Who Was Kondratieff? Can Trading
Kondratieff Waves Make You Money?
pronounced "Kon-DRA-tee-eff") who was an economist and an early pioneer
of dynamic economic theory.
THE TRUTH ABOUT
TRADING & TRADING SYSTEMS . . .
and some of the major reasons why most traders end-up losing money
Nikolai Dmyitriyevich Kondratieff (1892-1938)
A good time to learn about Kondratieff economic waves and cycles to help you make money trading the financial markets is today so study Kondratieff waves and cycles for trading success... Why is successfully trading the commodity futures markets so difficult? Let us research the main reasons behind the difficultly in becoming a successful commodity futures trader.
Unfortunately, the vast majority of traders lose money trading the markets. There are a number of reasons for this. That's the Bad News. However, there is Good News providing you can get in the small Winner's Circle you too can achieve profitable trading. Then you may reap the rewards with the money lost by the many losing traders flowing to you and richly rewarding you for being a winning trader!
Since there are far less winning traders than losing ones, by being in the winning minority, you will be in a position to receive much greater profits than normally possible! This is especially true what with the great leverage involved with commodities trading, options trading and trading stocks on margin.
Read all about the major reasons so many commodity
futures, stock market
and options traders lose money (so you can avoid these
After reading this Special Report "The Truth About Trading and Trading Systems" Special Report, you may visit other areas of CTCN's website and our links trading related links for more specific trading knowledge covering all aspects of commodity futures, stocks and options trading for traders & investors.
This Special Traders Report was originally written (by CTCN's Editor) some years ago. These common trading problems are just as evident (perhaps more so) well into the New Millennium as they were in the early 1990's when this Report was originally written. The main difference in the report after almost a decade is the fact the prices used as examples may be different. Actually, the price levels themselves make no real difference.
Also, we originally used Daily Bars for our trading signal time-frame examples, as applied to daily bar charts. Since then day-trading is much more popular with commodity futures, stock market and options traders.
Therefore, we have changed the word "Days" to the term "Bars," as in Bar-Charts. The Time Frames can by identified as inter-day (daily) bars, or intra-day tick-bars, like 1-min., 5-min., 30-min bars (bar-charts), etc. It really makes little, if any difference, as the concepts and theories are basically the same.
Here is The Truth About Trading Trading Systems Special Report
One reason for losing in the markets is the commodity futures, stocks or options trader is not really sure which time-frame or trend he is trading, or he is not matching his target objective price level to the time frames' expected movement. Perhaps the trader wants to capture a move which he expects to take about 4-bars (or 4-days).
However, the volatility increases so the 4-bar (day) trend is actually over in 2 bars and he does not realize it and stays with the trade 2-bars too long. Thus, he gives up all or most of his profit, because he expected the move to last longer.
The opposite can occur ... this happens when the volatility is low and after just 4 bars he gets tired of waiting for the expected move and exits the trade early, perhaps at a loss or small profit. Suddenly, over the next 2 bars the trend and move he anticipated happens; too late, as he has already exited the trade.
Of course, the 4-bar example above also occurs with traders expecting 2-bar moves which may occur in 1-bar, or vice versa. Also, 6-bar moves which end-up occurring over perhaps 8 or 9 bars, or vice versa, etc., and various intra-day time periods.
Another common occurrence, is the trader not using a specific stop-loss order. Thus, a small loss ends up as a big loss. For example, a trader believes a stop (loss) of $400 is reasonable, based on either technical analysis or on money-management rules. However, perhaps due to discipline problems the trader has, it's not actually used.
Once out $400, he relies on HOPE the market will go back in his direction, and he fails to execute the planned exit point. Frequently, the market fails to move back in a profitable position and the trader is finally forced out of market with perhaps a huge $2,000 loss, instead of the maximum $400 loss anticipated.
Note: More often than not, it seems once the trader who over-stayed the trade position finally decides to get out of the trade, the market frequently reverses the exact day (or next day) he got out! That seems to be an uncanny and almost unwritten law in the markets!
The stop-loss order is used, but the stop is not sufficiently precise. More frequently than you can imagine, the stop is hit by just a very small margin. For example, the market may be at 54.60 and a long position stop is placed to sell at 52.50. The market goes down to 52.47 and then reverses back to beyond 54.60 very quickly after stop was barely hit.
Sometimes the stop price of 52.50 may end up being the EXACT low price for that swing . . . very frustrating and upsetting when this occurs! For A Special Report on CTCN's Unique Method for calculating amazingly accurate stop-loss prices - Special Report #2 .
Why does this happen so often? Because many times the stop-loss price level happens to be a support area based on a trend line, gann angle, old bottom or old top formation, fibonacci numbers, a chart price gap, or just simply an obvious natural stop-loss area, such as a whole or even number.
Thus many other traders use the same logic to place stops at or near the same level. The market gets drawn to that area because that's where orders are sitting that the market (and Floor Traders) wants to get filled. Because of those orders resting in that obvious place, the market price actually moves to that area, almost like magic or magnetic attraction.
Failure to place a stop-loss order with your broker (unless you are always closely following the market using real-time intra-day data, when you are in an open trade) will result in the great likelihood of you losing all or most of your money (eventually) due to one or a couple huge losses caused by the price continuing to drop after going thru your stop-loss price. Sooner or later (probably sooner) it's almost certain to happen, if you don't use and place stop-loss orders to you.
There is an exception for day-traders who are using real-time quotes and watching their real-time quotes and price charts continuously. Sometimes a day trader may achieve better trading success by using so called mental stops vs. actually placing the stop-loss orders with his broker.
Another reason for failure, is you may be right on a trade, but don't know when to exit the position and take your profits. More often than you would believe, a trader has excellent profits, but ends up giving back all or most of the open equity profits because of not knowing when to get out!
For example, a trader is long at 62.40 and the price moves to 63.90 for a huge open equity profit of say $1,800. He has held the position for a few bars, but after looking at the chart and the powerful up-move, he decides the market should easily go to 64.40 within the next day or two. That way his profit will be $2,500, much more than the current profits of $1,800.
Perhaps the next day the market goes to 64.30 (just slightly under his objective) but ends up closing "weak" because it's "over-bought," and closes for the day at 63.92. The trader is mad about giving up some open profits so hopes it goes back to at least 64.30 again the next day. Unfortunately, some bad news comes out overnight and the market "gaps" down on the next opening and opens at much lower at 63.00.
The trader still hopes for an intra-day rally to get back some of his lost open profits, instead it goes lower all day and the trader finally gives up hope and gets out at a break-even price of 62.40. Because the market was "over-sold," over the next couple bars it eventually recovers back up to the anticipated 64.40 price, but the trader is now out of the market with no profit! This type of scenario is all too common an occurrence. To varying degrees, this happens more often than you would believe!
One solution to this problem is for the trader to take small profits or not use specific targets and place very tight trailing stops just under the market. This is poor practice because you will end up getting stopped out with very small profits most of the time. That will result in your average winning trade being quite small compared to your average losing trade, resulting in poor results.
The best alternative is to use targets scientifically based on the market's volatility. Unfortunately, not many trading systems do that. Ideally, a system should have each and every trade uses a specific and dynamic target price based on the market's actual recent volatility. With a dynamic approach based on volatility and past bar size, the market itself will reveal how far a move should progress, based on actual movement and recent volatility.
Still another reason many traders lose, is because they are using a methodology or trading system which is NOT in actuality fully mechanical, but its trading track-record does not reveal it's not mechanical.
For example, a system's advertisement may claim 60%, 70%, 80%, or perhaps even 90% winning trades. However, these promotional claims are usually based on 20-20 hindsight and subjectivity, and not on real-time actual trades. Perhaps the system says buy/sell when there is divergence between the price and a Stochastics or RSI Study. That divergence is very difficult to recognize in real-time trading, but it is easy to see using 20-20 hindsight looking at an old chart.
Another popular but subjective approach is to watch for turning points at certain times, also known as time-windows. This approach may say to enter or liquidate the trade after an obvious pivot-low or pivot-high occurs, and providing it's during the projected time-window. It's mostly subjective and easy to do by looking at the past, but hard to do in actual real trading. However, some system developers have in fact used hindsight or subjectivity to arrive at a high percentage of winning trade profit claims.