90% of traders lose money?

The main reason for the over 90% failure rate in Forex is the absolute deceptive nature of the market.

I traded (invested) stocks for over 10 years before starting Forex. The market does not use leverage, moves slower so losses can be contained quicker and positions are generally held for weekly or monthly periods. Forex is like shares on steroids, much more volatile and therefore larger losses can be generated in a significantly shorter time frame.

Stocks are also ~70% fundamentally driven and ~30% supported by technicals. Forex on the other hand is possibly the exact opposite with Price Action being the most successful strategy.

Price Action in FX is a must due to the absolute deceptive movement (by the insto’s) of the indicators, driving new Forex traders cash straight into their accounts.

When I first started to trade, I could not believe how often the the trades would go instantly negative (80%+) after placing a trade, you feel the need to trade in reverse of the direction that you see. This would also destroy a lot of newbie traders from the get go. Hence the need to learn price action as quickly as possible.

To be successful at FX you have to invest HUGE time to find your edge, strategy or system. Demoing or trading a small live account with micro lots. Most people would quit before they started if they knew how difficult it really can be.

The only real saving grace with FX compared with stocks is a lot less cash is required (leverage) trading FX as opposed to the larger sized positions required for the stock market. Most successful share traders are very dubious of the FX market.

Actually, the numbers I’ve seen suggest that active stock traders have a similar success/failure rate as forex traders. I’m talking here about folks in the short-term time frames. Since there really isn’t long-term investment in forex, it’s not really reasonable to compare it to stocks in that context.

I traded (invested) stocks for over 10 years before starting Forex. The market does not use leverage, moves slower so losses can be contained quicker and positions are generally held for weekly or monthly periods. Forex is like shares on steroids, much more volatile and therefore larger losses can be generated in a significantly shorter time frame.

Be careful characterizing forex as more volatile. Individual stock prices are generally much more volatile than exchange rates. For sure, the leverage used in forex can lead to the [I]performance[/I] of forex traders being much more volatile. And leverage is most certainly used in stocks. Mainly it’s day traders, but margin trading definitely happens. In fact, technically anyone who shorts a stock is using leverage.

Stocks are also ~70% fundamentally driven and ~30% supported by technicals. Forex on the other hand is possibly the exact opposite with Price Action being the most successful strategy.

I have a hard time agreeing with this - and I’ve traded both markets as well. In the long term fundamentals dominate both markets and in the short term fundamentals play a relatively minor role in both markets.

Hi Rhody, thanks for your reply.

Sorry should have clarified more. I traded the ASX (Aust.) which is no where near as volatile in comparison to the Dow. The whole trading experience was in slow motion… a large percentage of Stock Market “investors” are long term holders, 1, 3, 5, 10 years so the failure rate is no where near FX levels. Most active traders that are struggling to profit will transform into MT / LT holders.

No leverage and no ability to short with my stock broker yet was still able to quadruple my account over the 10 years.

In hindsight after now trading FX, it was like trading with both arms tied behind my back, but I didn’t know any better…

I invested in the nu-energy / mining sector ie: Lithium, Carbon, Zinc etc. (which have now collapsed) who’s stocks where 100% fundamentally driven… no news for months on end… price remains stagnate or edges down… positive news releases and price would jump 20 - 50% in a day.

Currency prices are moved (1m, 5m, 15m TF) by shear volume of money in the market.

FX is better (and worse) for its liquidity… prices are moving 24/5

Hi mate
My name is Martin
I’ve been trading for around 5 years now (Very successfully)

here’s what i can tell you
you are basically where i was around 5 years ago

so here’s the run down

THE STATISTICS SAY

"95% of all Traders will Lose ALL THEIR MONEY (Blow out their account) within 3 - 6 Months of opening the account "

and… Aint it the truth
Most people blow it out in a month or 2

further to this

of the 5% Remaining
73% of those remaining will be successful at forex and earn pretty good money
and the remainder 27% will Earn Bloody ridiculous amounts of money (in the Billions)

i put myself in the 73% Category at this stage
i don’t have a need to get to the 27% stage, i do not ever need that amount of money.

but… i digress

back to the point
is there truth to it… HELL YES mate

but you need to look at this more closely

let’s ask
WHY DO THE 95% LOSE ALL THEIR MONEY?

well. simple answer …
Because they are bloody stupid, that’s why

Most of them can be seen on those Binary Options you tube forums, asking stupid questions like
"I have $200, how can i use binary options to make $900 a day"
hehe… idiots
absolute idiots

so then the sharks come along and start phishing, because… (here’s a trade secret),
the sharks know they are stupid
and…Stupid enough to take the bait

and Forex is the same
if you have $200 in a trade account
and you just start off
and you figure 0.01 lots (which is 10 cents per pip) is not really doing it for you, because after 20 pips, that you worked your arse off for, you only get $2

these idiots ramp it up to 0.5 Lots (so… that’s $5 per pip) and after 20 pips that’s $100
sounds a bit better huh

so , they do that
but then the market turns on them
they have no Stop loss in place (let’s even say that it’s Non Farm Payroll that’s occurring) and the market spikes up 150 pips against them

now… 150 pips x $5 risk per pip - blown account , or ($750)
so even if they risked half, which would be 0.25 lots, they still don’t make it with $300 in the account

Basically newbies need to understand the following things

  • The Market Makers are smarter than you are
  • You NEVER KNOW where the market it going to go (if you think you do… You’re stupid)
  • Always trade with Stop Losses
  • Always Manage your Money
  • Always Manage your risk
  • Work it out mathematically and PROVE YOU CAN WIN
  • once you have a system . TEST IT THOROUGHLY before going live
  • they need to get their emotions into check
  • they need to back off on their greed
  • they need to understand it’s going to take a few years to learn this trade
  • they need to understand it’s going to take at least 6 months beyond the learning stage, to actually
    earn a living from this

so… that’s why 99% of people lose

basically, they are stupid, Non Motivated and absolutely lazy to begin with
and want a **** load of money for no effort

to prove how dumb they are
they actually believe statements like
"here is a trading robot that you can use you make limitless amounts of cash with NO EXPERIENCE and NO PREVIOUS TRADING KNOWLEDGE and NO SCREEN TIME"

now tell me, what moron would believe this
i mean

if you want to be a mechanic and you want to fix a car, A NORMAL PERSON understands, you need to go to school and learn
and you’re not really going to get it until about 2 years time or so
and you’re not really going to be that good at until around the 5 year mark

so. why should Trading be any different

the only difference though is this

The car DOESN’T TRY TO BREAKDOWN ON YOU on purpose and stuff you up

the Markets however, DO hehe

so, that’s another thing you need to account for
the Markets are intentionally trying to take money from you

so then the final question is this

“if that’s true martin, then… wouldn’t that mean that no one can win”

No… it doesn’t mean that.
people can win at forex , ( I personally have ) so , that’s proof

but, the catch is this
the Markets understand that they need to GIVE in order for newbies to KEEP PLAYING.

Since the Markets do Give
it means
IF YOU UNDERSTAND HOW MUCH YOU CAN TAKE , you’ll win
if you try to take too much…

THE MARKET MAKES AN EXAMPLE OF YOU AND WIPES THE FLOOR WITH YOUR ACCOUNT AND PUTS YOU IN YOUR PLACE and makes you feel soooo low that you don’t dare make that mistake again

that’s why a lot of people lose
but… the Majority of people in the market, are the people who think they can get rich quick,
that’s why the figure is so high

be cool

I can only concur with this sentiment: it has long struck me that a plethora of aspiring traders really have far too many latrines.

Hi Martin… I like your posts… no holding back… say what you really think etc. etc. You are totally correct.

Unfortunately some people just don’t understand financial systems at all… and pay a heavy price.

Others just get it from the start, no books, no courses, and go straight to 200 pips a day on a demo… I’ve seen it.

Hey Lexys… Latrines… I had to look it up, thought it may have had a different meaning… but no…

PS Martin. I like your 1 pair 2% per day account building strategy highlighted in another thread… newbies should note a KISS system like that.

When the Majority of Mentors insist on opening account with $10,000 without any caution to the wind, and then goes and blows it in 6months, is far devastating and makes the mind say, F That. Thats it, end of story.

And the leading cause has been identified to be overconfidence and not following their winning strategies. But the most important thing is to figure out the reason for the loss and learn from that experience.

Regarding the original question – that is the popular myth. Actually I think the myth is that 95% of newbie traders lose money. And I say myth because I have never seen any kind of official statistics from a properly conducted survey. Who knows what the truth is.

I am ever read this statement from statistic that issued from certain company, but this statistic might also not stand for all trader around the world, but only using data from these company, but I think as average if many trader especially beginner ever facing with failure included me

Maybe 90%, maybe 95% - we’ll never know for sure. The most important thing to know about a statistic presented as a percentage is - % of what exactly? And we’ll never know that for sure either.

However, given the very low obstacles to entry into trading, against the considerable mental and emotional skills required, I’d be very surprised if the failure rate was less than 95%. Though I’m not sure we know what “failure” means either.

90% of traders do not have good money/risk management plan that would help them in cutting short their losses and not investing more than they can afford to lose.

wow - you’ve had many replies!!! I can’t speak for if that stat of 90% is true or not - but i personally do believe it. I opened a demo/practice account with Forex.com when I started. After about 3 month I was impatient and put a small amount of real money in a live account. (real small - like the minimum that was allowed.) I lost it pretty fast and went back to the demo account since I obviously needed to learn more. Eventually, I had a run of 6 weeks with zero losses in the demo account, so I put a larger amount in the real account (still small - but like $1500) and the very next week I lost 1/2 :frowning: In a years time I did build it back up and trippled it. Had it up to about $4800 :slight_smile: but then I lost a ton and was back to about $750. Eventually, I got it back up to my 2nd deposit… a lot of up and downs along the way, but can’t seem to keep it there let alone make much profits… I still feel like a newbie. And I’ve been at this for over 2 years now… I did explore another demo account with another company - I forget who now, but I was so use to the Forex.com platform that I felt uncomfortable and awkward with the 2nd one I tried. One thing I learned for sure is I keep plenty of margin… I’m not disciplined with my stops, I ride waves which baby pips says only morons would do… so maybe those are some of my bad habits… I hope this helps… I really see the potential - so I’m still trying to get better. Let me know if you find any great secrets!! Also - an account manager with Forex.com advised me to practice with the same amount that I thought I might use in real money to make the practicing more realistic. vs practicing with hundreds of thousands when I knew I would only start with 1500… Not sure if that matters to anyone else. But I appreciated the advice and it really made practicing more realistic…

It is largely stated that 90% day traders lose money in long term. The study says that not more than 2% of the traders are profitable, net of the commission’s fees.
It is noticed that almost 40% of day traders leave trading within a month. 87% of day traders quit trading after 3 years. 93% of day traders quit after 5 years.
I am not sure if you will make profits in long term or would be one of those who would quit. It is right to go ahead with caution and make sure that you have vigorous risk management system.

and 90% of brokers go bust within 5 years :wink: [at best guess of course]

It is interesting to note that this issue has now been under debate for over 10 years in this thread - and it seems the basic sentiment on how many fail to make the grade, or give up for some other reason, has not significantly changed during this time, i.e. the vast majority of people entering the field of retail forex trading fail.

In spite of the vast increase in availabiity of training materials, access to information, and improvements in trading platforms and broker services, the vast majority [I]still [/I]cannot make it work…surely in most other fields of human endeavour this would be a staggering situation! :slight_smile:

I guess the core question to consider is whether this is because the forex markets are simply far too complex for the average human being to cope with or is it because the entry threshold is so low that too many start without the necessary knowledge and experience to succeed immediately - and with insufficient capital to finance learning the hard way through their own mistakes.

The true Newbie with no previous experience of these markets is truly vulnerable and to a large extent working on their own when taking on the markets - especially when it is not even easy to find genuine, thorough, reliable and comprehensive training material.

Therefore it is hardly surprising that a very large proportion of newcomers, who are lured by the promises of wealth and freedom in the adverts, fail very quickly. This means that the failure rate statistics are inevitably abnormally high in this industry and are not necessarily a [I]true [/I]reflection of the actual degree of difficulty in trading consistently.

My own impression, for what it’s worth (if anything): I don’t think it’s because the forex markets are too complex for the average person to cope with; I think it’s because there are almost no entry barriers (and in these days of increasing high-speed internet availability, worldwide, that’s even more true than ever); and I think that hand-in-hand with that it’s even easier for “forex-marketers/vendors” to target their ever-increasing promotional materials at those least suited to forex-trading. The survival of the marketers’/vendors’/“brokers’” businesses depends on their being able to do this, and they do it very well.

I agree.

It ought to be mentioned, though, that there’s also (probably) a statistical and societal reality at play, here, in that if broadly and loosely speaking (let’s say, for argument’s/illustration’s sake) 95% “fail” and 5% “succeed” (no definitions offered!), the proportion-skew is such that if the number of participants “succeeding” [I]either doubled or halved[/I], that wouldn’t be discernible, anyway. The further away from 50/50 the “success”/“failure” proportions are (and whoever’s figures you believe - and we can agree that they’re nowhere near 50/50? - the [I]more[/I] true that is). :slight_smile:

Could it be possible that a large portion of the percentage that fail are simply made up of younger adults with a hyped up gamblers mentality. They have a bit of spare time on their hands and a few hundred dollars in their pockets , seeking instant profits and not treating trading as a serious long term endeavour, with an attitude of arrogance and entitlement, very little work ethic, insufficient common sense - and very possibly intelligence . To even include them and label them as “traders” is absurd. They probably should not be in charge of a savings account let alone a trading account.
There is also an enormous body of people who are trading from desperation, trying to trade their way out of hopelessness and better their lives. Whilst this is admirable they are often doing it with the last dregs of their savings, with neither the financial capacity nor emotional stability - due to their predicament - to withstand such an undertaking. Most definitely a road to ruin.
If this colossal percentage of people is removed from the equation then what you would be left with would be a more realistic demographic from which the percentage of " real trading failure" could then possibly be ascertained.
People ultimately are responsible for themselves and their own decisions. The Internet is full of lies, nonsense and rip off merchants… and not just in regards to trading. People aren’t forced to do or believe anything and unfortunately you can’t always save people from themselves. People get themselves into all kinds of financial strife in life…mortgages they can’t afford to pay, credit card debt, wasting money on a million things they don’t want or need and so much more. Poor decisions and losing money are not just limited to the world of trading.
We all make decisions in our lives which can improve our situations or make them worse. Often the wrong decision will make us stronger and better in the long run.
The people that don’t “make it” in trading perhaps aren’t supposed to? We all probably couldn’t “make it” in many areas…we are just not suited .
People pay good money to “try” to do many things in life and either give up, fail, or realise that they didn’t really want to do them after all.
I have accepted the ten million things I will never be able to do. :slight_smile: And the things I have failed at. I wonder if I"m part of a percentage? :slight_smile:

^^^ One of the best and most realistic posts I’ve ever had the pleasure of reading, in this forum.

Most people stop at failure.