90% of traders lose money?

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 [B]lot[/B] 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.

Avoiding this, read and learn as much as possible, start trading on a demo account, or - if you need to trade with real money, because this is another thing than demo, use a micro account. If you have no holy grail, look for a strategy in forums, there are a lot, which are really working, take it, possibly adapt it a bit to your personal needs and go ahead 2-3 months. Do this without jumping to the next system, only because you have 2 or 3 days with losses. Profitable at the end of test period? - Satisfied not only with results, but your work with the market (not against it)? - Next step to real money, or if already started, increase your positions (small) step by step.

josch

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i think it’s more like 99%…but define “losing money”?

What if that is true? It will not keep you and me and so many of us away from trading…

why is that you’re smarter…or you think it’s false?

‘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” a trader may have “x-1”, after “y+1” may have “x +2”…your “math” argument is specious and arbitrary…

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.).

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%? :smiley:

If so, be happy and satisfied!

josch

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.

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.

Since Rhodytrader [B]IS[/B] John Forman, he does in fact know more about it.

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? :smiley: :smiley: :smiley:

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.

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

I think that most people would fail to get to the top at most things if they tried to do it self-taught and for free.

[QUOTE=“SimonTemplar;588800”]I think that most people would fail to get to the top at most things if they tried to do it self-taught and for free.[/QUOTE]

Yep. Paying someone to show you what can be found for free online is the answer.

[QUOTE=“DarkPool618;588802”] Yep. Paying someone to show you what can be found for free online is the answer.[/QUOTE]

Not actually what I said, if you’d focus more on reading than on sarcastic soundbites maybe you’d learn more.

But this is complex stuff with a lot of factors involved in getting it right, most people won’t make a sustained, successful go of it. That’s true of most things that can make a lot of money, success etc.

The fact that it is possible to learn for free and on one’s own simply means that more people will be attracted to it than are realistically going to succeed at it. As would be the case if any other lucrative career were opened up in similar fashion.

So the 90% or so statistics are inevitable and shouldn’t put off everybody.

[QUOTE=“SimonTemplar;588807”]

Not actually what I said, if you’d focus more on reading than on sarcastic soundbites maybe you’d learn more.
[/QUOTE]

Actually I don’t see how it could have been taken any other way.

You posed the problem: large number of people failing to excel at a chosen activity.

You proposed a cause: because they are trying to learn on their own via the vast amounts of free material online.

The implied solution: pay someone to teach you.

[QUOTE=“SimonTemplar;588800”]I think that most people would fail to get to the top at most things if they tried to do it self-taught and for free.[/QUOTE]

[QUOTE=“DarkPool618;588809”] Actually I don’t see how it could have been taken any other way. You posed the problem: large number of people failing. You proposed a cause: because they are trying to learn on their own via the vast amounts of free material online. The implied solution: pay someone to teach you. [/QUOTE]

Well that’s a very narrow view. Actually all I mean is that on any occasion where a lot of money can be made on one’s own through applying one’s own effort through free resources it will attract large numbers of people who go on to fail at it. Thousands of people buy lottery tickets but very few make their millions.

So some will have the personality type, personal circumstances, intellect etc to negotiate through that and forge a career, most won’t, but the few who can should not be put off by the many who cannot, in my opinion, as the two groups bear little relation to one another.

The merits or otherwise of paid courses is a different argument.

But fine, I meant it one way, you took it another, we can live with that.