Why do 95% of retail traders lose?
- Thread starter fanews
- Start date
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FanNickname;
Well full time traders/investors;
is quite, quite different from full time daytraders
ES also is a great product, highly liquid........
But doesnt trend very well,
nor would i want to use it as investment vehicle.....................
Perhaps the reason most dont trade/invest persistantly well-
Interactive Brokers ad, Mr [Chairman]Peterfly sits on a brown horse[ in the city,probably Chicago or NYC]-
punchline ''never chose an ordinary investment vehicle''
Read here. This was from a prop firm, but the stats are about the same.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=162253
let me give u an idea of a typical loser.
At 1am, charlie is watching a trading infomercial. The infomercial stated how to get rich quick by investing a trading system $5000.
After a week of debating whether to purchase the system, charlie decided to buy the system.
After purchasing the system, charlie begins to papertrade. for 2 months, his sim account is up $30K plus.
Charlie decides to trade live and begin to shop for a brokerage that offer deep low commission rate and best data feed.
Charlie talked to a mid 20 yrs old broker and gave him a deep low commission with a so called best data feed in the industry (generic brand).
Charlie opened an account and funded $5000. He talked to his mid 20 yrs old broker about his HOLY GRAIL system. Because his broker knows that most people lose trading, he encouraged charlie the system is the best and suggested to trade greater volume.
Charlie begin to trade live doing 1 lot. He profit on his first trade.
The next day, Charlie begins to add more lots. Instead of trading 1 lot, he increased 5 lots. The trades profit. He begin to feel like a hero!
A week later, Charlie increased to 10 lots and finally lose.
A month later, Charlie account value fell from a $7000 to $1500. Charlie became frustrated and begin google searching for another 3rd party educational vendors.
He came across another 3rd party educational vendor that will almost guarantee $7000 profit per day if subscribing his $3000 per month service.
Charlie decided to subscribe and funds his account additional $5000.
Charlie begin to trade live and suddenly his generic data feed malfunction. He called his mid 20s years old broker for an explanation why his data feed malfunction. His mid 20 yrs old broker blamed his computer malfunction and suggest he needs to buy a new computer.
Charlie decided to listen to his mid 20 yrs old broker and bought a $2000 computer.
Charlie began to trade live. He loses 4 days in a row a total loss $3500. Charlie demanded a refund and called the 3rd party educational vendor a big liar.
He was so upset and begin to look for another3rd party educational vendor. He found a forum site elitetrader.com.
He begin to read other comments in the elite forum looking for a free trading education.
When Charlie creates a new thread asking for a good coach, the handler EMG advises him to give up trading because more than 90% of traders lose. They just lose!!
Charlie decided not to listen to EMG and began searching for 3rd party educational vendor in the elitetrader forum.
He came across this god speaking sales pitch 3rd party vendor that his system work. This god speaking 3rd party vendor directed him to his site. From there, Charlie decided to subscribed.
2 months later, he lose. Charlie was so fed up and asked his mid 20 years broker if he knows anybody make money.
Charlie regretted not listening to EMG
Next up. Why a newbie prop trader lose.
At 1am, charlie is watching a trading infomercial. The infomercial stated how to get rich quick by investing a trading system $5000.
After a week of debating whether to purchase the system, charlie decided to buy the system.
After purchasing the system, charlie begins to papertrade. for 2 months, his sim account is up $30K plus.
Charlie decides to trade live and begin to shop for a brokerage that offer deep low commission rate and best data feed.
Charlie talked to a mid 20 yrs old broker and gave him a deep low commission with a so called best data feed in the industry (generic brand).
Charlie opened an account and funded $5000. He talked to his mid 20 yrs old broker about his HOLY GRAIL system. Because his broker knows that most people lose trading, he encouraged charlie the system is the best and suggested to trade greater volume.
Charlie begin to trade live doing 1 lot. He profit on his first trade.
The next day, Charlie begins to add more lots. Instead of trading 1 lot, he increased 5 lots. The trades profit. He begin to feel like a hero!
A week later, Charlie increased to 10 lots and finally lose.
A month later, Charlie account value fell from a $7000 to $1500. Charlie became frustrated and begin google searching for another 3rd party educational vendors.
He came across another 3rd party educational vendor that will almost guarantee $7000 profit per day if subscribing his $3000 per month service.
Charlie decided to subscribe and funds his account additional $5000.
Charlie begin to trade live and suddenly his generic data feed malfunction. He called his mid 20s years old broker for an explanation why his data feed malfunction. His mid 20 yrs old broker blamed his computer malfunction and suggest he needs to buy a new computer.
Charlie decided to listen to his mid 20 yrs old broker and bought a $2000 computer.
Charlie began to trade live. He loses 4 days in a row a total loss $3500. Charlie demanded a refund and called the 3rd party educational vendor a big liar.
He was so upset and begin to look for another3rd party educational vendor. He found a forum site elitetrader.com.
He begin to read other comments in the elite forum looking for a free trading education.
When Charlie creates a new thread asking for a good coach, the handler EMG advises him to give up trading because more than 90% of traders lose. They just lose!!
Charlie decided not to listen to EMG and began searching for 3rd party educational vendor in the elitetrader forum.
He came across this god speaking sales pitch 3rd party vendor that his system work. This god speaking 3rd party vendor directed him to his site. From there, Charlie decided to subscribed.
2 months later, he lose. Charlie was so fed up and asked his mid 20 years broker if he knows anybody make money.
Charlie regretted not listening to EMG
Next up. Why a newbie prop trader lose.
I tried to search for the 20 old threads on the subject â95% of retailers loseâ, but could not find the answer that has been posted before. So I will give it to you from memory.
The last time I remember the press using the 95% stat was when congress was passing the âpattern day traderâ act a few years back for brokerage accounts. The SEC and CFTC use this 95% stat as a reason to pass laws to protect us from ourselves.
Brokerages often site studies. But the only stat I remember was one year (late 1990s?) Linn-Waldock stated that about 90% of their small accounts (less 25K) trading futures had a losing year.
The last time I remember the press using the 95% stat was when congress was passing the âpattern day traderâ act a few years back for brokerage accounts. The SEC and CFTC use this 95% stat as a reason to pass laws to protect us from ourselves.
Brokerages often site studies. But the only stat I remember was one year (late 1990s?) Linn-Waldock stated that about 90% of their small accounts (less 25K) trading futures had a losing year.
Here is a study where it was found that up to 90% of fx traders lost money.
http://in.reuters.com/article/2008/06/12/china-banking-trading-idINPEK33998520080612
http://in.reuters.com/article/2008/06/12/china-banking-trading-idINPEK33998520080612
The chance still higher than you are playing lottery, right ?
The main killer for most traders is that they think they can improve their chance to win by overtrading, not realised that this will incur more slippage and commission. Encourage more people to trade is the main source of income to all the broker and market making firms as this is almost risk free money to them, same approach as casino used. One way to do this is to give the novince traders some false sense that short term trading , especially day trading, is the route to lifetime finance freedom.
The true to win in the trading is that you have to be patience and take LONGER time frame. The rule of thumb is that if your trading cost (commission, slippage, data feeding cost and etc) are more than 1.5% of your overall profit, you chance to survice in long term are pretty slim, none of the edge can compensate more than 5% of the cost.