I decided to put this question in the “Beginner Questions” section. Because some say 90% some say 95%, some say 99% fails. But the easy math is it’s over 90%. That’s means 10 people remain profitable in the long run. So,
Why should we choose that system as our livelihood?
Just for speculation?
Where our money goes when we lose in trading?
Does the so-called “Big Banks” take our money?
Oh, man… I need some answers.
Happy Trading,
Trader_203BA
It is actually probably nearer 75%.
The European Securities and Markets Authority ( ESMA ) now requires brokers under its jurisdiction to publish the failure rate of their retail clients. So you will see on their web pages statements like this one:
"CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money."
This only covers European brokers but there is no reason to suspect that the rate is substantially higher elsewhere except maybe with those offshore brokers whose clientele are seeking their excessively high leverage availability.
Forex trading is a speculative activity that is very close to gambling (but not the same) and so many traders are attracted by the potential of making abnormally large profits. This is enhanced by the availability of leverage which allows one to take positions far larger than our actual cash balance. Where else can one do that!
Yes, mainly. There may be some element of hedging as well but primarily speculating.
As a retail trader your counterparty to your trades is your broker. You do not take direct positions with any specific bank or other financial institution. So the broker gains from your losses. But that does not mean they actively trade “against” you. The fact is that most retail traders are not experienced enough or sufficiently trained to manage positions consistently.
It is not “the market” that is difficult. It is finding the right strategy, applying the right risk/money management, and maintaining patience and discipline, that divide the winners from the losers.
It is also largely because many new traders trade short term, intraday, thinking this is easier. It is not. Short term timeframes move according to changing pressures in market activity that are largely random in nature. But we are human and we try to find logical reasons for these brief moves and place stops ridiculously close to the market price and then wonder why we get stopped out on brief, meaningless spikes and then accuse the banks of stophunting.
@SovoS, I understand. Thanks for your time to respond 
But why the terms Big Banks are sometimes used by some trader. They always say that Big Banks hunts for SL.
In my opinion it is a false claim that has gained popularity only through its constant repetition in the same way as “95% of retail traders lose money”, and is not based on fact.
The large commercial and investment banks, as well as the sometimes even larger corporations and investment/pension funds deal in position sizes hugely larger than any retail trader, so even the idea that any financial institution capable of moving the market would be interested in targeting Joe Blog’s handful of microlots is rather beyond any credibility.
Besides, Joe Blog’s position is with his broker and if the price reaches his SL then the broker closes the position. The bank receives nothing from this transaction. If a specific client has a large enough position and tends to be consistently successful then a broker may lay off his risk with an equivalent position with his liquidity providers. But at any one time a broker will/may have open client positions in both directions which tend to partially offset one another and therefore a broker is interested in his net exposure rather than each and every small position that is opened.
The bottom line is the hard truth that we, and we alone, are responsible for our positions and where we place our stops and targets. There is, of course, the issue of bad broker practices which may include such tricks as widening spreads and trawling for close stops. But that is another issue and more related to the question of why choose a properly regulated broker.
The big banks are so big they can’t even see private retail forex traders. We are not their targets.
The big banks are important because they cause exchange rates to move. But they’re not speculating on exchange rates as such, they are actually buying and selling currency and are hoping to buy it and sell it at favourable rates of course. But the movement of the exchange rate is not their main concern, it is obtaining or supplying enough of the currencies their clients need to own or dispose of.
So elephants do trample mice, but not because elephants hate mice or want to eat mice or steal mice’s food. They just don’t see us.
Great quote. I like that.
Cheers
Blackduck
I love that 
Love it! It is the best quote i have read yet.
The market is not a scam, but the knowledge offered about it is. The technical analysis is fallacious and requires some adjustments to make it work, that is why 99% lose.
Use a popular broker that is heavily regulated and not a market maker + has good spreads and track record. Find a system that works and has a winrate of minimum 51%. Do the correct risk management not risking more than 2% a trade, eliminate all emotions from these trades and treat it as a long term thing. Dont trade during news events, dont place your stoploss in an obvious way like right on a trendline. It might take you a few years to find a strategy that works but forex is definitly not a scam.
Just like 3 other members above me, I couldn’t help but comment on how witty that statement is.
Thanks so much. And Merry Christmas.
My pleasure and Merry X’mas to you and your loved ones.
This lesson, I’m learning now. I used to think the H4 was the best place to make money.
I’m getting eaten alive there. A major bullish trend on the H4 could be a minor bearish trend on the W1.
Things can be very deceiving on the fast charts. I know there are lots of people profiting there, but it’s been difficult for me there.
However, trading the W1 or M1 requires such wide SLs, that your SL is equal to your margin requiremenr for that trade.
And if you’re only trading 1-2% of your account per trade, you’re not profiting much in the short-term. Sure, you can get 120% profit, but after a long time.
It makes the H4 tempting.
According to statistics released by the Australian financial regulator ASIC, actually 63% of traders lose their money to trading. That number isn’t as drastic as 90% and above, but it is still pretty concerning.
As to whether one can live off forex trading profits, some people do. The vast majority of traders don’t and can’t, even if they are not losing all the time.
I never look at anything below the daily time-frame. D1 highs and lows are real and I’m not convinced anyone trading multi-day ever needed H4 charts or less to make their trading profitable.
As far as profits are concerned, my formula is to aim for 6% a month. This doubles your money every year. Wish I was doing it. I genuinely can’t understand why 6% a month is such a hard target to get to.
I agree with you that the longer term timeframes identify more meaningful and durable trends. I also agree with you that trades on these longer term timeframes require wider stops to provide the necessary so-called breathing space for price movements.
One way to counter this is a hybrid long term trading approach using a top-down analysis across 2 (or more) TFs, one long term for trend direction and one shorter term for actual trade entry/exit.
The order of progress being first to identify a suitable long term directional move. But instead of just placing and holding a continuing position with wide stops, a suitable entry and exit are identified from the shorter TF. In other words you are taking a series of proverbial “bite-size chunks” in the direction of the main trend. The advantage being that the stops are based on the short term chart reading and positioning.
But I would suggest that the 4H is the lowest TF worth considering for the short-term chart because anything lower requires a lot of monitoring and will inevitably distract from the longer term trend. For example, even a 1H chart will produce an excessive number of brief trades (in both directions) and often miss out on big chunks of the trend.
One possibility, if one has the discipline to avoid sinking into day-trading could be to 1) identify a trend on a daily/weekly chart, 2) enter a trade from a 4H chart signal (with a 4H chart SL), 3) only when a trade is opened, drop to a 1H chart for an exit. However, the difficulties here include failing to find a suitable entry on the 4H chart in a strong trend and missing the bus, and a series of losses from the lower TFs when the trend is weak, erratic or fading into consolidation or reversal (there can be long periods of consolidation and ranging before a reversal/continuation on long term charts like the weekly).
This is an interesting and maybe explanatory statistic as to why so many traders lose. Brokers under ASIC are reporting around 63% losing traders and brokers under ESMA jurisdiction in Europe also confirm around 75% losing traders.
However, the interesting point is that these statistics have only been published since these regulatory authorities capped the leverage availability for retail traders at much lower levels, for example, 30%. Although it is only a speculative thought, this would suggest that many small equity accounts, together with the more aggressive Newbie traders have migrated to offshore brokers in other, less-rigorous regulatory areas, who still offer leverage of 1:500 or higher.
If this is so, then it suggests that the traders who have remained with these highly regulated brokers are better financed and more experienced and who are less likely to indulge in high-risk trading. Therefore the percentage of losing traders has diminished in these regulatory areas but remains very high in the other areas. The difference being related to the leverage being used by traders.
However, even 63% is still extremely high! But, on the other hand, how does this compare with start-ups in any other line of business.
Good post. Actually, I don’t like to compare private retail trading with other businesses any more, its just not a fair comparison. I prefer to think of private retail traders as hobbyists who find they have a hobby in which some people make money - there are plenty of hobbies that technically carry an ability to generate income.
But let’s face it, does the average self-taught artist make money? How many people with a camera become freelance professional photographers? How many golfers win prize money they can live off? How many stamp collectors and coin collectors can say their hobby finances their life-style?