Who profits when retail traders lose?

O

Option Trader

Especially for first year traders, there are shocking statistics regarding the percentage of retail traders who lose, and lose large amounts of money or everything.

Who is on the other side of their trades? (I have my own belief about what happens, but would like to hear your input).
 
Quote from Option Trader:

Especially for first year traders, there are shocking statistics regarding the percentage of retail traders who lose, and lose large amounts of money or everything.

Who is on the other side of their trades? (I have my own belief about what happens, but would like to hear the feedback of others).
More...

the person on the other side of the trade
 
Quote from Option Trader:

Especially for first year traders, there are shocking statistics regarding the percentage of retail traders who lose, and lose large amounts of money or everything.

Who is on the other side of their trades? (I have my own belief about what happens, but would like to hear your input).
More...

Why do you assume those on the other side are "winners"?

Just because I lose money on a "trade" doesn't mean fading my entry was a winner, eh? Maybe I was right initially.

At the EOD the "winners" are the CME (or whatever exchange) and the various brokerage firms.....
 
Could be other retail traders, could be pros. Let's just hope the supply of dumb money into the markets continues unabated. At the end of the day, the best man wins.
 
Quote from Pa(b)st Prime:



At the EOD the "winners" are the CME (or whatever exchange) and the various brokerage firms.....
More...


It's summer and I've stopped all serious trading till Sept but I've been fooling around with some things that have interested me in the futures markets.

The last 2 weeks I've broken even with a 60% win ratio and a 1:1 stop loss/target.

This should speak volumes.

Commission
Slippage
and Execution errors

ATE the 10% success rate.

Seriously think about that :cool:
 
I honestly think a lot of unprofitable traders WITH some years experience are good at trading fairly close to break even before commissions.

Also, If you assume Market makers and specialists (sorry, thats DMM's) do a pretty decent job at making the spread (see annual reports of knight and labranche), thats another thing.

Of course that only gives a small part of the picture otherwise they would be making a ton more than they do.

So yeah, I think its true most traders can't beat commish and the spread. Thats where most of the account deposits go.

Also, stocks are not zero sum.
 
I think thats a good question!

I recently read a stat that said 95% of new futures traders lose money, and most futures traders in GENERAL lose money. I for one love these odds. Love them.

But where does this money go??? Do successful futures traders just rake in boatloads?
 
Quote from Option Trader:

Especially for first year traders, there are shocking statistics regarding the percentage of retail traders who lose, and lose large amounts of money or everything.

Who is on the other side of their trades? (I have my own belief about what happens, but would like to hear your input).
More...

Your question implies that there is some special group that is on the other side of all these retail traders first year trades. The market is dynamic and there are many entities on the other side of these trades. Most of the money lost by first year traders is most likely commisions.
 
Commissions of online trading are small, & spreads can sometimes be neglible, especially if you try to buy at the bid or midpoint--so this at best explains the losses of people with small accounts. For those with larger accounts, the picture should look much better.

My observation: When a retail trader places an order, his order is noticed by someone or something as a "retail" order, and he is targeted. The question is by who?
 
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