Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

GCB

95% of Traders Lose: Is this Stat Misleading?

Recommended Posts

Brett Steenberger once mentioned a private conversation he had with the CEO of a major retail brokerage and the guy told him that 80% of their customers blow out their accounts within a year of opening them. The percentage was much higher for customers with small accounts, as they took on more risk in an effort to generate worthwhile returns.

 

I don't remember much else about it other than that stat. Obviously must have been a futures/forex broker, I can't imagine that many people going up in flames that quickly trading stocks.

 

As for the longer term survival rate, I have no idea.

Share this post


Link to post
Share on other sites

Ya Todds, and I agree with Negotiator, when I say mental preparation it's actually the process of going through and reviewing the trades each night after the markets are closed, determining your exact criteria for entry, and then close your eyes and visualize that setup so you have no doubts as to what you are looking for and what you will do when that trade sets up.

Share this post


Link to post
Share on other sites
Ya Todds, and I agree with Negotiator, when I say mental preparation it's actually the process of going through and reviewing the trades each night after the markets are closed, determining your exact criteria for entry, and then close your eyes and visualize that setup so you have no doubts as to what you are looking for and what you will do when that trade sets up.

 

I often do the same visualization. I take it one step further though. I have actually drawn out all my favorite setups on paper and created a "Cheat Sheet". Then I compare the chart on the screen, to the set up on my cheat sheet. This helps keep me form going off on wild goose chases.

Share this post


Link to post
Share on other sites

Your post is excellent and well written. I have been trading/investing for over 10 years and can't agree with you more on everything you shared.

 

A discussion of this nature could probably go on forever without achieving a useful result. At the end of the day, I doubt any of us would have a good factual handle on the real percentage of successful versus unsuccessful nor am I at all sure that comparing trading to other forms of endeavor has any particularly useful application toward arriving at the answer.

 

Most all professions demand their pound of flesh. It has always been so and shall always be that way. Some people perhaps more easily adapt and feel at home in the markets but I think we can all rest assured that percentage is mighty darn small.

 

Let's assume for a moment that the real number (including all who try to whatever degree, which is as it should be measured across all endeavors) is in fact 95% failures, or even 98% failues if you wish. What does that really mean to a particular individual? It means nothing more nor less than what that individual's personality and mindset take it to mean. To some it will be an exciting challenge, wherein they have decided they shall be in that 2% to 5% number "no matter what it takes". To others, those figures will cloud their feelings, emotions and judgement and perhaps cause them to take actions in their trading which match up with the projected casualty rates. There is just no telling.

 

Soultrader hit upon an extremely important issue and that was learning and knowing yourself. It has been suggested by some of the best traders in the business that you are the holy grail for which you are searching and that it has very little to do with trading method or technique. I assure you that after all this time, there is very little new under the sun with regard to methods and strategies in trading and that almost everything has been tried hundreds or even thousands of times before.

 

Just as in other areas of life, you can take the proverbial two friends of reasonably equal intelligence, age, backgrounds, educations, beginning capital, etc. and put them both to the same task or career and have one succeed brilliantly and the other fail miserably. What made the difference?

 

Some will say it was their beliefs. Others will say it was that one had persistence and commitment and the other did not. Still others will say it was their actions or lack thereof that made the major difference. I would say that it is a combination of all the above combined with a passion or ardent interest for the career or endeavor being pursued. That brings us right back to the phrase of "no matter what it takes" or in essence "doing" whatever it takes to succeed. A large part of that is belief but belief is lost without passion and applied action.

 

I am not sure that it is truly important to know the specific surveyed percentages of faiure. In any field of demanding endeavor where the stakes are high (in both risk and reward) there are those precious few who are naturals and their success often defies explanation. However, for the rest of us it comes down to committing to do whatever it takes and then doing it over and over without giving up.

 

Most people give up quite easily and of course usually defend their poor results by blaming some outside party or when all else fails.. blaming the well known "statistics "of the industry, whether they be real or just legend. They quickly point to how it was clear the odds were totally against them from the very start and thus it should be no surprise they couldn't quite make it.

 

What is the real truth? Well, I won't claim any special access to knowing that, but my suspicions are that most people simply found reasons to give up. Whether those reasons were money, family or health related, matters little. What I suspect really matters at the end of the day, is not the statistics or power curve of success versus failure in what you attempt to do, but probably your own passion and commitment to somehow stick it out (come Hell or high water, as my father was fond of saying) no matter what hurdles you come across, until you have achieved what you set out to do.

 

In trading, my own personal beliefs tell me that it is more about conquering yourself and controlling your trading behaviors as you continue to learn about the markets, the particular instruments you trade and about the emotions of those involved that serve to drive price across the playing field. I think most people trade a long time (or at least as long as their captial holds out) before realizing that no matter what strategy or technique they use, they are not going to materially warp the probabilities in their favor and they finally realize it is really a game of controlling the size of your losses and taking trades only when you truly believe you have an edge that suggests there is a high probability that those trades will run in your favor.

 

In the final analysis, I say forget about the statistics of the industry. Forget about the search for the holy grail of methods or strategies (that includes fancy software with blinking lights and pretty colors,) and decide once and for all to commit yourself entirely to finding and developing a tiny "edge" in your method of play and then just keep coming up to bat day in and day out, often enough to let the odds work out in your favor.

 

Will that provide the answer to what percentage of people fail in this industry? No it won't, but I assure you it probably will put you on the right side of that percentage and after all, isn't that what really matters?

 

Happy Trading ;)

Share this post


Link to post
Share on other sites

I think this (95%) was correct before 2005. Now people can reach more resources. You can read, discuss and learn from others. Trading platforms are more sophisticated, brokers offer better trading conditions...And many people learned from their mistakes, I guess...

Share this post


Link to post
Share on other sites

I didn't take time to read through all the replies.. But there is something very important.. just because 95% of businesses "fail" doesn't mean the owners didn't make a profit. Businesses fail for a variety of reasons.. just because someone gives up on trading also doesn't mean they blew out.

 

I had a software business for several years. It "failed" but it doesn't mean that I lost money. In fact, it led to a lot of good things for me.

 

I imagine that the really good traders, those who are well trained, don't blow out so much as find they aren't making as much money as they want and can do better in other activities. The idea of the blow out trader is I think over blown (pun intended).

 

Curtis

The Market Predictor

 

According to the U.S. Small Business Administration, over 50 percent of small businesses fail in the first year and 95 percent fail within the first five years. It's interesting that this 95% number matches the infamous number of overall losing traders.

 

The problem I have with this stat is that it probabably includes every yayhoo who ever threw $3000 into a futures account and blew it out in a week.

 

The stat I'd like to know is out of all traders who compiled well-thought-out, detailed, written trading plans, what percent wins. Or, for every trader who has traded for more than 3 years, what percent wins.

 

The 95% stat may be a solemn warning, but it also may be innappropriately discouraging. It seems that, according to the statistics, if you become a trader you have roughly the same chances of success as if you start a small business in general. That's actually encouraging news to me.

Share this post


Link to post
Share on other sites
According to the U.S. Small Business Administration, over 50 percent of small businesses fail in the first year and 95 percent fail within the first five years.

 

The stat I'd like to know is out of all traders who compiled well-thought-out, detailed, written trading plans, what percent wins. Or, for every trader who has traded for more than 3 years, what percent wins.

 

Whether it matters, or not, it would be interesting to see a report for certain period(s) including all trading accounts. And of those accounts, how many traders moved from hobby status to trading as a business. And then, of those accounts how many lasted for more than so many years.

Share this post


Link to post
Share on other sites

I think a more interesting stat would be something like: what percentage of traders are successful who have put in at least 3-5 years of concentrated full time effort? Or, a graph that compares success rate against time spent in concentrated full time effort.

 

In either case it doesn't mean much personally. As someone said in an earlier post, to the determined individual, stats about the masses are irrelevant. A few are going to do what it takes to make it and the rest are not.

Share this post


Link to post
Share on other sites
Brett Steenberger once mentioned a private conversation he had with the CEO of a major retail brokerage and the guy told him that 80% of their customers blow out their accounts within a year of opening them. The percentage was much higher for customers with small accounts, as they took on more risk in an effort to generate worthwhile returns.

 

I don't remember much else about it other than that stat. Obviously must have been a futures/forex broker, I can't imagine that many people going up in flames that quickly trading stocks.

 

As for the longer term survival rate, I have no idea.

 

I recall the same Steenbarger post. If I remember correctly, there was also an interesting stat about starting account size - something like if the account was 20k rather than 10k, then the chances of survival were more than doubled.

Edited by BlueHorseshoe
Quoted wrong author

Share this post


Link to post
Share on other sites
Ya Todds, and I agree with Negotiator, when I say mental preparation it's actually the process of going through and reviewing the trades each night after the markets are closed, determining your exact criteria for entry, and then close your eyes and visualize that setup so you have no doubts as to what you are looking for and what you will do when that trade sets up.

 

This is a great suggestion of Tim's for an end of day exercise. Another way to use it is as follows:

 

If you regularly trade intraday, then you'll most likely have forgotten the nuances of any given day's price action within a couple of weeks. Perform the visualisation that Tim recommends, then return to that previous week and use the cursor arrows to scroll through your intraday charts one bar at a time, and identify your setups (I believe some charting platforms - perhaps Sierra - actually offer high speed replays). Record your entries and exits.

 

Now get out your actual trading record for that week and compare your results - did you do any better on the 're-sit'? What had you learnt?

 

If you've got a particularly keen visual memory, then just wait longer before revisiting.

 

If you've got a photographic memory . . . well then I can't help! :)

Share this post


Link to post
Share on other sites
I think a more interesting stat would be something like: what percentage of traders are successful who have put in at least 3-5 years of concentrated full time effort? Or, a graph that compares success rate against time spent in concentrated full time effort.

 

In either case it doesn't mean much personally. As someone said in an earlier post, to the determined individual, stats about the masses are irrelevant. A few are going to do what it takes to make it and the rest are not.

I completely agree with this post. I'm sure a good chunk of that 95% are people who just opened up an account and thought they were going to leave the markets with boatloads of cash. I frequent a lot of other forums and every single one has threads titled "just opened up a Scottrade account, what should i buy?" that pop up regularly.

Share this post


Link to post
Share on other sites

This stat is probably related to day-trading.

 

A lot of NoOb traders believe daytrading is the "easier" method; the less worry-free, less risky technique...so a lot of new people (who frankly don't know what they're doing) get sucked into the allure of type of "fast money" trading, that is neither easy, less risky, nor worry free.

 

Subsequently, they lose their shirts, and become...just another statistic.

 

I myself do know how to daytrade somewhat successfully, and have pretty good system in place; but I don't use it, because of the stress, and the higher probability of failure relative to swing-trading, or trading longer term time frames (my favs).

Share this post


Link to post
Share on other sites

I really think that you are mostly the determinant of your success in trading. Yes there are factors that you cant control but there are ways to really give you the best chance at being successful and profitable in trading!

 

Personally, I began trading only after I had learned everything I possibly could about trading, the terms, tips, how to avoid common mistakes, strategies. After having a good basis of knowledge I then went online again and found a website that compared brokers, choosing one that I thought was most advantageous to me, looked promising and that I felt I trusted.

 

I started trading using all my previous knowledge about trading and keeping up with current tips, etc. I found daily broker signals and also looked at previous trends in the market. Eventually I was developing my own trading strategies by using all my information and broker signals which led me to become a highly profitable trader!

 

Basically, knowledge is power and in this case (regarding trading) is money...

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • BITCOIN PRICE ANALYSIS: COULD CBDCS BE THE END OF BITCOIN? Ever since Facebook publicized its plans to develop a digital currency called Libra, central banks across the globe have tried to counter it with their cryptocurrency. While Facebook’s Libra has come under heavy scrutiny and regulatory obstacles, more than 80% of the world’s central banks are working assiduously to develop a central bank digital currency (CBDC). Meanwhile, the foundational basis of a CBDC is fundamentally disparate to what Bitcoin (BTC) is about. That said, the cryptocurrency community has begun speculating what the effect of a government-issued digital currency would have on the benchmark cryptocurrency. Below are some of the possible outcomes of CBDCs on Bitcoin: Plot A The common expectation is that CBDCs will be bad for Bitcoin and the crypto industry at large, considering that world governments will place their weight behind CBDCs giving it a higher adoption rate compared to BTC. Plot B The next popular opinion is that CBDCs could give Bitcoin better widespread use and adoption, as it could spark heightened interest in digital currencies. Plot C Assuming that Plot A comes into fruition, there would be no use for Bitcoin as a peer-to-peer payment system. However, this doesn’t mean BTC becomes useless, instead, it becomes an excellent store of value. BTCUSD -4-Hour Chart Key BTC Levels to Watch in the Near-Term Bitcoin, against popular belief, doesn’t seem to be slowing down any time soon. The cryptocurrency just recorded a new YTD high at $13,357 in the past 24 hours. BTC has been trading within a consolidation range between $13,300 and $12,895 for the past four days, as traders expect a fresh bull wave. That said, as long as Bitcoin maintains its stance above the $12,895 support, we could see a fresh bull wave in the coming days. A sustained fall below the aforementioned support could trigger an extended retracement for the cryptocurrency. Total market capital: $395.4 billion Bitcoin market capital: $241 billion Bitcoin dominance: 61% Source: https://learn2.trade 
    • ETHEREUM (ETH) PRICE ANALYSIS: ETH FACES REJECTION AT $420, FLUCTUATES BETWEEN LEVELS $400 AND $420 Key Highlights Ethereum battles resistance at level $420 high The coin is likely to reach another high of $434 Ethereum (ETH) Current Statistics The current price: $415.57 Market Capitalization: $47,020,287,242 Trading Volume: $12,506,980,622 Major supply zones: $280, $320, $360 Major demand zones: $160, $140, $100 Ethereum (ETH) Price Analysis October 25, 2020 Following the breaking of the $395 overhead resistance, Ethereum resumed upside momentum. However, the coin rallied to a high of $420 and was resisted. Since October 22, the upward move has been resisted as the coin resumed a sideways trend below the resistance. On the upside, if the price breaks the current resistance, the coin will resume the uptrend. However, Ether will face another resistance at $440. The coin will rally to $480 if the current resistance is broken. ETH/USD – Daily Chart ETH Technical Indicators Reading The 21-day and 50-day SMAs are sloping upward indicating the uptrend. Ether has risen to level 65 of the Relative Strength Index period 14. It indicates that the market is in the bullish trend zone. The coin is approaching the resistance line of the ascending channel. A break above it will push the coin upward. ETH/USD – Daily Chart Conclusion Ethereum will rise after breaking the resistance at $420. The Fibonacci tool analysis has indicated an upward move to level 1.618 Fibonacci extensions. The market will reach another high of $434.55. Source: https://learn2.trade 
    • Date : 23rd October 2020.Dollar Dips as Equities escalate.EURUSD, H1 The Dollar fell back concomitantly with rallying European stock markets and US index futures, which was likely a repositioning dynamic after declining over the last two weeks.EURUSD rebounded quite strongly, rising back above 1.1850 from a three-day low at 1.1787. Preliminary October PMI data in the services and composite readings out of the Eurozone and UK undershot the median forecast of economists, but didn’t impact the Euro or Sterling. Technically, the H1 chart has moved over the 50-hour moving average (1.1835) to test R1 at 1.1852; above here is Wednesday’s high and R2 at 1.1885. Today’s pivot point is next support at 1.1830, below the 50-hour moving average. The MACD histogram has broken the zero line and the signal is starting to rise, although still south of the zero line, RSI is positive and trades at 64.50, Stochastics are moving into the OB zone.Cable settled at near net unchanged levels around 1.3090-95 after dropping back from a high at 1.3124. The UK currency remains comfortably up on week-ago and month-ago levels against the Dollar and Euro, and others, with market participants anticipating a limited trade deal between the EU and UK. The two sides are amid intensive face-to-face discussions. The UK and Japan today signed the trade deal that was agreed in principle a month ago.USDJPY is modestly softer after upside forays over the last day stalled at 104.93-95. At levels around 104.70, the pair remains down by 1% on the high seen on Wednesday. AUDUSD rallied to an eight-day high at 0.7158, floated by higher stock markets in Europe and an above-forecast composite PMI reading out of Australia. Global asset markets are likely to remain skittish, notwithstanding the rally today, with investors pondering the uncertainties presented by the surge in Covid cases in Europe and elsewhere, including now in many US states and in Canada, and which are leading to ever more restrictive countermeasures. The ongoing delay in new US fiscal stimulus and the event risk posed by the upcoming US elections are also in the mix. Regarding the elections, polls point to a Biden presidency, but it is less clear if his Democratic party can take control of the Senate. If not, then Congress will remain split at least until the mid-term elections in two years, which will limit the scope for policy changes and crimp Democrat ambitions for expansive fiscal policy.US data later is topped by flash PMI data, Manufacturing numbers are expected to show a slight rise to 53.5 from 53.2 last time, whilst the more important and significant Services numbers are expected to increase by a single tick from 54.6 to 54.7. The data is due at 13:45 GMT.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Good examples, near the top, for those who are time and attn. challenged https://www.thedailybell.com/all-articles/news-analysis/how-the-elite-use-attila-and-the-witch-doctor-to-keep-power/ Grasp alternatives https://tomluongo.me/2020/10/20/about-two-years-anarchy-capitalism/  
    • Date : 22nd October 2020.Volatility and US elections.US Elections had been and always expected to be an event historically extremely volatile globally. Elections similar to other political or banking sector events are notably treated by market participants with anticipation and speculation. As discussed in our HF Markets Q4 Outlook, markets look to have already pricing in the possibility of Biden’s victory even though they overall maintain an increasing cautious optimism, holding US Dollar basket to 2018 low territory.Election-year fund flows, 1993-2020Historically, it has been noticed that during election years, market participants due to the heightened uncertainty, shift their investments into Money market funds instead from the safety of stock and bond funds, AS THEY waiting out. The 2020 is not any different but it’s been a unique one as we have seen an extreme money flow into currency assets in comparison with past election years, due the sluggish US and worldwide economic activity as the Covid-19 crisis resumes, the truce with China again which is under scrutiny, the lockdowns in several areas, the lack of additional fiscal stimulus from central bankers, Brexit frictions and the fear of double dip recession in Europe.Year-to-date fund flows, through June 30Source: BlackRock, with data from Morningstar as of June 30, 2020. Money market funds, stock funds and bond funds are represented by their respective US fund categories as defined by Morningstar.That said, cash balance into money funds spike to $980 in 2020 as of June 30, given the large risk premia. However as soon as uncertainty recedes we might see equity market’s volatility and volume to spike again since they consider to be attractive and more stable assets in period which there are historically low interest rates. If we emphasize on the medium term thought it is expected that if current conditions sustained, market volatility will extend beyond Election days with any potential outcome, i.e. a Biden win and Democrat majority in Congress, a Biden win but split Congress, or a Trump victory with split Congress.Meanwhile, a very chart from Wells Fargo Investment Institute, shows the USA500 implied Volatility index along with USA500 index performance prior and post the Election Day based on the election since 1988 with 2008 recession year excluded. This chart interestingly suggest that typically the USA500 tends to eased/consolidate a bit a month prior elections despite a extremely high volatility, while USA500 price continue their upwards move after the election day even though volatility declines significantly.WELLS FARGO INVESTMENT INSTITUTEAlways trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.  
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.