Retail forex traders don't make money? Bust this myth

I’ve watched this thread at Warrior Forum and get statement from someone who claimed that he was a trader. He said that retail traders don’t make money, but banks made money from their mistakes. Now, I’m super annoyed with this kind of statement. Care to argue with this?

Everyone with a IQ over 50 understand that statment is correct…!!!

Retorical go to every forex forum on this planet, How many positive statment account do you find where the trader have make more than his country Mc Donalds worker salary over a 3 years period !!

Hi Azian…

Consider this: brokerages are like casinos, they need retail traders in order to boost their coffers and stay liquid… As they say: the house always wins :slight_smile:

I still don’t understand the term. Is there a difference between retail fx traders, compared to those who learn and trade fx with education and legit brokers?

Education, brokers, etc. have nothing to do with it.

Retail traders - in forex, in stocks, in any market - are individuals operating on their own behalf. This is compared to institutional traders who work for banks, hedge funds, major corporations, etc.

Thanks for the reply guys. In oppose to that statement, that retail trader doesn’t make money, is this mean that they didn’t make money at all, or perhaps only 10% succeed and the rest fail just like other business models? Also, is this mean that successful traders have some kind of trick to avoid from being used by banks or something?

You shouldnt just listen to some random guy on the internet, heck dont listen to me either. There are just some people who think they got all the answers. If you can trade and make money you have youre own answer, dispite what anyone else anywhere is going to tell you. Ask yourself this if there is no chance whatsoever to get money out of trading as a Retailtrader, then why is everybody here and on godknows what other forum trying to do so? Better yet ask yourself this question are you going to stop trading now, because some unknown tells you its not going to happen? If you have goals do what ever you can to reach them, and dont let anybody with some statistic pulled out of their ass tell you otherwise. ( thats should be you psychology.)

Azlan, whilst its correct that around 90% of retail traders lose money this is also true of most other small businesses. It doesn’t mean you will also, that depends in part on a number of factors that vary from trader to trader, for example:
How well do you understand fx?
How deep are your pockets, can you withstand losses long are will you go bust after the first few losses?
How does stress affect you?
Do you NEED the money you are risking?
How diligent are you in developing and sticking to a strategy?
and much more.

Exactly what I think. Which is why, I’m super annoyed with that guy. He even quote my post in that thread, telling me to trust him, while in the same time I doubt that he is a successful business person himself, given that he is still new to that forum.
I already made tons of money with aff marketing now, despite lots of people and even my best friends, 7 years ago, said that aff marketing and online business won’t work and has no future. Becoming doctors or engineers are much better. Of course 90% people will fail in any online business model, but those who has the gut will win.

There is no “battle” between institutional traders and retail traders. Institutional traders are not paid high salaries just to try and win a few bucks off as many retail traders as possible and bust their accounts. The reasoning behind why institutional traders are more consistent than retail is simply that they are professionals at what they do.

An institutional trader is part of a team. That team comprises professional economists, money and portfolio managers, risk exposure managers, strategists and many more. They pool their experience and formulate a consistent plan that reflects their company’s objectives and is approved by their management. They have sufficient funds to trade long term. They also have a customer base that they trade on behalf of. Each individual trader on the team will have his own area of expertise, specific objectives to implement and achieve and personal limits to work within.

A retail trader is usually none of these things. The reason why institutional traders beat the retail is simply because most retail are incompetent, inconsistent, inexperienced, naive and/or totally unprofessional in the way they approach their business. Those that succeed in building professionalism into their trading are the minority who succeed. But even those that succeed as individual traders are often unable to maintain their momentum for many years simply because of the intensity of trading when attempting to generate a monthly income. Traders who are professional and long-term are more likely to be capital building rather than income making.

Successful trading demands discipline and consistency - just like any other business if it is to succeed.

The banks are not the “enemy” they are just better at it.

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This has sort of been stated, but maybe it could do with a clarification.

[I]Collectively[/I], retail traders lose money in forex. There’s a simple reason for this that has nothing to do with skill. It’s a zero sum market before transaction costs - meaning what’s being made by one side of a given trade is being lost by the other side (I don’t want to get into a drawn out discussion of this. It’s a simple mathematical reality of the retail forex market structure.). When you then factor in the bid/ask spread, it becomes negative sum. Even if all we retail types ever did was trade with each other, we collectively would slowly lose money because we are on the wrong side of the spread.

Now factor in the skill and information factor. To the extent that retail forex traders are trading with institutional traders - who have a number of advantages, as Manxx points out - collectively they will lose money.

That’s where statements like “retail forex traders lose money” come from and are factually correct.

What is also true, however, is that some retail traders [I]individually[/I] make money. It’s a small fraction, to be sure, but they are out there.

Good post :slight_smile:

As an aside, it can also be said that institutional traders [I]also [/I]sometimes lose - and sometimes in a big way! There have been regular incidents of institutional fiascos with stocks, financial derivitives and forex, etc.

Speculative forex (as opposed to commerce-based) has the one common factor amongst all players that the “right” value of a pair is somewhere other than where it is right now. We all have our means of deciding which direction it is setting off into, but no-one, not even the institutions can say how far it is going to continue because no-one can measure the volume and continuation of interest. Therefore, with a sound strategy, consistent money management and strict discipline, there is no reason why a retail trader should not make profits on his/her trades.

Retail Forex traders do make money, they just dont hang around that much and go quietly about their business and their trading.

Absolutely right! :slight_smile:

The reason why the percentage of those that make money is so low is simply because there are so many, many, many that try their hand with a few hundred dollars and blow it through inexperience and/or bad advice. If these statistics only count the raw number of failed individual traders then of course there will be millions of failures because virtually anyone can trade with almost any amount and with no qualifications whatsoever.

If people were allowed to drive cars with the same degree of training required to trade complex international financial markets how many smashed cars would you expect to see by the roadside? Would we then conclude that no-one is capable of driving unless they are a professional?

Yeah. Big up to that comment. There is no, “one size fits all” in trading. Whether it’s forex, real estate, baseball cards, stocks, CFDs…whatever. We all have different goals with the money we make (or plan to make) in any of these markets. We have different time frames set to reach these different financial goals. The right answer for you, after you’ve done all your studying research, and so on is the answer that resonates with your set targets and goals. Your “holy grail” is unique to YOU.

All traders can make money in forex who had skill of trading either they are retailer or not. Huge funds are not surety of profit taking . Earning depends on good analysis and risk management ability of a trader . Retailers make small profit according to their account size and grow capital slowly.