Trading Statistics...Where do they come from?

T

TheGoonior

You know the type:
-95% fail.
-90% of options expire worthless
-Markets trend 30% of the time.
Etc, Etc, etc.

Other than the options expirations (which I would guess could possibly be compiled from CBOE data), does anyone know of some actual case studies (with a decent sample space) or hard evidence which gives rise to these numbers?
I'm just curious.
 
Interesting...I've always assumed they're mostly made up, sometimes by those trying to sell you something ("90% of options expire worthless! That's why we sell naked options and make 6000% a week! Only $99.95)
 
Quote from TheGoonior:

You know the type:
-95% fail.
-90% of options expire worthless
-Markets trend 30% of the time.
Etc, Etc, etc.

Other than the options expirations (which I would guess could possibly be compiled from CBOE data), does anyone know of some actual case studies (with a decent sample space) or hard evidence which gives rise to these numbers?
I'm just curious.
More...

I believe a few years ago, an exchange CME? reported that something like 78% of options expired worthless, but that is from memory

The "95% fail" is probably generous. Most of the rest probably breakeven, make small amounts, or were profitable short term

Very few are longterm lucrative. But it is very hard to overcome the strong belief of the many ET paper traders convinced they are 6 months away from trading success.
 
Some of these stats came from brokers and the exchanges during the last century. Many of these stats where defined in testimony or papers used in government hearings.

Twenty years ago or so, when I was trading commodities at Lind-Waldock they published an internal study about losses. They said the previous year that 87% of their traders had lost money . The study was not supposed to be public but for the CFTC’s eyes only but it was leaked out. It made big headlines. Lind-Waldock sent all of its customers a note saying the study was not completely revealed. They said the 87% who lost money were those with small accounts and they had been misquoted. Those with adequate resources had a 58% (? Been to long but it was way under 90%) losing rate.

About ten years ago during the pattern day trading hearings brokerages were told to tell the committees how many traders had lost money in their accounts. This came about on or about the time July 1999 (?) Mark Barton, a 44 day trader, opened fire at an Atlanta brokerage firm killing nine people and wounding thirteen. This event and the market melt down angered the public who demanded changes in day trading. Shortly after that congress in 2001 passed rules for pattern day traders. The pattern day trading hearings testimony reinforced many of the “common” loser notions. Many senators sighted data from brokers about “90% fail” as part of their reasoning for requiring adequate funds be in a day trading account to prevent the “90% fail” rate.

These as just some of the examples of how these myths were started and are perpetuated.
 
Let this simple statement be your quide. "If it was easy, everyone would be a trader"

Getting to the top % in any profession is hard. How many factory workers, floor grunts get a key to the executive "JOHN"?

Thats the real failure of trader wannabe types..........they fail from the git-go to understand what they are getting into.

The % of traders that end up losing is large but the % of the general population that fail to better themselves is even larger. Trading is more difficult than politics.

Like they say: Better to fail trying than not to try at all. :cool:
 
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