Hi. Why 98% of traders loose money?

Beginner Questions
1

Hello to all,

lets discuss here why most of people lose some money.

I have the opinion, that the most trades lose money, bcs the have no plan to win.
lets look to all trading book, the most of discussions, everywhere are stated out, that you should not risk mor then x% of your money. That i will agree, you have to do risk managment. But the most important thing is, no one have a winning plan.

Lets say in this way, a lot of people say, let the winners run. this is maybe a point, but not a plan. Nearly nobody want to start a business without a business plan. I know, there are some projects on kistarter or some internet startup in the past where this was working. But in general, 99% of trders have a job. Most of them are not self employed. Most of them following a business plan from the managment.

In trading, you are your own manager. You have to make your own plan. A businees plan is always a plan. Noone of them will be fullfilled in time, relly nowone. This is like the 5 year plan from Russia in past communist years. No plan was fullfilled. But this isnt the question in my opinion. The mean thing is, you have to have plan. A plan should have goals. This goals must be hard to arrive, but not be impossibe.

Let me stay out, the most of the hedge funds make 10 till 100% a year. The funds with 100% you can count on one hand.

What is a goal? Is a goal to find daily profit? when yes, how much daily profit?
What comes after daily profit? whats happen if you pass the daily profit?

I think, a plan have to include more then one goal like
daily profit
weekly profit
monthly profit
yearly proft
2 years profit
3 years profit
5 years profit
and this goals have to be monitored regulary on daily, weekly, monthly, yearly base.

Why i think you should have to do this?
looks to the daily profit, yes you can pass it, also 4 days a week, but you can reach your weekly target.
you can pass your weekly target 3 weeks a month and you can reach the montly target,
even you can continue this.

but in general, you should arrive your target. f you cant arrive it continiusly, you maybe have to adopt it.
if you pass a target, looks to the next higher one and look if you can reach it. if the next higher one is impossible, adopt your targets.

feel free to discuss

2 Likes
2

Successful trading demands a plan. This should have targets. All elements of the plan should be SMART -
Specific – target a specific area for improvement
Measurable – quantify or at least suggest an indicator of progress
Achievable – realistic, attainable, properly resourced
Relevant – will help achieve the targets or the main objectives of the overall plan
Time-related – specify when the result(s) can be achieved

SMART should be applied to the plan’s targets, risk management protocols, position sizing etc…

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3

It is a shame that we have to see yet another thread concerning how many people lose in retail forex - and now the proportion of losers has risen to 98% from 95% and 90%! What is that based on?

Why can we not have a thread instead that discusses why the “5% of traders” actually make a profit!!! Would that not be a little more positive? :smiley:

That may be one reason but I think it is far from being the main one, and probably during the early stages, not even an important one - at least in the limited sense that you describe of how much profit to target per day, week, etc.

So are you suggesting that it is more important to pick an arbitrary daily pip value as a profit target and call it a “plan”, than establish some form of risk management?

In any business, before you can plan your profits you must develop a viable product. There is no value in any business planning how much profit it is going to target until it has a product that matches a market. In our case, that market is the relative movement of currencies. Our product is a strategy that can identify and ride those movements. Until we have developed that strategy there is no basis or criteria on which to establish or support any realistic and meaningful profit targets on any timescale.

I would certainly agree that a plan is essential but I do not think that it should be limited to how many pips per day/week/month/xxxyears and so on. Our potential gain in forex is as much limited by the market itself as by our own planning. Our plan must be much more like a broad strategy that encompasses all aspects of our business - and issues such as whether the objective is a regular withdrawable income or long term capital building have a bigger impact on our trading style than a mere daily pips target.

In my opinion, a suitable goal in forex trading is consistency rather than daily profits. If one has a strategy that details a trading method together with its typical risk/reward parameters, selected instruments, markets and sessions, position sizing, anticipated performance ratios, etc then it is far easier over time to evaluate performance and identify areas that can be further developed, expanded and/or optimised - and then one could talk about profit objectives.

Without that kind of underlying broad strategy one is only left with a time-based pips target - and that can be very dangerous! For example, what do we tend to do if we are falling short of our pips? We launch bigger positions and take bigger risks and take trades based on intuition and pre-emption rather than our strategy - and then what happens…?

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4

Hi Folks

Check few more reasons why traders lose money

  • Have Insufficient Experience and Practice
  • Overtrading
  • Have No Clear Trading Tactics Proved to Lead to Success.
  • Have a Poor Trading Discipline
  • You Are Trading Against the Trend
  • Stacking Further Losses to Losing Positions
  • Failure to manage risk
  • No discipline
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5

If you’ve never traded before, and you want to know if you will win or lose at trading, ask yourself the questions in the following list.

If you answer “Yes” to all of them, you will lose everything -
You see price in a long steady uptrend. Do you look urgently for a place to get short? - Yes/No

6

I agree with you. THere must be plan. If the daily, weekly, yearly profit can be achieved. The five-year plan is too much. What if you do not fulfill the plan? Will it increases to 10 years? Really? People come to Forex to make money quickly. You can trade for 5 years, but only if you’re profitable trader. Otherwise, I don’t see the point.

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7

We can’t measure the number of losers and winners accurately and from my opinion it is not wise to do so. In stead it is good to overview their success and failure stories and try to get lessons from it. If 98% are losers, then why millions of people are coming and earning money in this decentralized market? The fact is majority of traders get impatience and lack proper trading skills and expertise, thereby unable to handle trades effectively.

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8

It’s definitely not 98%. Brokers usually release their quarterly winners/losers % and it’s usually around 35-40% winners and 60-65% losers. This isn’t black jack, you can play both sides of the market and these markets are very 2-sided, so winning isn’t elusive you just need a strategy, patience and occurrences.

9

So what do you think those tigures would look like if tehy were presented on a Yearly basis ? or even a 5 year basis ?:slight_smile:

10

I’m not a mathematician but I would guess, all things being equal, due to the law of large numbers it would be about the same.

11

No I can see that.

Look at it this way - 1/3 rd are making money in a 3 month period. 2/3rd are losing.

So what do the 2/3rds do ?

The 1/3rd will stay in the game.

The generally accepted rule is 90% lose 90 % of their account within 90 days - wich just nicely fits with the “3 month stats” the brkers present.

THe 2/3rds are paying ALL the profits of the 1/3rd, + the wages of the broker’s staff, the profits for theowners, the interest on the loans from the “Liqidity Prviders”, the costs of "Complianace, Taxes, Advertising, etc etc - ie they are getting severely abused !

SO of course they will disappear. THey will NOT appear in next Quarter’s figures - because their accounts are BUSTED !

Another and different set of “2/3rd ers” will appear in next Quarters figures - but the same 1/3rd will still be the "Profitable ones ! "

so lets take 1000 punters - 330 are profitable and 670 go bust in the first 3 months, 670 in the second 3 months, 670 in the 3rd 3 months and 670 in the 4th 3 months. -

So 2680 go bust in a year and 330 are profitable - that’s 13400 losers - in 5 years and still 330 are profitable (THEY’RE NOT GOING ANYWHERE !)

Now what do the statistics look like ? :slight_smile:

That’s why the Industry quotes such short term figures !

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12

I can’t take anyone serious who actually believes 90% of people lose 90% in 90 days. Not to mention you’re example is so wrong and backwards I wouldn’t know where to begin untangling in. So good luck to you.

13

Exactly so ! :slight_smile: there is no doubt that my assessment is way closer than yours - but hey there we go = goodnight ! :relaxed:

14

Don’t forget all the unregulated and offshore brokers whose clients won’t appear in any figures, and where 100% lose

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15

This is very, very far from the reality.

This thread may interest you:-

16

I’ll guess upon studying Mr krugmans threads is he is here to sell the dream not live the reality.

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17

It’s also nice when a little luck is on you’re side.

I’ll be blunt, in my opinion I can easily see why c.90% of retail accounts don’t last the ride. Speculating in FX is not easy, and saying that all you need to succeed is patience, a strategy and occurrences doesn’t even scratch the surface.

It’s rather easy to make profits in the short term, but to last the long term is almost impossible.

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18

Aww, you took time to study my old threads. That really hits me in the feels. :slight_smile:

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19

Sure, i can conceed that leverage and overrisking are also big components to why traders lose, but i would place that in the strategy bucket. I know there are lots of other reasons as well, heck i have written hundreds of posts here on babypips talking about all of those reasons, but for the sake of brevity i wrap them up in some high level ideas.

20

a Reality check needed. Quantity does not equal quality.

This says quality.