i recently watched a video of a french trader from FXCM, he said that FXCM has done statistics about its US traders and said that 70% of traders lose money and 30% are winning
in these 70% losing traders, 59% of them have mostly winning trades but all of them close their positions too early so they don’t gains enough pips to cover their loss
so what are your thoughts about these statistics ?
Oanda says over 30% of their traders are profitable too.
You are on the right path, it’s a myth or at least partly. I think forexmagnet has enlightening reports about that.
Cheers
No they don’t
They say that 30% of their traders are profitable in a given 3 month time period. That means the value of profitable trades over that period exceeds the value of the losing trades during that period
It doesn’t mean that those people where profitable before that period, and it doesn’t mean they will be profitable in future
A trader could deposit 100K at Oanda, lose 75 thousand, but be lucky enough to make a dollar in profit over the 3 month reporting period. That trader would be classified as profitable, despite being in the position of having a history of the most appalling losses and facing the prospect of having to make 400% returns just to get back to break even !
When the figures where first compiled, Oanda reported a huge number of profitable traders. On closer inspection, most of those profitable traders where dormant accounts with profits of a few cents earned in interest paid on the account balance !
The reality didn’t stop the marketing departments of most retail brokerages attempting to spin the message that vast percentages of clients where profitable.
One of the long time members here at babypips is currently undertaking research into client win rates as a part of his PhD thesis, and he has access to real life brokerage account information from a fairly large sample of accounts. I can’t remember how many profitable accounts there where from the tens of thousands analyzed, but it was ridiculously tiny, a handful at most if I recall correctly
If you want further proof, look at trading results from Zulu trade, curensee, myfxbook etc.
Do any of those sites have 30% winning traders, seriously, do any of those sites have a single profitable trader with a multi year track record ?
If you download a bunch of data for their tens of thousands of busted accounts, over practically any 3 month period you want to choose, you’ll find about 30 percent of those accounts where profitable, and that’s exactly what you’d expect by random chance
You might want to check out this article which gives a little more insight into what these figures reported by brokerage firms actually mean.
Starting to detail forex profitability data | The Essentials of Trading
As for my comment about myfxbook, it’s claimed there are 4 profitable traders with track records longer than 2 years. I’m not sure how many accounts are registered there, but it’s tens of thousands.
I acknowledge that there won’t be many serious traders using these kinds of services, but even so, the statistic of only 4 long term profitable traders is quite shocking
While these last posts are informative they are not necessarily correct. Good traders might change their brokers once every while.
For reasons of using different instruments, gaining better spreads or platforms…etc.
It is a factor to take into account. However it shouldn’t put anyone off trading. I believe that everyone is capable
of assessing once self in order to find out if they are able to make money or not.
Cheers
if even most of the traders are losing money its important that to notice that its not the fault of forex market but might be of Individual trader himself…
Of course it’s the fault of the forex market
If people play a negative sum game, then most people are going to lose
It’s precisely as if they where playing roulette, which in effect, most are. The house edge erodes their capital, and as the size of the erosion increases, it gets increasingly harder to recover.
I’m not saying you can’t overcome the negative edge because you can but most of the players can’t because they have no idea. Most of the players don’t even understand the most fundamental rules of the game
There’s hardly a week goes by without someone mentioning this 30% of traders are profitable meme. It’s almost as if they are afraid to disbelieve the marketing spin published by their brokers. Whilst a positive mental attitude is a good attribute for a trader, burying your head in the sand and ignoring the truth doesn’t really help at all
Yeah,I really been reading about this percentage of failed traders and I wonder if where do they get all of this stastics?
That is what they say. It could be true but manipulated. Go to myfxbook, tradeslide or any broker with public offered pamm managers. The patern is the same, those on the top win big but they risk a lot. In fact in the entire Tradeslide universe I think the only one who risks little is me so yes 95% is a myth, 99.99% are the real number. Those risking big are losers too.
I doubt if 95% of forex traders fail is really disturbing. The figure might sound too large to be true but there is a measure of truth in that fact suggesting that most traders are losing. Doesn’t mean all of them are careless? No, I have even professors of pipsology, honorary forex chief fall big and lose big time. One thing is some brokers get to intervene in traders’ transactions; it is normal for platforms to go volatile after news; but why also long even after. Some licensed brokers personally hike your charts, manipulate core pricing and even route servers. We may not believe, they are still hale and kicking in the market. Some get terribly fined that you could think they would fold up; but you are just joking- they are waiting for the next chance to dupe clients and recover their sanction money.
I have heard these figures too. We must consider that since FX is open to retail traders (the masses), a lot of people get in to the game with zero or little financial trading experience. In which case there are a lot of people gambling and not properly trading. Then even if people have honed their skills we must consider that forex trading is a zero sum game meaning for every winner there is someone losing. The reason there might be a lot of forex traders with experience that lose money is because traders with small bankrolls work on leverage, can easily get stopped out and are not on an even playing field with the guys that are trading with $100k or take it to the next level the bankers who simply cannot get stopped out.
The lesson here is that to make money in forex you need to be in the level of top performing retail forex traders, have a big bankroll and a lower leverage. It is possible as there are licensed fund managers out there with proven track records… but it requires the correct level of funding and risk management.
Some guy interviewed 700 traders and came up with these results (it’s in MP3 format). (What Does It Really Take to Be a Successful Trader? | Interviews With Top Traders)
Brad: Yeah. And I think definitely, we’ll get a bit more into those reasons and one of them is definitely about a stop loss, but how we approach a stop loss really does affect the whole ball game. [B]The next set of people which is just under 5%[/B], which is really interesting 'cause I think that’s where the 95% to 99% of traders who make money comes from. These are the guys who consistently meet their targets whether it’s a 5% target a month or a 25% target, it doesn’t matter. They are consistently meeting their target.
I don’t think we should be intimidated by the 5% survival chance. The main difference between the 5% and the 95% of the losers may simply be dogged persistence. One must also bear in the mind the low barrier of entry for FX trading. Anyone with a spare $100 can open an account, roll the dice and contribute to the “95%” of losers out there. But supposing that you are a diligent and disciplined person? I’d say your prospects are much better than 5%.
This is one very underestimated truth there. Most licensed brokers tend to tell the public how good they are doing, the fortunes their clients are winning. But most times the inside story is very different, the statistics they publish are false, as they manipulate the records just like they manipulate their traders’ transactions.
It would be very interesting to see the open books at a few big brokerages… if this information were public I’m sure it would cause a stir somehow. Incidentally though this information can be calculated for some of the giants… check out this link on the CFTC website:
Financial Data for FCMs - CFTC
Here you can download the monthly reports from Oanda and Alpari(US)… also companies listed on the stock exchange are obligated to produce annual reports so someone interested could check them out and see how much money they are making (clients are losing) taking into account revenues, operating costs etc. …but then again I know how companies even manipulate these figures.
From what I can tell from the CFTC website it looks like Oanda has $133m held on behalf of its clients in September this year… its major money. While Alpari US show less than $1m