Is It True That 90% of Traders Never Make a Dime!

[blindfingers 10]

90% OF TRADERS NEVER MAKE A DIME!

 

I have read this "90%" comment for a long time now and frankly, I am not sure I believe it. I'm suspicious that it isn't statistically sound.

 

I have been trading for four years now and until lately, have beaten the S & P consistently each year with a per annum gain of just under 9%. This year has not been so profitable; I've made several mistakes in my options trades BUT I'm still ahead of the game. And, I am CERTAINLY not the smartest guy in town.

 

Frankly, I'm suspicious this comment is steeped by trading educators trying to sell their wares and think if they can convince you that you don't stand a snowball's chance in hell without them, you'll spend your dollars on their system.

 

Don't misunderstand. I believe in education. I even think there is value in certain educational programs offered though I'm quite sure that much of what one needs to know is very available for less than you might think. I just question the statistical significance of the "90% are losers" comments that are so frequently read in the sales letters I receive in my emails from the pitch monkeys.

 

So, my questions to you, the reader, is this:

 

1) Are you making money or losing money?

 

2)How long have you been trading?

[blindfingers 10]

Again, I know I'm making money and I'm just not that clever when compared to the general population. Consequently, I'm suspicious that this "90% rule" is simply a generalization that sounds quite foreboding.

 

If this statistic IS true, then I would say this to all you traders out there, newbies and otherwise, get out NOW because apparently 9 out of 10 of you are simply brands for the burning!!

 

But I doubt it.

 

I've taken a few courses at the post-secondary level and I have NEVER seen a 90% failure rate in ANY class no matter how difficult the course may have been and I've taken my share of tough stuff.

 

So newbies, DON'T DESPAIR.

 

The truth is, you too can be successful at trading. Some people in the arena of traders would like you to believe they are very exclusive and they know what you never can, but know this:

 

In order to be successful, you will have to commit to a disciplined study program. No, it isn't easy but it's doable and if you're up to the challenge, you WILL win! Have no delusions - WALL ST. CHARGES TUITION. You will have losses but keep learning.

 

Remember - ANYTHING you do a lot of in life, you will start to get the hang of.

 

Trading is no exception.

 

Practice, practice, practice.

 

And never quit.

 

You're quite likely better than they would like you to believe.

[JEHs 10]

Actually, I've always heard it was 95%.

I doubt if there is any statistical evidence to back up specific numbers like this, but I think it would be safe to say that "most traders" fail.

 

Just as in any other business... most fail.

[zdo 20]

Have you witnessed or concieved all the different ways to 'fail' or are you just going off what your own experiences?

Having been in the retail and discount brokerage business for a while (in almost a different lifetime now), I can tell you those stats are more accurate than not. I personally think it’s somewhere just under 80% overall - but the ‘reasons’ for the high rate of failure are many and the timelines for all the failure are also widely varied – so it could be 90% +.

You are incomparable… and be careful how you take that

Be advised that with this thread you also just added to your overall risk of joining that %

[SIUYA 11]

while I am sure you can dig out stats, what broker is going to tell you that most of their clients fail.

Plus there are various levels of failure.... is stopping failure due to

- a realisation they dont have enough money to really make it worth while from a time and effort basis

- a realisation that the biggest winner is the broker and their PL at best is breakeven after costs

- a realisation that they dont have the effort energy or focus required

- a realisation that its potentially a boring, lonely job for some people

 

not every failure means a monetary loss, I have opened numerous accounts with brokers and closed them out as I did not like the broker, or moved countries, or found a cheaper broker.

[fajarmulya 10]

It is a sad fact that 90% of traders fail, and many very quickly give up. Why? When I went through a phase of losing trades I treated it as a temporary setback and went back to the drawing board. I analysed the reasons of my failure and I sought the guidance of Top Traders, Mentors and Coaches to put me back on the path of success and profitability.

In my opinion the high rate of failure for a new trader can be related to the six major obstacles that a trader faces, which are summarised as follows

 

1. Poor Skills : Lack of adequate capital

2. Setting unrealistic targets and goals

3. Lack of Patience

4. Lack of discipline

5. High risk aversion.

 

If we look at the list, it becomes apparent that the failure is as a result of trading without having in place a proper Trading System and a Trading Plan– One that includes mind training, quality Forex education and strategies and sound money management rules.

 

So what are the Characteristics of a Successful Trader? All we have to do is to reframe the liabilities listed above;

 

1. Adequate trading knowledge and understanding. You should seek services of good quality mentors and a trading coach.

2. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500

3. Realistic Goals – don’t expect 100% profit each month, it simply is not possible.

4. Have patience – don’t trade if you don’t have to. You should wait for a set-up according to your trading plan and system.

5. Have Discipline to follow your rules

6. Understanding and Managing Risk

7. And lastly the most important is having a Trading System and a Trading Plan. Virtually 90% of Traders that I have coached have never had one!

 

If you look at the advice from the world’s most successful people or traders today, you will notice that they follow the guidelines as identified above.

“Define first the level of risk you dare assume. Start with a small position, and then build it up if it works”

–George Soros

“Give me a stock clerk with a goal and I’ll give you a man who will make history. Give me a man with no goals and I’ll give you a stock clerk”

– J.C. Penny

“ If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.”

– Jim Rohn

 

Good Luck!

[gianno 10]

More or less it is close ot 90%. The most inportant reason is undercapitalization (taking huge risks in relationto trading capital, something that leads to ruin). This is a great blog post on this matter:

 

Account Undercapitalization is the Primary Cause For Trader Failures | Price Action Lab Blog

[blindfingers 10]

Thanks to all of you for your input.

 

I would like to think that more than 10% are profiting from their trading and yet, I am well aware of the fact that casinos are built on the profits of people who have an overall losing percentage and still come back to do it again. It just seems mindboggling to me that the likelihood of success as a trader is no better than 10% or as JEH says, closer to 5%. Though not terribly scientific, I tend to adhere to the 20/80 rule for explaining many, many things in life. Applied to trading, it might suggest that 80% of the money is made by 20% of the traders.

 

I have to think that in a business that is steeped in statistical analysis, there must be many studies done at the university level that shed some light on the actual success to failure ratio and the reasons why. One day, when I have some time, I may search this out further. Right now, I probably need to keep honing my own trading skills.

 

Fajarmulya, I think you identify several primary factors responsible for so much failure. Undercapitalization and poor money management, unrealistic expectations (greed), and a poor understanding of how the market works in the first place. Thanks for your statement of characteristics of a successful trader. I think you are "on the money".

 

Good luck everyone. If it is only 5%, then let's be that 5%!!

[Cosa Nostra 10]

It is a sad fact that 90% of traders fail, and many very quickly give up. Why? When I went through a phase of losing trades I treated it as a temporary setback and went back to the drawing board. I analysed the reasons of my failure and I sought the guidance of Top Traders, Mentors and Coaches to put me back on the path of success and profitability.

In my opinion the high rate of failure for a new trader can be related to the six major obstacles that a trader faces, which are summarised as follows

 

1. Poor Skills : Lack of adequate capital

2. Setting unrealistic targets and goals

3. Lack of Patience

4. Lack of discipline

5. High risk aversion.

 

If we look at the list, it becomes apparent that the failure is as a result of trading without having in place a proper Trading System and a Trading Plan– One that includes mind training, quality Forex education and strategies and sound money management rules.

 

So what are the Characteristics of a Successful Trader? All we have to do is to reframe the liabilities listed above;

 

1. Adequate trading knowledge and understanding. You should seek services of good quality mentors and a trading coach.

2. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500

3. Realistic Goals – don’t expect 100% profit each month, it simply is not possible.

4. Have patience – don’t trade if you don’t have to. You should wait for a set-up according to your trading plan and system.

5. Have Discipline to follow your rules

6. Understanding and Managing Risk

7. And lastly the most important is having a Trading System and a Trading Plan. Virtually 90% of Traders that I have coached have never had one!

 

If you look at the advice from the world’s most successful people or traders today, you will notice that they follow the guidelines as identified above.

“Define first the level of risk you dare assume. Start with a small position, and then build it up if it works”

–George Soros

“Give me a stock clerk with a goal and I’ll give you a man who will make history. Give me a man with no goals and I’ll give you a stock clerk”

– J.C. Penny

“ If you go to work on your goals, your goals will go to work on you. If you go to work on your plan, your plan will go to work on you. Whatever good things we build end up building us.”

– Jim Rohn

 

Good Luck!

 

I agree with you, the main reason is that they don't have a lot of skills, and also don't use the pschyhology, it is very important to feel when out and when in into the market

[sadscorpion 10]

why 90% traders fail in forex?why????????

 

 

why 93%age of traders fail and loss all thier hard earning in trading. They have good system, strategy,

plan and knowlege to sucess in trading then why they fail in it.....

let me give u an example:-

in a city out of total population 2crore 20%age are fat and want to loss thier whight.

it mean 40 lacs peoples are fat in the city and they all want to loss thier wight.

if we reduce more on it out of 40lacs 50%age is b/w 15 to 45 mean 20lacs peoples try to loss thier wight.

 

in that city a book market there are 1000 diffrent authors books, magzenes are present on the topic of

"weight loss" with diffrent names like "exercising and fitness" , "how to loss wight"

with same aim but diffrent methods to loss thier wight.these 20 lacs peoples try these books on wight loss.

if i wrote a book on wight loss it would be a very , very short(that is core of all books written on this topic)

1)eat less

2)exercise more

come on it's simple. we all know that we can loss 10 pounds in 10 weaks if we just follow these two rules.

we reduce our colorie in take to 1500 or 2000 colories per day and then we do some exercise at least three

times a weak for a minimum of 30 minutes.

we have a smart goal ("loss 10 pounds in ten weeks") and we have a plan ("eat less and exercise more").

 

so why do we keep buying these books and magazenses that promise a new diet, a new way to lose wight.

and what u think how many peoples success in this process to lose wight just 5 or 8 out of hundread.

"Because other fails to execute a plan "

like these fat peoples think that they all are traders and want money in trading.some of them just

buy books,magazenes,systems and think one day they will get holy gril and become very rich.

like yu cant lose your weight in one day.u can do it with some hardwork and constancy to follow ur plan to loss

wight.like this you cant become rich in one night while sleeping.you must follow the simple rule

"plan your trades,then trade your plan"

 

your job as a trader is to follow/execute a trading plan.and who's going to write his trading plan? you are.

notice the word "write".it needs to be written down.on your trading desk.in front of u.

your trading system will give u the rules to follow. all u do is translate these into ur plan.

a trading plan must have four pars.

1)set up

2)entry

3)exit

4)money managment

your trading plan covers every eventuality. you know what to look for in the market.when to get into a trade

and when to get out.

keep it simple and follow it religiously...

[swisstrader1 10]

Again, I know I'm making money and I'm just not that clever when compared to the general population. Consequently, I'm suspicious that this "90% rule" is simply a generalization that sounds quite foreboding.

 

If this statistic IS true, then I would say this to all you traders out there, newbies and otherwise, get out NOW because apparently 9 out of 10 of you are simply brands for the burning!!

 

But I doubt it.

 

I've taken a few courses at the post-secondary level and I have NEVER seen a 90% failure rate in ANY class no matter how difficult the course may have been and I've taken my share of tough stuff.

 

So newbies, DON'T DESPAIR.

 

The truth is, you too can be successful at trading. Some people in the arena of traders would like you to believe they are very exclusive and they know what you never can, but know this:

 

In order to be successful, you will have to commit to a disciplined study program. No, it isn't easy but it's doable and if you're up to the challenge, you WILL win! Have no delusions - WALL ST. CHARGES TUITION. You will have losses but keep learning.

 

Remember - ANYTHING you do a lot of in life, you will start to get the hang of.

 

Trading is no exception.

 

Practice, practice, practice.

 

And never quit.

 

You're quite likely better than they would like you to believe.

 

 

Having had insights into mainly FX brokerage firms I can tell you that traders with accounts of 5000USD or less (or was it 2500?,not sure) over 90% wipe out their account in less than 6 months! Mainly those losses were built because the initial investment was so small that those newbies gambled and did not apply any risk management (also because those bucketshops traded against them when they didnt lose).

 

Also, I believe that success has not much to do with cleverness, rather with "deliberate practice" and learning to trust yourself, your method and learn to trade in a focused manner controlling risk!

successful trading has much more to do with beeing a professional athlete than some "intellectual genious"!

[amatulic 10]

One thing that one must remember is that the population of successful traders is rather stable while the population of unsuccessful traders is likely a different group of people every day. It isn't necessarily true that at any given moment there are 9 unsuccessful traders in the market for every successful one. Over time, however, a broker might see 9 losing clients come and go for each winning client.

 

The 10% of traders who are successful rely on newbies continually coming in, because who else will the successful ones take money from? This is a zero-sum game, so it needs a constant source of fresh blood to extract.

 

-A

[JEHs 10]

One thing that one must remember is that the population of successful traders is rather stable while the population of unsuccessful traders is likely a different group of people every day. It isn't necessarily true that at any given moment there are 9 unsuccessful traders in the market for every successful one. Over time, however, a broker might see 9 losing clients come and go for each winning client.

 

The 10% of traders who are successful rely on newbies continually coming in, because who else will the successful ones take money from? This is a zero-sum game, so it needs a constant source of fresh blood to extract.

 

-A

 

I think this is important to realize. All trading courses, books, website and forums, (yes including this one), are really just avenues for bringing fresh meat for slaughter. The numbers would have to be skewed about 90/10 for this to work out at all for the few that get there.

[zdo 20]

I think this is important to realize. All trading courses, books, website and forums, (yes including this one), are really just avenues for bringing fresh meat for slaughter. The numbers would have to be skewed about 90/10 for this to work out at all for the few that get there.

JEHs why don't you just go ahead and tell it like it is instead of beating around the busch

 

There are many, many ways traders combine to get to these percentages.

However in my experience a major chunk of the losers get there with two decisions/actions

Decision #1 starting undercapitalized (as others have noted) / overleveraged (same diff)

Decision #2 choosing to hold on to one particular position for it to 'come back' instead of taking (stop) loss

[laurus12 10]

Instead of having this "90% Ghost" hanging in front of us it is better to be realistic about it. Personally I do not pay any attention to it, because I know it is completely up to me and what I do with my homework and challenges.

 

If one take that "90%" failure number one will see that this is about the same with other businesses too. The advantage with trading is that it is only you and the markets. Which is in my opinion actually a big advantage.

 

Just as with other businesses we as traders need a business plan, maybe several strategies for different markets and when markets behave differently, done enough research and homework, and the most important which I have seen a lot of times lacking with other businesses too, which is psychology and the necessity to grow personally. Smart people in successful businesses know this and invest time and resources in all of these fields, both with themselves and their employees. Do the opposite of this and we have a high chance of failure.

 

Personally I hate stuff that can be seen as obstacles and expressions that says that it can't be done. What one should do in this matter is to forget about that 90% number and take the full responsibility and ownership for ones own destiny and do what is required. That's it.

 

Sincerely best wishes,

Laurus

[JEHs 10]

Instead of having this "90% Ghost" hanging in front of us it is better to be realistic about it. Personally I do not pay any attention to it, because I know it is completely up to me and what I do with my homework and challenges.

 

If one take that "90%" failure number one will see that this is about the same with other businesses too. The advantage with trading is that it is only you and the markets. Which is in my opinion actually a big advantage.

 

Just as with other businesses we as traders need a business plan, maybe several strategies for different markets and when markets behave differently, done enough research and homework, and the most important which I have seen a lot of times lacking with other businesses too, which is psychology and the necessity to grow personally. Smart people in successful businesses know this and invest time and resources in all of these fields, both with themselves and their employees. Do the opposite of this and we have a high chance of failure.

 

Personally I hate stuff that can be seen as obstacles and expressions that says that it can't be done. What one should do in this matter is to forget about that 90% number and take the full responsibility and ownership for ones own destiny and do what is required. That's it.

 

Sincerely best wishes,

Laurus

 

Well said.

I am a small business owner and people think I sit around and the money just rolls in.

They tell me they want to do what I do.

I say "go for it".

Anybody can do what I do... but they won't.

Trading is like any other business. If you are going to do it, then get off your butt, roll up your sleeves and get to it. Even then, you might fail, but you will have learned something...

[laurus12 10]

Well said.

I am a small business owner and people think I sit around and the money just rolls in.

They tell me they want to do what I do.

I say "go for it".

Anybody can do what I do... but they won't.

Trading is like any other business. If you are going to do it, then get off your butt, roll up your sleeves and get to it. Even then, you might fail, but you will have learned something...

 

Well said to you too JEHs :thumbs up:

[pipbanker 10]

That is absolutely true! and the reason is very simple.

Only when you ready to accept the truth about forex and get over that very reason you will have a chance to be among 5% of the winner.

[jackb 10]

Rather than evaluating the percentage that fail, the more important statistic is the percentage that are successful. In between the failures and those that are successful lies a sizable percentage that might only breakeven or realize small gains but not enough to cover their cost of labor (let alone a return on investment). Those that both make a living trading and also produce a reasonable ROI (i.e., successful), are certainly less than 5%.

 

You mentioned you have only been trading 4 years. Unfortunately, randomness is a lot more clumpy than most people realize. As such, there is a high degree of probability that you have just encountered a batch of good fortune (don't take it personally, this is just how the math works). In order to determine if you are trading with an edge (as opposed to good fortune), you'll need, at minimum, another 16-18 years to find the answer. It's a long hard road fraught with many opportunities to blow up along the way...like Hoffman recently did. But you might be one of the few, the proud...

Edited August 5, 2011 by jackb
sp

[bonchi07 10]

90% OF TRADERS NEVER MAKE A DIME!

 

I have read this "90%" comment for a long time now and frankly, I am not sure I believe it. I'm suspicious that it isn't statistically sound.

 

I have been trading for four years now and until lately, have beaten the S & P consistently each year with a per annum gain of just under 9%. This year has not been so profitable; I've made several mistakes in my options trades BUT I'm still ahead of the game. And, I am CERTAINLY not the smartest guy in town.

 

Frankly, I'm suspicious this comment is steeped by trading educators trying to sell their wares and think if they can convince you that you don't stand a snowball's chance in hell without them, you'll spend your dollars on their system.

 

Don't misunderstand. I believe in education. I even think there is value in certain educational programs offered though I'm quite sure that much of what one needs to know is very available for less than you might think. I just question the statistical significance of the "90% are losers" comments that are so frequently read in the sales letters I receive in my emails from the pitch monkeys.

 

So, my questions to you, the reader, is this:

 

1) Are you making money or losing money?

 

2)How long have you been trading?

 

 

I agree with your quotation and I do because there are a lot of people out there who believe that trading is easy and they are looking for a get rich quick type of scenario.

A lot of people start trading with this in mind so they start gambling in the market. They want to make it a Vegas experience.

As far as the schools, I also agree, most of them promise a lot!!! but ultimately is the students choice to believe it or not. Education is always good but then it is up to the student to apply what he or she has learned.

I think what happens in trading is that there is no mercy in the mkt. You make a mistake and it is tangible, right there in the moment. In any other industry or job, people get second chances but the market does not forgive so yes the chances to succeed are slimmer.

Now, this is not to imply that it is impossible. Jessy Livermore went bankrupt 4 times before he finally said he figured it out. He was obviously a very exceptional case. I think what made him successful is his ability to learn from his mistakes and that is something vere few people do. Besides learning the trading technique I think that the psychological work that needs to be done is far more important. You can know all you want about indicators, strategies, etc, but if you cannot control your emotions, all your knowledge goes out the door.

 

I truly feel that the mkt is capable to bring the worst and the best of us in a split of a second. I think that the ability to recognize what we did wrong and right will make us better traders but you have to be open....

[blindfingers 10]

I agree Jackb that probability can be "clumped". Years ago, I had the unusual experience of picking 19 of 20 winners in hockey. It seemd to defy the law of probability BUT, as fate would have it, I couldn't find a winner in the next 20 games!!

 

In fact, I am well aware that someone can believe their analysis is correct and their trading decision is right when, in fact, it is sheer happenchance that they have been on the winning side and given enough time, there will be an eventual backlash to theit faulty logic.

 

Still, I remain suspicious of the "90% or 95% of traders are losers". It just seems to be statistically skewed. If I accept the statement, then of the 14 contributors to this thread, at best, only 1 of 10 are actually winners and at worst, 1 in 20 are succeeding. In fact, maybe all of us are ultimately losers and the 5%er hasn't even spoken yet!

 

Though I don't think anyone has specifically stated that they are making or losing money, as I read the posts, the gist I'm getting is that several of you are profiting traders. It's illogical to think that this is a gathering of the elite where only winners are posting.

 

Your contributions support my suspicion. The winning percentage is higher than 5-10%.

[steve46 12]

I'd like to put some balance into the discussion

 

I have a small class of students learning to trade the S&P futures. We have just begin the third month of class and all but one are profitable. I believe this is because we practice excellent risk management.....and we select trades carefully....

 

For what its worth I am not making the kind of money that I normally do and I attribute this to the fact that I have my attention divided between my own screen and issues relating to my students (answering questions, fielding comments, looking at other markets, etc)...I expected this...the reason I bring it up is that I am pretty sure that this is one reason why is it difficult to find skilled traders willing to give up some income in order to teach.....(perhaps more accurately expressed as "skilled traders willing to do a good job of teaching".)

 

Good luck and better days to those who may be struggling

 

Steve

Edited August 7, 2011 by steve46

[Tradewinds 12]

For what its worth I am not making the kind of money that I normally do and I attribute this to the fact that I have my attention divided between my own screen and issues relating to my students (answering questions, fielding comments, looking at other markets, etc)...I expected this...the reason I bring it up is that I am pretty sure that this is one reason why is it difficult to find skilled traders willing to give up some income in order to teach.....(perhaps more accurately expressed as "skilled traders willing to do a good job of teaching".)

 

Good luck and better days to those who may be struggling

 

Steve

 

You are making the ultimate sacrifice to help others. You truly have a good and caring heart. You are phenomenal. The world needs more people like you. Imagine a world full of people like you. It would be the perfect world.

[steve46 12]

Yes of course and without your intelligent comments how would any of us go on?

Edited August 7, 2011 by steve46

[blindfingers 10]

Thank you Steve46 for your relevant comments. Though you don't say how many are in your small class, it is very encouraging to note that all but one are experiencing profitability. That's a good percentage and it does bring some balance into this discussion.

 

I concur with Tradewinds; it's a good thing you do. Sharing what you know with others and teaching them too how to profit as traders will ultimately help to erode the idea that trading is primarily for losers.