% of losers in various trading entities

S

SethArb

hmmm ... ok I guess I could have given this a different name

but here goes ...

some people claim stats like up to 90 % of retail traders
are net losers over time

I am curious ... even if this is the case ...

is it only true for day traders or are there loads of losers
even those who buy and hold a small portfolio of stocks?

Also ... in the Investment Banking , Hedge
Fund , and rest of the prop active trading world ... we all know of the big "blow ups"
but in reality ... the number of losers is way lower ...
is this because they only hire the best of the best
and have a huge amount of capital to fall back on ?
 
I think most people fail to understand the nature of the Hedge Fund industry.

It's a massive SKIMMING OPERATION.

Probably 80-90% of "hedge funds" have no realistic chance of outperforming anything...
And their management ** does not really care **...
That is NOT the Business Model.

The Model is to accumulate assets under management with a Sexy Sales Pitch...
More or less match the market averages...
And SKIM massive profits ** off the top with ZERO risk **...
From very rich, very stoopid people that are locked into your "hedge fund".

Like ALL Zero Sum Games...
Only 5-10% of "hedge funds" are in any position to take money away from the other players.
 
"Back in the early 1990's Goldman consistently took young people into the prop group and churned them out. The success rate was minimal, 5 percent at most"

Christian Siva-Jothy, Former Head of Proprietary Trading, Goldman Sachs quoted in Inside The House Of Money, P90

One can only assume that Goldman have cracked it in the interim as now it seems that the bulk of Goldman's profits come from it's own "trading" yet for some reason it seems this magic does not extend as far as Goldman's Managed Funds open to outsiders. Perhaps there are other edges at work...................
 
investment banking is complete different.

Hedge funds are considered to be for Asset management...


Investment Banking are usually try to sell one business to another...Make mergers happen and acquisition. ETC....ETC....ETC..

So, my point being you do not have a lot of investment banks blow up because there are too few.
 
I meant the prop trading desks of the IB's

for example ... in forex interbank trading

citigroup ubs Deutsche are three banks that actively
trade forex

in precious metals there are a number of banks
around the world dealing as well

then we also have IB's making markets in
equities on nasdaq as well as fixed income

and banks whom have traders in energy markets
etc

perhaps there is turnaround amongst their junior
traders and only the best ones remain

I know every few yrs I read of
mergers between banks
sometimes or market conditions that lead to layoffs
 
trading is completely different from investing. the 90% refers to TRADING, not investing

the overall bias of the stock market is UP, and the average investor goes long only.

a basic investment strategy of dollar cost averaging over time, even with ZERO attempts to actively choose stocks, would have been a winning strategy in ANY 20 yr time period in the last 100 years of the US stocks market AND in most rolling 20 yr periods would handily beat most other asset classes.

investing and trading are very different in terms of methodology, and also traders have much higher costs to overcome in terms of slippage and commissions the shorter the timeframe they are using

the potential for gains is MUCH bigger with traders, but only a very few traders accomplish this.

i make a living scalping futures so it CAN be done, although i don't make tons of money by any stretch

i also have an investment account where i do just dollar cost average into stocks and mutual funds and have done so for over 10 years, through the ups and downs.
 
When I worked for prop shops people were sacked every second week, whole graduate groups would go every June and many others would leave within the first two years. In one instance a guy left after one day, he was no farmer, but he knew the smell of bull.

Now I work for a bank and I have yet to see a single person get fired, a few leave, but only for other banks and the numbers hired outstrips the number who leave. Interbank forex is mostly flow trading - you can't really screw that up and the prop positions are much longer term (eg 100k loss limits,positions held for a week or a month) so you aren't churned and burned like in a prop shop. Even Dresdner in London, having had a terrible couple of years, is only sacking 7% of staff. At a prop firm it would be more like 20%.

Obviously this does not respresent every far flung galaxy of the trading universe but nonetheless I have noticed a distinction between failure rates at banks and prop firms which should not be understated.
 
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