90 percent of traders lose <yada yada>...

J

JangoFolly

In looking around many trading sites, including many threads on ET, one can find the often-quoted statistic that 90 percent of traders lose in the markets. What is actual basis for this statistic? I recall reading about a study sponsored by the SEC which showed that a large proportion of traders (perhaps it was 90 percent) lose their initial capital when actively trading ("day trading" was the term used in the study).

Saying that "90 percent of traders lose" versus saying "90 percent of traders lose their initial capital" are two very different things. The former would suggest that if you're a winner in the market over some period that's longer than the short-run, then you are part of the 10 percent who don't lose. The latter allows for the possibility that you lost it all at some point, but you're now winning (i.e., significantly more than 10 percent of traders currently in the market are winning).

What do you think?
 
Quote from JangoFolly:

In looking around many trading sites, including many threads on ET, one can find the often-quoted statistic that 90 percent of traders lose in the markets. What is actual basis for this statistic? I recall reading about a study sponsored by the SEC which showed that a large proportion of traders (perhaps it was 90 percent) lose their initial capital when actively trading ("day trading" was the term used in the study).

Saying that "90 percent of traders lose" versus saying "90 percent of traders lose their initial capital" are two very different things. The former would suggest that if you're a winner in the market over some period that's longer than the short-run, then you are part of the 10 percent who don't lose. The latter allows for the possibility that you lost it all at some point, but you're now winning (i.e., significantly more than 10 percent of traders currently in the market are winning).

What do you think?
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The study said: 90% of the DAYtraders never make money.
 
Quote from spike500:

The study said: 90% of the DAYtraders never make money.
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Agreed. Honestly, if it were 50/50 then everyone and their mother would be doing it. 90% sounds perfectly reasonable.
 
2nd to this
it might not be far fetch to say 95%... but... who cares? what does the stats have to do with you personally?


Quote from spike500:

The study said: 90% of the DAYtraders never make money.
More...
 
I don't disagree with the idea that 90 percent of traders will suffer a crippling blow to their initial trading capital, but in the long run I believe the percentage of successful traders is probably in the 20-25 percent range (successful traders in this context being those who after some initial period of crappy, losing trading manage to net a long-term positive return on their second (or third, or fourth, or fifth, etc.) grubstake).

I'm simply curious whether the scope of this statistic has been broadened through its frequent recitation, in much the same way that the biblical statement that "love of money is the root of all evil" gets quoted by many people as "money is the root of all evil".
 
90% is too low...

Neophytes underestimate the difficulties of this game and are prone to blow up before they make their key realizations... but once things click, this game is easy...
 
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