98% of Traders Fail? Says Who...?

For the life of me, I can't find the article. But yes, there have been studies done. The one I saw, was something like 70% of traders fail.

Another study I saw was about which strategy works, it was either one or none out of several thousand strategies.

All those things leave out the issues of discretion. I might follow a strategy, but occasionally I will not trade it (like during some big announcement - even though my backtesting did NOT consider FOMC announcements).

I still am a hit and miss trader if measured by P/L only, but I get a paycheck since I always take out 30% percent of my profits. That makes me steady after all. Other stops in place (daystop, month stop, portfolio stop) protect me long enough to have kept me in the game till now.
 
Richard Dennis selected and trained 14 people, the so called turtles. Almost all of them became succesful traders.

If Richard would have taken 14 imbeciles without any brains, they would all have failed.
Conclusion:
Adjust your sample data and you can exactly get the failure rate you had in mind .

To have a realistic failure rate a number of necessary skills should be rated from 0 to 10, and for each possible combination (profile) there should be calculated a failure rate.
After that, each person should fill in his personal rating for each necessary skill and compare his matrix with the matrix of a big population.
This should give a more realistic rate for the person in question. An idiot would have a failure rate of almost 100%, but a quant who has full emotional control over himself would have a much lower failure rate.

So THE failure rate doesn't exist. It only exist for predefined profiles.

That's my personal opinion.
 
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98% of traders fail?

What about the traders that survive the steep learning curve the first year.

I would think that the longer a trader stays in the game the failure rate would decrease.

What is the failure rate of traders after the second,third and fifth year of full time trading?

Maybe 98% of traders fail within the first 3 months.
 
You make a very good point. I wonder what the stats are on those who survive year 1? I know real estate agents are right up there with traders on the Top 10 list of first year failures, but the ones I know who survived the first year are make a decent living.

Signed,

Trader trying to survive year 1 :p
 
Quote from BullsEye:

Many people are fond of quoting the statistic that 98% of traders fail. Googling "% of traders fail" yields 4950 pages (interestingly, "% of traders succeed" yields only about 15 pages!).

A quick scan of the search results shows that the quoted percentages range from 80% to 99%. :confused:

Where do these statistics actually come from? Does anyone know of a reliable, verifiable source of this information, please?

And while we're on the subject, what exactly defines "failure"? Is it losing *all* of your money, all your *trading* money only, *some* of your money, breaking even, making less than 5%, quitting after 3 months, losing more money than you have (i.e. getting into debt), or what?

Thx!
BullsEye
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Just call your broker and ask them!
 
this statisctics, even if accurate, is meaningless. How about a headline like this:
"90% of the traders who worked their a$$es off trying to honestly learn the business of trading for 4 years, eyeballing the setups in realtime, reading, asking questions, creating strategies, backtesting them, testing them in realime, dealing with psychology, angry wifes, working in MacDonalds to get their working capital up, fail"?

Now, that would be something worth attention, imho. I don't think we should be concerned with somebody who once upon a time bought a few shares of, say, EMC at $95 4x margin, let it drop to $8, got margin call, then said "F** it"

in 4 years you can get only an entry level education if you want to work for someone else.

just my 2 cents
 
Here's a quote from Drew Niv, ceo of FXCM regarding daytrading forex.

The retail trader always pays the bid/ask spread making his odds of winning lower. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade must be "resettled" each day, costing the full bid/ask spread every day. Even people running the trading shops warn clients against trying to time the market. "If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised." Source - Wall Street Journal
 
Quote from Jaba122:

this statisctics, even if accurate, is meaningless. How about a headline like this:
"90% of the traders who worked their a$$es off trying to honestly learn the business of trading for 4 years, eyeballing the setups in realtime, reading, asking questions, creating strategies, backtesting them, testing them in realime, dealing with psychology, angry wifes, working in MacDonalds to get their working capital up, fail"?...
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Yep, I fully agree with you, Jaba.

The more I investigate this topic, the more I feel that the question: "What percentage of traders succeed?" is essentially impossible to answer and that it's also basically meaningless, due to the many significant variables that it ignores.

As you say, a more useful question might be: "What percentage of swing traders/day traders who trade stocks/options/forex using System-X, with Software-Y, at Broker-Z, having attended Course-C and seminar-S, starting with $$-NN trading capital, trading from home surrounded by yelling kids, <<insert your own specific trading situation idiosyncrasies>> are consistently profitable after YY years?".

Looking at it this way, it seems to me that any study of this nature will always be doomed to comparing apples to oranges even before it begins, because no-one will never be able to assemble a big enough sample of traders who are comparable enough to each other.

Here is an article written in 2000 which deals with success rates of day traders. Unfortunately, a lot of the references it points to are no longer there (or are hidden behind members-only archive areas):

http://www.investorhome.com/daytrade/profits.htm

One more interesting article about a study of day traders at a Texas firm in 1999:

http://articles.latimes.com/1999/jan/29/business/fi-2732

Another about day traders (again? – they seem to be popular as study subjects):

http://www.nuffield.ox.ac.uk/users/murphya/Active Traders.pdf

I found the articles by searching Google for ["study by" "% of traders"]

Happy Trading!
BullsEye
 
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