How many traders are actually making a living?

[Overnight]

What point do you consider the line between trading and investing? I have no good opinion on success rates but would’ve thought there aren’t too many people who have the discipline to accumulate >1mm in personal capital and then fail to even tread water.

With capital, intelligence, interest in markets, and an appetite for risk it seems like it isn’t too unfeasible to hit maybe double the total return of B&H on SPX or something, over the long run. Would you disagree with that?

Wouldn't disagree with a B&H strat on a market that will go up until someone invents Mr. Fusion, and then money becomes unnecessary. But if money becomes unnecessary, then you kinda' didn't lose anything.

As for the line of "trader" over "investor'? It is really semantics. If you buy a mutual fund and hold it for 50 years, and then cash out, that is one trade, yes? You entered with a buy, and exited with a sell.

It was a "trade" Albeit, a 50-year-long "positional trade" that most likey had more trades during it's lifespan where you would have reinvested quarterly or semi-annual dividends into the same instrument. So swing trades within the position trade? Don't get caught up in the buggery of terminology.

 

[tiddlywinks]

As for the line of "trader" over "investor'? It is really semantics.

WRONG!

An INVESTOR "trades" for profit motivated reasons like (long-term) appreciation, interest, and dividends.

A TRADER seeks profit from daily market movements.

Whether the activities of an individual constitute trade or business or investment is determined from facts and circumstances of each case. Distinctions have been established through court cases.

 

[newwurldmn]

What point do you consider the line between trading and investing? I have no good opinion on success rates but would’ve thought there aren’t too many people who have the discipline to accumulate >1mm in personal capital and then fail to even tread water.

With capital, intelligence, interest in markets, and an appetite for risk it seems like it isn’t too unfeasible to hit maybe double the total return of B&H on SPX or something, over the long run. Would you disagree with that?

The specific definition is hard to agree upon, but it’s like pornography. You know a trading vs investing.

I always judged it based on motivation: a trader looks for a change in price, an investor looks for a change in value.

There are many headwinds for a trader. Even if you Earn 2x of the spx, your return on a post tax basis will be a significant hair cut. And that’s if you hit 2x. It only gets worse. Further if you are looking for a change in price, the predictability gets much tougher as you are getting closer to predicting “random”.

 

[newwurldmn]

WRONG!

An INVESTOR "trades" for profit motivated reasons like (long-term) appreciation, interest, and dividends.

A TRADER seeks profit from daily market movements.

Whether the activities of an individual constitute trade or business or investment is determined from facts and circumstances of each case. Distinctions have been established through court cases.

Can’t a trader profit from weekly or hourly movements?

Don’t traders “trade” for profit motivated reasons?

 

[ETJ]

Again if so few traders made it - why isn't the dart/volume data worse? CFD's are a negative expectation dealer market where pricing is determined by the contra party. Sounds fair to me.

SBA is the lender of last resort and a government-guaranteed program or nobody would take those risks. Banks have passed, VCs have passed, angel investors have passed - by the time the deal get's to SBA it has been passed upon by anyone with a pulse.

90% probabilities would force the community to evolve or die and yet the question comes up here almost every year. "The Pros are making all the money" - funny aren't they just retail who haved trained, evolved and moved to the next level.

 

[Magic]

The specific definition is hard to agree upon, but it’s like pornography. You know a trading vs investing.

I always judged it based on motivation: a trader looks for a change in price, an investor looks for a change in value.

There are many headwinds for a trader. Even if you Earn 2x of the spx, your return on a post tax basis will be a significant hair cut. And that’s if you hit 2x. It only gets worse. Further if you are looking for a change in price, the predictability gets much tougher as you are getting closer to predicting “random”.

Thanks, that makes sense. I tried my hand at shorter term stuff for a while but found the most consistency building off known risk premiums with lower frequency. With a
combo of diversification, risk control, and willingness to lever I’ve been doing pretty good. But as always curious to get opinions for what realistic long-term returns are possible since even the long-term stuff can have protracted regimes that are either favorable or not.

 

[tradenet]

I think no stats can ever justify the profits and losses people are making through such trading due to the highly volatile nature of these markets.

 

[J_C_Anderson]

It is difficult to trade for living for many reasons connected together. Trading income should be substantial enough to cover daily expences, so the trader would need relatively large initial capital to be able to get such profit. Some traders start with mid-term trading and investing, and only then move to full-time trading. At the same time, some specific instruments like options require special knowledge. That is why they are suitable mostly for professional traders.

Another important element that is necessary for trading success is discipline. In fact, it would be easier to follow the rules of the strategy being a part of a team or company just because prop trading companies could impose their additional restrictions or special rules. Thus, the company would control the way the trader operates. For example, if the trader would reach his daily loss limit, the system would block the possibility of placing new orders and the trader will have to use demo accounts for several days. Such measures help traders to deal with emotions and save their capital. Sole traders have to deal with all these issues without the assisstance of the team or company, and that is why most of them fail.

By the way, the team is necessary not to control the performance, but also to exchange with ideas and experience. If newbie traders would be able to talk with professional ones, their progress would be faster.

To my mind, the key success factors are:
- education
- capital (buying power)
- equipment and access to information
- discipline
- communications

 

[d08]

I don't know the number, but I gave up on trading. While I tend to be a highly accurate technical analyst, I couldn't consistently make money with my accurate analysis, so fuck it. I decided to go back into Programming. During my stint as a trader, I knew a few guys who were rich and actually did this full-time, but the majority were just scraping by.

How come you were accurate but didn't make money? It doesn't make sense. Sounds like you were accurate only some of the time and when you were wrong you paid out more (poor risk/reward).

 

[Snuskpelle]

If you are well enough capitalized, you can under-perform every year and as long as you have more than you ended the year with, be in a good place. (Because a few percent of a large amount of capital is still far above living needs.)

Consequently, a good trader in a wider sense has a lot of money and a tendency to not lose it. That's all there is.

(Now, of course it's preferable to be more competent than that and outperform lame ass buy & holders/accumulators, but that's an entirely different ballgame. )

Being under-capitalized and having to live off trading is being an automatic loser. Yeah, the world sucks and is unfair. As Bill Gates (if attributed correctly) might have said: Deal with it. The ways to becoming a good trader in the above sense generally revolve around acquiring the necessary capital in any way, including not trading.