I’ve been reading and it even states here on babypips that 90% of traders lose money? is this true? How can you measure that? any light on this subject would be a great help
While I think that statistic might be exaggerating a little, I think the general message is true.
Many traders tend to overtrade, don’t practice good money management, and don’t take the time to actually learn the market and practice what they learn and apply it to their trading.
Trading isn’t something you learn after reading 1 or even 100 books and websites. It is about continuously learning and having the willingness to persevere even when times get rough.
Most people can’t get through this. Trading profitably is not impossible, but at same time it isn’t easy either. Don’t let that statistic scare you but you must also be prepared to work at becoming a very good trader. If this is something you can really think you can do, then you will make money in the long run.
I’m still on that journey and I am determined to better myself as a trader each and every day. Good luck on your journey!
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Uninformed traders lose their money. The stats that I read stated that almost all new traders will lose their money in the frist 3 months. This is not something to undertake on a whim, unless you want to go broke. You need to study carefully and become well informed before attempting to make an investment. There is a website that will let you practice trading before investing your own money. I think it is good to try your hand at it, after learning the ins and outs of the Forex.http://www.fxcm.com/open-free-100k.jsp
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because lack of experience in Newbie in Forex
forex trading is a means of transferring money from the less experienced people to more experienced people
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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
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%? 
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?
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