90% of traders lose money? - Page 2
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  1. #11
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    after "y" a trader may have "x-1", after "y+1" may have "x +2"...your "math" argument is specious and arbitrary...
    Quote Originally Posted by josch View Post
    'Losing money' means, you start with an account of x USD and after y time you have an account with x-1 or less USD.

    josch

  2. #12
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    Quote Originally Posted by josch View Post
    I don't know any statistics about the kind of mistakes, most traders are doing. Maybe John knows some more about this. I'm convinced, most are running into very few traps, as over-trading, using too much leverage, revenge-trading, averaging (adding to) losing positions and others.
    Academics would point to what they call the Disposition Effect as being a major issue for traders. That is basically taking profits too quick and letting losses run. This has been something talked about among traders for ages, but I've definitely seen evidence of it in the data I have and I've been told anecdotaly that it even happens in copy/social trading where the trade follower cuts shorts trades when they're in the money.

    Beyond that, over-confidence is a broad issue for traders (and people in general) which no doubt contributes to the types of specific actions noted (over-trading, too much leverage, etc.).
    John Forman
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  3. #13
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    Doesn't really matter that 90% of traders lose.....if you're in that 10%, or believe you can be...

    i believe i can be

    i'm good, really good, top 1%?
    Last edited by pippuppet; 09-01-2013 at 03:24 PM.

  4. #14
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    If so, be happy and satisfied!

    josch

  5. #15
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    Quote Originally Posted by rhodytrader View Post
    The performance of retail forex traders is part of my PhD research. Here's some of what I've found in my work: Forex broker profitability figures likely overstate trader performance
    One thing that may be interesting is to compare the performance of retail forex traders with professional traders over the same period using different markets. There are a great many mutual funds, for example, which have multiple back-to-back losing quarters. It doesn't imply they are not profitable overall but consecutive losing quarters, even for professionals, seems to be part of the game. You may find that instead of overestimating the profitability of retail traders as you assert has happened in official reporting, it may not be off by too large a margin.

    Then, trying to determine what is "too far a margin" is a bit difficult. A retail trader with a $100K account will most likely perform closer to a "professional" and outperform a college student opening a $100 account which is, essentially, a trip to the craps table at Vegas.

  6. #16
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    Quote Originally Posted by JohnLeonard View Post
    One thing that may be interesting is to compare the performance of retail forex traders with professional traders over the same period using different markets. There are a great many mutual funds, for example, which have multiple back-to-back losing quarters. It doesn't imply they are not profitable overall but consecutive losing quarters, even for professionals, seems to be part of the game. You may find that instead of overestimating the profitability of retail traders as you assert has happened in official reporting, it may not be off by too large a margin.
    You have to be careful with the mutual fund thing because those returns are so heavily based on what the market as a whole does. You need to look at something more like hedge fund returns where active non-directionally biased strategies are employed. To a degree, that is somewhat included in my data, and presumably the broker data, since there is a small fraction of accounts who could be classified as pros.

    That's not really the point of my blog post, though. It looks mainly at the impact of counting accounts rather than traders on the figures reported to the CFTC each quarter. The implication is that the actually % of traders who are profitable in a given quarter is lower than that suggested by the % of accounts indicated by the brokers. It doesn't go further than that in terms of judging long-term trader performance. That particular subject is more specifically addressed in Starting to detail forex profitability data, which looks at performance persistence.

    Then, trying to determine what is "too far a margin" is a bit difficult. A retail trader with a $100K account will most likely perform closer to a "professional" and outperform a college student opening a $100 account which is, essentially, a trip to the craps table at Vegas.
    The academic research definitely supports the view that larger accounts do better. We should have no problem listing potential reasons why that is.
    John Forman
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  7. #17
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    Quote Originally Posted by josch View Post
    John Forman did a good job by researching this in depth. Only I'm wondering why it would be a great help to you knowing the exact number of percentage or get a confirmation about. Beyond question there are a lot of traders having a red account. But if you are on the path for getting a successful trader, you 'only' have to avoid the mistakes of the unsuccessful ones. Yes - I know, easy to say.

    I don't know any statistics about the kind of mistakes, most traders are doing. Maybe John knows some more about this. I'm convinced, most are running into very few traps, as over-trading, using too much leverage, revenge-trading, averaging (adding to) losing positions and others.
    Since Rhodytrader IS John Forman, he does in fact know more about it.

  8. #18
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    Quote Originally Posted by pippuppet View Post
    after "y" a trader may have "x-1", after "y+1" may have "x +2"...your "math" argument is specious and arbitrary...
    Quote Originally Posted by josch View Post
    'Losing money' means, you start with an account of x USD and after y time you have an account with x-1 or less USD.

    josch



    After "y+1" the trader is no longer classified a beginner and thus his 'profit' ("x+2") is a result of experience - thus the first argument is valid?

  9. #19
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    There is very large number of traders who are not able to trade properly and lose their capital because of the lack of basic knowledge and experience and it is important that trader should focus on learning first and then start trading.

  10. #20
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    Oct 2012
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    Most traders hear that statistic or something similar. They're basically told that, statistically, it's HIGHLY unlikely they'll succeed. Despite that, I think very few are ever deterred by that. If anything, it just makes them want to do it even more ("I'll show them! I'll be in that top 10%!") Well, sorry to say, if 95% of aspiring traders think they're going to be in the top 10%.... well, you get the idea.


    You can thank the optimism bias
    Optimism Bias - The Jellyvision Lab - YouTube



    & the Lake Wobegon effect
    The Psychology of Overconfidence - YouTube
    Last edited by Catabolist; 01-14-2014 at 12:28 PM.

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