What are your questions about trader performance?

Haven’t been around for a while as I’ve been working diligently - well at least sometimes - on my PhD. My focus has been on retail forex trader performance, some of which was the subject of this thread. My work is winding down now, so I have a chance to turn my focus to other stuff once again.

The research I’ve done is obviously quite academic, but at least some of it has the potential to be of practical use to traders. My plan is to start sharing it in a non-academic manner in hopefully the not-too-distant the future. Part of my intention there is to really get specific about how real traders do in the markets - actually returns and performance.

My question for the group is what questions you have on the subject. Aside from the “Do 95% of traders really fail?” is there anything else you’re curious about?

The only question I am particularly wondering about is do retail forex traders have impact on forex market? Or our community is still too weak that our footprints can be discovered there only in trace amounts…
Thanks in advance for probably valuable reply.

[QUOTE=“rhodytrader;676921”]Haven’t been around for a while as I’ve been working diligently - well at least sometimes - on my PhD. My focus has been on retail forex trader performance, some of which was the subject of this thread. My work is winding down now, so I have a chance to turn my focus to other stuff once again. The research I’ve done is obviously quite academic, but at least some of it has the potential to be of practical use to traders. My plan is to start sharing it in a non-academic manner in hopefully the not-too-distant the future. Part of my intention there is to really get specific about how real traders do in the markets - actually returns and performance. My question for the group is what questions you have on the subject. Aside from the “Do 95% of traders really fail?” is there anything else you’re curious about?[/QUOTE]

What was the average percentage gain per quarter of the profitable traders who had back to back profitable quarters?

As a whole, does the retail trading population performance net to zero on the average quarter?

What correlation to account size does retail trader performance have?

What is the average max drawdown of the back to back quarter profitable traders?

Are the back to back quarter profitable traders routinely withdrawing from their accounts? This would indicate they are trading for a living… What is the percentage of these traders compared to the entire retail population group?

How many quarters of trading on average did it take the retail traders to make their first quarter profit?

Part of my thesis is an explanation of the retail forex market - part of which is comparing its volume to that of the inter-bank market. I think it works out to something like 6%, which already is not much for making an impact. When you then factor in that only the net position imbalance of retail traders really makes it to the inter-bank level you get an even smaller influence.

Definitely some good questions GlobalMacro. I can give you a couple answers right away.

[I]As a whole, does the retail trading population performance net to zero on the average quarter?[/I]
Absolutely not. Retail forex is negative sum at the trader level. The average trader in my data set actually lost about 6% per [U]month[/U].

[I]What correlation to account size does retail trader performance have?[/I]
I can’t provide a specific answer just yet, but there is definitely a correlation. Bigger accounts perform better.

Building off of this, what does the distribution curve look like? Does it look like a roulette wheel, in that success is based off of blind luck? Or do we see a non-normal distribution in the positive sigma ranges, indicating that some measure of skill is involved to profit in the market?

It’s a very sharply peaked distribution with a median at about -1.5%. Definitely non-normal.

Can you provide some stats on the profitability of longer-term trades (e.g. held for 1+ weeks) versus shorter-term trades (less than 1 day)? Do longer-term trades tend to perform “better”?

I’d argue this question is impossible to answer unless some type of factor of strategy accuracy was accounted for. “Time in trade” has absolutely nothing to do with performance. A piece of the equation is missing.

Jake

I don’t have those numbers off-hand Kevin, but that’s something I can certainly include in the research. The vast majority of trades are less than a day, but there are some longer-term ones as well.

While trade holding period itself may not be a direct determining factor in someone’s net performance, it does have meaning. If nothing else, longer holding periods expose one to greater exchange rate volatility on a per trade basis. Also, cutting winners and holding losers is a definite issue. In general terms, the traders in my data held their losers something like twice as long as they held their winners. So while something like average holding period or trading time frame may or may not be informative, relative ones can definitely be.

I got into a bit of a discussion elsewhere on the subject of experience. In my data the traders indicated their level of experience, 0-1 years, 1-3 years, 3-5 years, and 5+ years. There is a clear difference between those in the first two categories and those in the other two. As in more experienced traders have returns that are statistically significantly higher. I should note, though, that higher doesn’t not mean profitable. The average monthly returns for both groups are negative.

Number of years trading in real account is the first thing to see, then a trader, if he is providing signal service should have some real happy customers. If he is managing account he must have a myfxbook track record of at least 2 years.