I'm sure the number of knowers is larger than that.
Unfortunately, knowledge and the wisdom to act on your knowledge are two very different things.
Why do 5% of Traders Win?
- Thread starter oldtime
- Start date
I'm sure the number of knowers is larger than that.
Unfortunately, knowledge and the wisdom to act on your knowledge are two very different things.
Somehow I don't believe that's the whole story. There are a lot of talented programmers in the world. If it's a matter of automation, then a lot of those programmers will be rich. Among automated traders, perhaps still only 5% win.
Just to add another wrinkle: 5% is the threshold most often used to determine if something is due to a real effect, or if it is due to chance or luck. Most statistical tests use p=0.05 as the threshold. So the fact that only 5% of traders make it is somewhat coincidental, kind of suggests that most of those 5% just got lucky. Of course, we know of certain legendary cases where a trader is too consistent over the years to have gotten lucky. So it is clearly not all luck, but may be a good percentage of the 5% is also luck.
The mystery is, if the rules are simple, why is it that the majority still loses? Some say it's because most of the 95% are degenerates. I believe to some extent that's true. What we need is a stratification of this statistic, for example:
overall % successful traders: 5%
% successful traders who completed high school: x %
% successful traders who completed college: x %
% successful traders who hold a post-graduate degree: x %
% successful traders who worked with a successful mentor: x %
% successful prop traders: x %
% successful professional institutional traders: x %
% successful traders who do it full time: x %
% successful traders who do it part time: x %
% successful traders who have at least 5 years experience: x %
% successful traders who were successful in a team sport: x %
% successful traders who were successful in another technical career: x %
% successful traders who has work experience in finance: x %
Ironic isn't it that 5% of the people enjoy 95% of the wealth. Maybe this reality has something in common with the 5%/95% succeful/failed traders.
Emotions aren't the problem by itself. Uncontrolled emotions are the problem. You can't make decisions without bringing emotions into it. Humans are not robots and will never be robots. Even traders that automate their strategies have to deal emotions. Can they handle it when their system goes through a draw down? Do they honestly believe that the system will keep working in the future? People on here act like automation equals automatically being profitable, which is totally laughable.