully, it is also one of the hardest to succeed at.

I posted in this forum because I made the assumption that many of you have an entrepreneurial spirit and have probably delved deeply into real estate, consulting, brick and mortar businesses, and perhaps even trading. Emotions can wreak havoc on those endeavors just as they can trading, although they are probably a lot less amplified outside of trading.

I appreciate your candid responses and I have a lot to think about moving forward. Trading may not be an option for my personality, but I do know now that at least the first move I can rationally make is to stop using real money for an extended period of time until my psychological situation changes drastically. If I can’t stay diligent with the steps outlined above, I will know that my psychological situation has still not changed, and I will ultimately get the same results I always have.

At this point, my time would might even be better spent focusing on real estate or another venture.

I know Warren Buffet is a proponent of index investing, but the more I read about his story and the way he thinks, I start to feel like index investing has been misrepresented and I am not completely sold on this method, at least in the way it has been traditionally implemented by wall street.

The premise to index investing is that you should not attempt to time the market, because it is impossible, and your next best option is to take a basket of stocks and dollar cost average over time.

However, I wonder if this traditional index investing strategy is just a more laid-back approach to market timing. Is the index investor just assuming that the market will be higher in 15, 30, 60 years from now, and thus is currently in a price range that merits entry? “Buy low, sell high?”

This can look like it works in many cases historically, but again, I think it depends on the time frame I choose to look at.

If I poured the portion of my portfolio allocated for stocks/equities into a market index in late January 2018, I would be down currently.

If I poured my money into an index fund in 2000, my portfolio would not have broken even until 2007, only to again fall, and not reach that same entry point again until 2013. 13 years where my stock investments did nothing.

If I poured my money into an index fund in 1966, my portfolio would have been in the same spot in 1982.

Between 1906 and 1924? It ends at the same spot I entered. My portfolio did nothing.
Between 1924 and 1942? Nothing.
Between 1936 and 1950? Nothing.

Dollar cost averaging every month over a long enough time frame certainly helps the strategy be more comfortable since I will go through multiple market cycles and buy all the way down, but it is still timing the way I see it, buy low, sell high later on.

Also, my risk tolerance lowers each year I age. Thus, the portion of my portfolio that I am willing to allocate to stock investments lessens each year/decade I grow older. This shortens the time frame I can hold stocks for.

The hope is that I can dollar cost average over a period of time during my younger stock tolerant years in such a way that my average cost of stocks is lower than the stock market prices when my stock tolerant years are up, so I am timing the exit point based on my age and risk tolerance at that age.

It makes sense on paper, but I also try to ask the question of how much of the stock market price increases are simply due to traditional inflation (CPI) and Ponzi-like inflation versus real returns based on company earnings? I think it could be quite a lot.

The total money supply (pretend it is all cash assets and no debt for this example and has remained steady via modest inflation over the past 150 years) would be the total amount of money that could be invested in stocks. Of course, not all money is invested in stocks at any given period of time, but the portion of the total money supply that is invested in stocks during any period of time would fluctuate based on human behavior, which is driven by sociological and psychological factors.

Those behavior patterns are very apparently driven by what wall street (Warren Buffet, Financial Advisors, Business Schools, etc.) communicates to the general public regarding investments and what investors generally agree upon in totality.

If more and more investors start to agree that stocks are good investments, then more and more of those dollars will chase stocks and prices will rise for the same basket of stocks. If less and less investors start to agree that stocks are good investments, then less and less of these dollars will chase stocks and prices will fall for the same basket of stocks. This inflates asset prices in a similar way to how a Ponzi scheme inflates its own investment returns, via more and more money coming in.

The pre-Great Depression stock market boom was a period of time when Wall Street successfully convinced the general public that stocks were good investments for everyone, whereas before this period of time, the common many did not necessarily have access to the stock market.

When there are more and more people interested in stocks, a larger portion of the money supply will be allocated to stock investments and historically this happens in a bubble-like fashion where prices rise to levels well above their underlying asset value.

The big question for me then becomes, how do I determine what a good underlying asset value is?

I have to remind myself of what the stock market actually is. The stock market is made up of businesses that can be bought in proportion to the number of shares purchased out of the total number of shares available for each business.

The way I value a stock investment should closely resemble how I value any traditional business, by how much future cash flow/earnings I can reasonably expect to get back in comparison to my original investment.

Now I would ideally like a business that I can pay $1 dollar for and have it return to me over $10,000,000 per year, but I run into the problem of competition, because quite frankly, you want a business like that to, and you will pay more than my $1 dollar.

You are willing to pay $2 for that same business. The neighbor down the street is willing to pay $5. ABC Hedge Fund LLC is willing to pay $1,000. XYZ Charitable Trust Fund is willing to pay $500,000. Warren Buffet would be willing to buy this business for $100,000,000, etc.

The point is that a very good deal will attract more and more investors usually until the underlying asset value no longer reflects the current cost of buying that business. But this Ponzi like inflation can carry on for a very long period of time due to sociological and psychological factors I mentioned earlier, aka investors get out of touch with reality, just like I do with my active trading accounts.

If I am going to invest in a business, two factors I would very much like to consider are the investment yield and the payback time I require to get back my initial investment, and the two are directly related. Again, my first preference would be to invest in a business for $1 dollar and have it return to me 1,000,000,000% Return/Year and get back my money within seconds and then have everything beyond that be pure profit.

You have this same preference, but you are more flexible than me, so you are willing to pay $2 dollars for this same investment. Let’s compare the deals we are getting with some metrics.

PE Ratio = Price divided by Annual Earnings (This number also represents the # of years to payback your original investment)
Earnings Yield = 1/PE = This is the classic % return of investment.

Examples:
$1 / $10,000,000 = 0.0000001x & .0000001 Years to get back original investment (1,000,000,000% Return/Year)

$2 / $10,000,000 = 0.0000002x & 0.0000002x Years to get back original investment (500,000,000% Return/Year)

$5 / $10,000,000 = 0.0000005x & 0.0000005x Years to get back original investment (200,000,000% Return/Year)

$1,000 / $10,000,000 = 0.0001x & 0.0001 Years (100,000% Return/Year)

$500,000 / $10,000,000 = .05x & 0.05 Years (2000% Return/Year)

$100,000,000 / $10,000,000 = 10x & 10 Years to Payback (10% Return/Year)

$1,000,000,000.00 / $10,000,000 = No Limit Index Investors = 100x & 100 Years to Payback (1% Return/Year)

So clearly the less you pay, the greater the deal due to the higher yield on your money and thus shorter number of years before you get your original investment back.

As the total amount someone is willing to pay for a business increases, we get prices that reflect Ponzi-like inflation more and more. Like someone willing to pay $100,000,000,000,000.00 for the same business that Warren Buffett would prefer to pay only $100,000,000.00 for.

We can look at the stock market with this method using the Schiller PE which is one of MMM’s favorite indicators. This was originally advised by Benjamin Graham (Warren Buffett’s Mentor/Professor) but Robert Schiller expanded on the concept using a statistical approach.

Schiller PE Ratio = Take the average earnings over the past 10 years and adjust those earnings for traditional inflation (CPI). It is more reasonable to take the average versus assuming that earnings will remain the same each year.

Currently the Schiller PE Ratio for the SP&500 is 32. Roughly this comes out to be SP-500 Index at 2760  divided by $85/Year Schiller Earnings).

Using the example from above, this implies that index investors looking to get into the market right now are willing to pay $322,600,000.00 for the business that returns $10,000,000.00 per year.
This will pay back our original investment in 32 years and thus give us about a 3% return per year on our money.

I am not convinced that a 3% return on investment is worth my time. I would be getting a much better deal investing in tax free municipal bonds and perhaps even 10-Year Treasuries or even TIPS if I just wanted to stay conservative until I find good investment opportunities.

What would make stocks more attractive to me against other investments?

A higher earnings yield and shorter payback period. If I am a market timer no matter what my investing strategy, I would prefer to do the bulk of my index investing when the businesses I am buying are at more attractive levels.

This can only occur if earnings continue to increase and prices stay the same (unlikely from what I can tell) or prices come down to a level where compared to their earnings, they provide a yield that is above any other investment vehicle I can choose from and I can get my original investment back in a reasonable amount of time that I am comfortable with.

If I want to retire at age 60, then I am hoping that the stock market is higher when I am 60 then when I was investing in it when I started in my 20’s. Although I may be right about this, I are still timing the market. It kind of has a bull market bias built into the exit strategy which I would call timing.

And this also assumes that I am comfortable investing in stocks as a large portion of my portfolio from age 20 to 60, which I am not. I essentially have an even shorter time period to invest in stocks than those 40 years due to the fact that I will gradually move into more conservative investments as I age.

This is why I would personally prefer to look at trading or other types of traditional business opportunities that have a higher yield and shorter payback period or wait for a better deal on stocks before I buy index funds.

Warren Buffett’s actual behavior would reflect something similar, considering Berkshire Hathaway is sitting on near-record levels of cash currently, waiting for more opportune times to deploy.



TripleM

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Re: Failing Trader
« Reply #29 on: July 06, 2018, 10:48:31 AM »
These books helped me get control of my emotions.

https://www.amazon.com/Disciplined-Trader-Developing-Winning-Attitudes/dp/0132157578/

https://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447/

Thank you. I have read both of these one time around each, but I have heard Van Tharp recommend his own books be read about 3x each so It think the same will hold true for Mark Douglas, especially in my case.

TripleM

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Re: Failing Trader
« Reply #30 on: July 06, 2018, 10:49:45 AM »
I lost a similar amount, over a much shorter period. Granted in 2008/09 I would have lost 3/4 of that amount simply holding a broad index fund but it kinda hit me harder when I had to physically sell the specific stocks that I had selected as being "good ones".

I recognised that trading was not the way to go. You need to do the same. You recognise that emotions get the better of you, and put plainly this means trading is not for you.

Right, it simply may not be an option for me and my personality traits, it may only work well for certain types of people. Thanks for your input.

TripleM

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Re: Failing Trader
« Reply #31 on: July 06, 2018, 10:50:30 AM »

To be a successful trader, I will need to some how gain confidence, but it is tough to get to a place of confidence when the repeated failures have left me fearful and discouraged and ready to give up on trading entirely.


Wrong. Confidence and $4 gets you a latte'.   In order to be a successful trader you need skills.  First skill is to recognize that chart reading is for suckers.  If it  worked then everyone would do it, but if everyone did it, then it wouldn't work.  See the problem?   Until you decide to learn skills, then you might as well take a blow torch to your money.   It will be just as expensive, but a lot more enjoyable.

Yep, agreed. I aggressively used the word confidence but really that confidence will come naturally once the skills are truly there. Without the skills, I have nothing. Thank you.

TripleM

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Re: Failing Trader
« Reply #32 on: July 06, 2018, 10:53:22 AM »
I think you're making a horrible assumption when you attempt to put any confidence into a model that's backtested for less than a year. Hell, by the time any short-term trading model has enough data to be verifiable, the dynamics of the market will have shifted, making your new strategy a potential loser. The stock market is not patterned chaos, it is a Complex Adaptive System: https://en.wikipedia.org/wiki/Complex_adaptive_system.

Complex Adaptive Systems are defined by bounded ranges of stability that make it look patterned, but are dominated by nonlinear feedback behaviors that alter the dynamics out of nowhere. You can follow a particle in the Lorenz Attractor (https://en.wikipedia.org/wiki/Lorenz_system) to the point where you think you have it figured out, only to see it switch trajectories on a dime. If a simple system of three non-linear differential equations can create such unpredictable behavior, imagine what the full complexity of the stock market inputs can do.

Understand that the stock market's short term behavior is governed by adaptive agents (human traders) that are learning and adapting to past performance just like you are. What looks like stable behavior at any time can evaporate instantaneously. Thousands of full time math geniuses work 80 hours or more a week trying to do what you're doing and a vast majority of them fail. You work a full time job in tech and likely have little formal training in the knowledge needed to be a quant, yet you are trying to play the same game as them, even against them.

Complex Adaptive Systems are fundamentally unpredicatable in the short term, but do exhibit stable bounded behavior over the long term.

The only winning move is not to play.

I know there are many out there looking at the stock market like they would physics, and many of them do well, but Warren Buffett and Charlie Munger don't really put any thought into this area. To them, these are businesses that can be valued with easier methods to figure out what a fair price is to buy them for, then hold on until that value is reflected in reality. But then again, I am the one losing my tail here, so what are my comments really worth? Thanks for your input, I appreciate it.

TripleM

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Re: Failing Trader
« Reply #33 on: July 06, 2018, 10:54:31 AM »
You are a poster child for why Warren Buffet says that low-cost index investing is the best move for almost everyone. Just go buy yourself some Vanguard and go live your life, like someone else said.

+1

If you enjoy trading, treat it as a hobby with a couple % of your portfolio.  Go nuts, win some loose some and have a laugh along the way.  If you don't enjoy it (or if you "enjoy it" only when you are winning) and still feel compelled to trade more than a few % of your money, it's now a gambling addiction, and should be treated as such.

Yes, I agree 100%. I have leaned more towards this strategy, using tiny amounts of money, but psychologically, failing this much is still a bit heart-breaking. Thanks for your input.

TripleM

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Re: Failing Trader
« Reply #34 on: July 06, 2018, 10:56:47 AM »
I actively trade but have never blown an account, and don't plan to because I manage my risk. Being completely honest I don't think the time and energy I've invested into learning and practicing trading have been financially worthwhile, but I do it because I have enjoyed the journey and the knowledge that I've gained about markets.

It's good that you have realized that your losses are mostly from emotional trading. Every trader struggles with this and even veterans slip now and again. You HAVE to get your emotions under control if you want to trade, and this includes knowing when NOT to trade.

I can't really answer whether you're going to eventually learn to trade successfully: it's up to you how much time and money you want to risk. Clearly what you're doing is not working, so the first step might be forgetting everything you learned. I can offer a few pointers that I've picked up over time though:

  • Do not trade with your full account. Only trade with money you can afford to lose. If you blow up a $10k account you have a chance to play again, assuming $10k isn't that much to you. It's all relative to your NW of course.
  • Always hedge. You will be wrong (a lot) and you need a plan for when you're wrong.
  • Keep learning. You will never be able to learn everything.
  • Use everything, not just chart patterns. Chart patterns can be useful but only when combined with a solid thesis. That thesis is only useful if you have good tactics (using portfolio greeks, stop-losses, only using x% per trade, etc).
  • Nobody knows anything. Don't follow trades from other people. There are no experts. Don't try to trade news. Don't pretend anyone (including yourself) knows the future.
  • Do not gamble. Trading is about being on the right side of probabilities and choosing a risk/reward balance that mathematically will be profitable over many occurrences. It is not about finding the next hot stock, or finding that one secret strategy that always works. All of the strategies work in the right environment; it's the trader's job to use judgement to assess the environment.

I doubt this advice is new to anyone who's been trading for 10 years, so just be sure to set your own standard rules and follow them.

Another forum where you may find advice more suited to active trading:
https://www.reddit.com/r/thewallstreet/

Yes, I really need to take a long break from the pattern I am in and get things together as you laid out above. Lots of good advice here for me to reflect on. Thanks for your input and also for the reference to the reddit group, I will check this out.

TripleM

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Re: Failing Trader
« Reply #35 on: July 06, 2018, 10:59:06 AM »
For context, I'm a somewhat active trader (100+ trades per quarter). I went broke investment-wise in the Nasdaq crash in 2000. I took a bad beating along with many others in the 2008 crash. Since then, it's been nearly straight up and with my tech company salary, I have an easily FI 7-figure sum in my investment accounts. I've kept my active investing to less than half my net worth, with the balance in low-cost funds, mostly Vanguard.

If you've taken consistent losses over the last decade (the greatest bull market anyone alive has ever seen), either you have a negatively biased trading strategy or you may need to face the facts that you are (currently) terrible at trading.

What's your (perceived) edge? What makes you think that you're better than the hundreds of thousands of smart, dedicated, full-time market participants who are trying to steal your lunch money? (And seemingly succeeding.) Your edge is never going to be confidence.

Yep, definitely depressing looking back with hind-sight 20/20 and seeing what that money could have been

I have a strategy that I learned from a professional trader and that worked very well for him and others, but my implementation of that strategy is what fails. I would have thought that as long as the strategy was profitable on paper then it would be easy to implement in reality, but I have been very wrong on this.

The goal has always been to learn how to be just as good as the other people who do it, although I am currently not. It simply may not be in the cards for me. Thanks for your input here, much appreciated.

TripleM

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Re: Failing Trader
« Reply #36 on: July 06, 2018, 11:00:05 AM »
I'm a trader.  I wouldn't keep doing it if my long term track record was negative.  I wouldn't keep doing it if my long term track record was positive but less than the dividend reinvested return on the S&P 500.  You are expending a lot of effort and going backwards. 

Recommend 2-5 years of indexing while you do some more research and "paper trade" new ideas on the side.  When you can beat the index over a rolling 3 year period, you can think about dipping your toes back in the water.

Yes, I definitely need to take a step back here and go back to the drawing board with everything. Thanks for your input.

boarder42

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Re: Failing Trader
« Reply #37 on: July 06, 2018, 11:03:51 AM »
dude you cant beat the market just invest in index funds and destress your life - the smartest people with the best analytics dont beat the market you're not a special snowflake  - stop gambling.

you keep talking of going back to a drawing board and testing strategies with fake money you may just get lucky for 5 years and then put your real money in and end up in the same place. 

hodedofome

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Re: Failing Trader
« Reply #38 on: July 06, 2018, 11:15:03 AM »
These books helped me get control of my emotions.

https://www.amazon.com/Disciplined-Trader-Developing-Winning-Attitudes/dp/0132157578/

https://www.amazon.com/Trading-Zone-Confidence-Discipline-Attitude/dp/0735201447/

Thank you. I have read both of these one time around each, but I have heard Van Tharp recommend his own books be read about 3x each so It think the same will hold true for Mark Douglas, especially in my case.

For me, Douglas didn't really 'click' until I watched a video series he did. I think ultimately, he comes down to:

1) Set aside a small amount of capital that you are going to devote to your market tuition
2) Create a strategy and commit to following that strategy no matter what
3) Execute that strategy without making any trading errors
4) When you are able to go a certain amount of time without any errors, you're probably disciplined enough to follow a PROPERLY BACKTESTED AND DESIGNED strategy with your full account

ysette9

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Re: Failing Trader
« Reply #39 on: July 06, 2018, 11:25:40 AM »
I can't hope to respond to everything you have written so I will just touch on a couple of points.

First, do you like trading stocks? What motivates you to continue doing that or wanting to beat that game? I ask because you have been spending an extraordinary amount of time, effort, stress, and money on this game that you are losing. Unless that is bringing you some intrinsic value in of itself, I don't understand why you would continue. You've had ten years to prove to yourself that this is a losing game. Perhaps a few people like Warren Buffet can win, but you are not Warren Buffet. There is a reason why he recommends that the rest of us peons invest in passive index funds and be done with it.

Secondly, you seem to be fundamentally misunderstanding the total value that the stock market returns. Your cherry-picked examples trying to prove that somehow investing long-term in the stock market is a bad bet are flawed. Looking at the compound annual growth rate of your carefully chosen dates, almost all of them give a decent return.

http://www.moneychimp.com/features/market_cagr.htm

Quote
If I poured my money into an index fund in 1966, my portfolio would have been in the same spot in 1982.
Adjusted for inflation and including dividends, your average return would be 1.49%, CAGR = -0.07%

Between 1906 and 1924? It ends at the same spot I entered. My portfolio did nothing.
Average return 3.99% / CAGR = 2.40%
Between 1924 and 1942? Nothing.
Average return 10.11% / CAGR = 6.54%
Between 1936 and 1950? Nothing.
6.59% / CAGR = 4.45%

Finally, you say you are debt-free now and saving 75% of your pay. That is such an amazing tool there by itself that you don't need this fancy pipe dream of beating the market to reach FI. Just keep working and saving for another 7 years, and dump all of that money into boring total stock market index funds like VTSAX and VTIAX. That will get you to FI in less time than you have already spent sweating and stressing and losing $82k in one of the biggest bull markets we have seen in a while. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

A last word on bad market timing in an index fund: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

boarder42

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Re: Failing Trader
« Reply #40 on: July 06, 2018, 01:00:42 PM »
also you  sited the shiller PE ratio - its overly high right now due to abnormally low earnings from 2009 - also GAP accounting has changed how business are reporting that allows for a higher than normal shiller.  in the next couple years 2009 will fall off.  and the stock market could be flat or earnings could grow faster and there would be a change to the Shiller PE that brings it back in line.  also a 32 for the shiller PE equates to a SWR of 3.125% according to kitces analysis.  this doesnt mean 3.125% returns that means 3.125% in perpetuity to including keeping up with inflation - you'd be better off learning why and how indexing is better and putting your energy towards something more fun than gambling - and losing in the hottest bull market ever.

Radagast

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Re: Failing Trader
« Reply #41 on: July 06, 2018, 01:06:25 PM »
Well that was a nice big wall of text :). It showed me that you don't seem to know what you are talking about. You talk about being a charter, and a trader, and using a system, and backtesting it. And then you talk about Warren Buffet and fundamentals as if they are they same thing. They are completely different and often opposed strategies, Buffet neither practices nor preaches any of the stuff you have actually been doing. Read "A Random Walk Down Wall Street" for firm foundations vs. castles in the sky.

Another thing is that you bring up key points and buzz words as if you know what you are doing, but then you lost money over a period where US stocks, international stocks, US bonds, international bonds, gold bullion, and 0% Wells Fargo checking accounts have all surpassed you. Has all your knowledge profited you? If not, why do you still know so much of it?

And you question how much market returns and fundamentals have been influenced by inflation? For real? For one thing, if a $ sign is in both the numerator and demoninator of Price/Earnings (note: it is) then the value of the $ is canceled out and inflation is fully accounted for. For another, inflation adjusted returns and calculators are very easy to come across, in fact the ones that do not account for inflation are rarely mentioned around here. You wonder if prices have been bid up by "ponzi", but again you can easily find the fundamental ratios of Price/Book Value,Earnings,Dividends, etcetera etcetera to test your hypothesis.

I would not consider trading to be entrepreneurial. More like a hobby, and in your case a time consuming and expensive one. You talk about risk and declining future appetite for stocks and market returns, when in reality market returns are something you should greatly aspire to, and you would be much wealthier right now if you had obtained them. And by the way, dollar cost averaging generally adds several percentage points to realized market returns in bad times, for example 2000-2013.

The best advice:
Finally, you say you are debt-free now and saving 75% of your pay. That is such an amazing tool there by itself that you don't need this fancy pipe dream of beating the market to reach FI. Just keep working and saving for another 7 years, and dump all of that money into boring total stock market index funds like VTSAX and VTIAX. That will get you to FI in less time than you have already spent sweating and stressing and losing $82k in one of the biggest bull markets we have seen in a while. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

If for some reason you decide to keep trading despite all the evidence you are really bad at it and would be better off spending that time working at Home Depot and putting all your money in a portfolio consisting entirely of Vanguard funds containing the word "total", maybe:
For me, Douglas didn't really 'click' until I watched a video series he did. I think ultimately, he comes down to:

1) Set aside a small amount of capital that you are going to devote to your market tuition
2) Create a strategy and commit to following that strategy no matter what
3) Execute that strategy without making any trading errors
4) When you are able to go a certain amount of time without any errors, you're probably disciplined enough to follow a PROPERLY BACKTESTED AND DESIGNED strategy with your full account

ysette9

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Re: Failing Trader
« Reply #42 on: July 06, 2018, 01:19:28 PM »
Quote
If for some reason you decide to keep trading despite all the evidence you are really bad at it and would be better off spending that time working at Home Depot and putting all your money in a portfolio consisting entirely of Vanguard funds containing the word "total"


tee-hee

TripleM

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Re: Failing Trader
« Reply #43 on: July 06, 2018, 02:05:31 PM »
I can't hope to respond to everything you have written so I will just touch on a couple of points.

First, do you like trading stocks? What motivates you to continue doing that or wanting to beat that game? I ask because you have been spending an extraordinary amount of time, effort, stress, and money on this game that you are losing. Unless that is bringing you some intrinsic value in of itself, I don't understand why you would continue. You've had ten years to prove to yourself that this is a losing game. Perhaps a few people like Warren Buffet can win, but you are not Warren Buffet. There is a reason why he recommends that the rest of us peons invest in passive index funds and be done with it.

Secondly, you seem to be fundamentally misunderstanding the total value that the stock market returns. Your cherry-picked examples trying to prove that somehow investing long-term in the stock market is a bad bet are flawed. Looking at the compound annual growth rate of your carefully chosen dates, almost all of them give a decent return.

http://www.moneychimp.com/features/market_cagr.htm

Quote
If I poured my money into an index fund in 1966, my portfolio would have been in the same spot in 1982.
Adjusted for inflation and including dividends, your average return would be 1.49%, CAGR = -0.07%

Between 1906 and 1924? It ends at the same spot I entered. My portfolio did nothing.
Average return 3.99% / CAGR = 2.40%
Between 1924 and 1942? Nothing.
Average return 10.11% / CAGR = 6.54%
Between 1936 and 1950? Nothing.
6.59% / CAGR = 4.45%

Finally, you say you are debt-free now and saving 75% of your pay. That is such an amazing tool there by itself that you don't need this fancy pipe dream of beating the market to reach FI. Just keep working and saving for another 7 years, and dump all of that money into boring total stock market index funds like VTSAX and VTIAX. That will get you to FI in less time than you have already spent sweating and stressing and losing $82k in one of the biggest bull markets we have seen in a while. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

A last word on bad market timing in an index fund: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Yes you bring up very good points here. I purposefully left out dividends in those examples I gave because I think it is widely misunderstood how money is actually extracted from the stock market. Money comes back in the form of either dividends (where the company hands money back to the business owners) or through the proceeds of sales of shares owned (ignoring short selling).

So if I put $1000 into the stock market 1966, I will have gotten out of it (in terms of actual cash) only the dividends paid out to me as a shareholder of whichever basket of stocks (index) I own.

Yes, those dividends can be re-invested quarterly/annually but those are typically not more attractive rates than bonds when talking about index fund dividends. If you only require a 1-2% dividend yield, than have at it.

Aside from dividends, the only way I can extract money out of the stock market from my original investment is to sell the shares I own at the current market rate. So that annual compounded growth rate is really dependent upon my cost basis for the shares I own. My best case scenario is to dollar cost average over a long enough time to lower my cost basis, but ultimately, I bought the shares I own at the average price of $X and I can then sell them at any point of my choosing for a different price $Y to get the "return" on my investment.

But that means that the annual return that I would calculate at price $Y is really determined by the following formula:

(($Y / $X) - 1) / (# Years Invested)

In the case of the earlier example, DJIA at the end of 1966 was $785.69 = $X, and at the beginning of 1982 if I sold, $875 = $Y

(($875 / $785.69 - 1) / ~15 years = (11.36% / 15 Years) = .75%/year. What I would call nothing for holding assets of which the value is time period dependent and which can fluctuate to being down as much as or even more than -(50%) from one year to the next.

This is completely different than an interest rate from a bond where I am actually paid back 5% cash each year I hold it in interest payments. If I have a 30-year bond that pays 5% annually, I will have made back more than my original investment from just the payments and then even get my original investment back at year 30.

So again, I like stocks, but stocks that are appropriately valued and buying them on the way down to stay comfortable.

In the above example, I left out the impact of the averaging down & dollar cost averaging over each month, which makes a considerable impact, but I left it out intentionally because if you went to invest in the stock market in 1966, most people would have dumped the entire $1000 in at one time, which MMM even blogged about and referenced a study on doing as an appropriate appraoch. Most people would not have just put in $100 in Year 1, $100, Year 2, $100, Year 3, $100 Year 10.

This is where I can at least get a theoretical edge on index investing, so long as I am comfortable with being associated with the stigma of a market timer.

sokoloff

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Re: Failing Trader
« Reply #44 on: July 06, 2018, 02:09:17 PM »
so long as I am comfortable with being associated with the stigma of a market timer.
There's no stigma per-se; it's just that most people that try it end up losing money versus a simpler strategy of buy-consistently during the accumulation phase of life.

ysette9

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Re: Failing Trader
« Reply #45 on: July 06, 2018, 02:15:22 PM »
Well sure, if you discount a meaningful part of stock returns then the number you are left with isn’t going to look that great. If I discount the money I earn working Thursdays and Fridays my salary doesn’t look very good, but that is also invalid. Why on earth would you choose to discount dividends when they are a solid and legitimate part of the benefit you get from investing in stocks?

You can hand wave all you want, but the data we have for the US stock market over its history says that it is an amazing wealth-building tool for those who invest dispassionately, regularly, and stay the course. All of your worries and thing yourself into knots doesn’t change the fact that most of us on this forum are busy getting rich with a very simple stock market investment strategy while you have missed out. Maybe it is time for you to consider something different?

ysette9

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Re: Failing Trader
« Reply #46 on: July 06, 2018, 02:27:02 PM »
I can't hope to respond to everything you have written so I will just touch on a couple of points.

First, do you like trading stocks? What motivates you to continue doing that or wanting to beat that game? I ask because you have been spending an extraordinary amount of time, effort, stress, and money on this game that you are losing. Unless that is bringing you some intrinsic value in of itself, I don't understand why you would continue. You've had ten years to prove to yourself that this is a losing game. Perhaps a few people like Warren Buffet can win, but you are not Warren Buffet. There is a reason why he recommends that the rest of us peons invest in passive index funds and be done with it.

Secondly, you seem to be fundamentally misunderstanding the total value that the stock market returns. Your cherry-picked examples trying to prove that somehow investing long-term in the stock market is a bad bet are flawed. Looking at the compound annual growth rate of your carefully chosen dates, almost all of them give a decent return.

http://www.moneychimp.com/features/market_cagr.htm

Quote
If I poured my money into an index fund in 1966, my portfolio would have been in the same spot in 1982.
Adjusted for inflation and including dividends, your average return would be 1.49%, CAGR = -0.07%

Between 1906 and 1924? It ends at the same spot I entered. My portfolio did nothing.
Average return 3.99% / CAGR = 2.40%
Between 1924 and 1942? Nothing.
Average return 10.11% / CAGR = 6.54%
Between 1936 and 1950? Nothing.
6.59% / CAGR = 4.45%

Finally, you say you are debt-free now and saving 75% of your pay. That is such an amazing tool there by itself that you don't need this fancy pipe dream of beating the market to reach FI. Just keep working and saving for another 7 years, and dump all of that money into boring total stock market index funds like VTSAX and VTIAX. That will get you to FI in less time than you have already spent sweating and stressing and losing $82k in one of the biggest bull markets we have seen in a while. http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

A last word on bad market timing in an index fund: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Yes

This is where I can at least get a theoretical edge on index investing, so long as I am comfortable with being associated with the stigma of a market timer.
I think you are letting the pursuit of Perfect get in the way of enjoying Good right under your nose. Set aside that almost everyone can’t beat the market consistently for a moment. Why do you need to beat the market, “get an edge on index investing”? For bragging rights? So that we can stand around and compare who has the biggest one?

Index investing is massively successful and incredibly simple to boot. I don’t need to beat that because just riding in that train is bringing me unbelievable riches and allowing me to retire two decades before my parents. That is pretty kick-ass awesome.

I think there is a stigma to being labeled a market timer for the simple reason that for most people most of the time it is a losing strategy. You may well think you are the exception to that, but I humbly suggest that your track record speaks for itself.

Bogle says that index investing requires humility. Set the ego aside.

boarder42

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Re: Failing Trader
« Reply #47 on: July 06, 2018, 02:31:23 PM »
While you've been working on this theoretical edge you've lost money on the longest bull run of all time. So why not keep going what you're doing it's worked out so well for you.

Swish

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Re: Failing Trader
« Reply #48 on: July 06, 2018, 04:01:49 PM »
While you've been working on this theoretical edge you've lost money on the longest bull run of all time. So why not keep going what you're doing it's worked out so well for you.

I have a friend who is a trader. He told me a story once about how their firm hired an intern whose buy rec's consistently lost more money than any one else they have ever worked with. So they hired him full time, gave him a small portfolio, and now they have a more senior trader short his picks. The key he tells me is being consistently bad is better than being inconsistently right.

Don't know how much truth there is to this as the individual exaggerates a fair amount but it is amusing none the less.

ILikeDividends

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Re: Failing Trader
« Reply #49 on: July 06, 2018, 06:14:32 PM »
This is where I can at least get a theoretical edge on index investing, so long as I am comfortable with being associated with the stigma of a market timer.
You could make a lot more money being a mediocre pro baseball player than you could do by being a super-star in the minor leagues too.  But how does that apply to you?  You haven't even excelled in little league yet.  What makes you think you can skip little league and leap right into the pro league?

Listen, you use the terms, "entrepreneur, investing, trading, and ponzi-scheme," pretty much interchangeably, as if they all mean the same thing, when in fact they are all very distinctly different things.  You aren't doing yourself any favors by twisting definitions into unrecognizable shapes so as to justify your penchant for trading.

You expend an awful lot of effort talking yourself into the illusion that index investing and trading are approximately the same thing, without really even questioning your own unproven assumptions that "beating the market" is realistically attainable by the average person, or is even a worthwhile risk adjusted goal, when simply matching the market is so effortless and consistently rewarding over a lifetime of reinvesting dividends while waiting to cash out until you need the money to live on.

I am not one of those who holds a doctrine of no trading not ever ever ever.  But know your own limits.  Your ten year track record defines your limits fairly well.  The results are in.  You suck at trading. If it helps drive the point home, I suck at trading too.  I am but one of many members from your same tribe. You're too old to continue pursuing that destructive fantasy.

Face it, you're no Mike Trout, and at your age you should know it by now.  There's no shame in that.  Mike Trout, himself, could tell me all of his "10 secret tips to become a pro ball player."  I would still never be able to qualify for that league.  The vast majority are not qualified for the elite pro leagues, regardless of career choice, and never will be.

At least start off in the little leagues where you stand a high probability of retiring content and reasonably well off.  Or skip that and continue swinging for the fences, which are defended by actual pros, and hope that McDonalds hires senior citizens when you become one.

You could choose to see insults in this post.  But for your sake, I hope you don't.  No insults were intended.
« Last Edit: July 06, 2018, 11:27:02 PM by ILikeDividends »