Why 95% loss rate in forex? | Forex Factory

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Why 95% loss rate in forex?

  • #1
  • First Post: Nov 5, 2007 7:25pm Nov 5, 2007 7:25pm
This is my first post so here's where I'm coming from. I was recently introduced to forex by a friend, about a month ago. I got metatrader 4 and quickly began experimenting with demo accounts. My first couple demo accounts I quickly ruined, but when I really put my mind to trading and don't put in trades just to see what will happen, I usually break even after a couple trades. I found this forum which I really like and find very useful about two weeks ago.

So, I was wondering why 95% of forex traders are on the losing side. There are only two ways a currency pair can go - up or down. That should mean 50-50 chance you win or lose after entering a trade. Now combined with spread I don't know how to apply the math, but spread shouldn't make the success rate go from 50% to 5%... with lower time frames spread will obviously effect success rate negatively more.. but most traders(based on this forum atleast..) seem to trade 1hr+ charts, where spreads should barely make a difference whether you win or lose. With all the market analysis and strategies there are out there, and the 50-50 chance I just mentioned, how in the world is the success rate only 5%?
  • #2
  • Nov 5, 2007 7:28pm Nov 5, 2007 7:28pm
Quoting MattL4417
This is my first post so here's where I'm coming from. I was recently introduced to forex by a friend, about a month ago. I got metatrader 4 and quickly began experimenting with demo accounts. My first couple demo accounts I quickly ruined, but when I really put my mind to trading and don't put in trades just to see what will happen, I usually break even after a couple trades. I found this forum which I really like and find very useful about two weeks ago.

So, I was wondering why 95% of forex traders are on the losing side. There are only two ways a currency pair can go - up or down. That should mean 50-50 chance you win or lose after entering a trade. Now combined with spread I don't know how to apply the math, but spread shouldn't make the success rate go from 50% to 5%... with lower time frames spread will obviously effect success rate negatively more.. but most traders(based on this forum atleast..) seem to trade 1hr+ charts, where spreads should barely make a difference whether you win or lose. With all the market analysis and strategies there are out there, and the 50-50 chance I just mentioned, how in the world is the success rate only 5%?

Most peoples losses due to poor money management not because of poor entry
  • #3
  • Nov 5, 2007 7:30pm Nov 5, 2007 7:30pm
Nobody really knows the real figure, the 5% thing is just a marketing myth.
The breaking of a wave cannot explain the whole sea.
  • #4
  • Nov 5, 2007 7:33pm Nov 5, 2007 7:33pm
It all lies with MM & leverage. With mini and micro mini accounts these days it should be a lot harder to blow up accounts.

I remember when you had to have 5k to open an account and the lowest amount you could trade was 1 standard lot (100,000) so that meant if you only wanted to risk 2% per trade that was 10 pips

It wasn't to hard to become a statistic those days.
  • #5
  • Nov 6, 2007 11:19am Nov 6, 2007 11:19am
Quoting Craig
Nobody really knows the real figure, the 5% thing is just a marketing myth.
I agree. I've no idea where the 95% myth come from.
  • #6
  • Nov 6, 2007 11:49am Nov 6, 2007 11:49am
REMEMBER THIS...... 95% of TRADERS DO NOT LOOSE..THEY QUIT...
  • #7
  • Nov 6, 2007 12:08pm Nov 6, 2007 12:08pm
5% of market participaments making profit on Forex, within a short time trading?

Come on, you must be kidding, it's just a myth. The real % of profitable participants isn't public anyway, but I guess in the long term (couple of years trading at least) I would be surprised if there's 0.5% profitable traders left, propably less.

In the long term Forex or "actual currency" investing (holding a position for a year or more), long term stock market investing, long term real estate investing - I think the profitable precent of market participants in the just mentioned areas is much better although. Maybe even the famous 5%

But making money on short time Forex trading is something that very few people (cmon, we shouldn't call them even people/a human ) can reach and hold over long period of time. That's much harder than impossible.
  • #8
  • Nov 6, 2007 1:34pm Nov 6, 2007 1:34pm
Quoting spiderforex
REMEMBER THIS...... 95% of TRADERS DO NOT LOOSE..THEY QUIT...
But, of course. They quit because they lose. Who in their right mind would quit if they were winning?
  • #9
  • Nov 6, 2007 1:43pm Nov 6, 2007 1:43pm
  •  mld
  • | Joined Sep 2007 | Status: Pips Raining Cats & Dogs | 85 Posts
is that official? lol
MattL4417 You should be enjoying harvesting your pips so long as you are not concerned with such statements and being a believer of who you are and what you can achieve
mld
  • #10
  • Nov 6, 2007 4:17pm Nov 6, 2007 4:17pm
I can't congratulate philmcgrew on an excellent post because I don't have 1KT status and I haven't even posted enough to PM him, but I'll do it by posting the link here that answers this question.

http://www.forexfactory.com/showthread.php?t=54985

It would behoove all newbies to spend a lot of time in the Trading Room as well as a handful of select other threads before doing anything else on this forum.
  • #11
  • Nov 6, 2007 4:59pm Nov 6, 2007 4:59pm
Quoting mld
is that official? lol
MattL4417 You should be enjoying harvesting your pips so long as you are not concerned with such statements and being a believer of who you are and what you can achieve
mld
Yup, It is official.

Bucketshop or marketmakers are the one who can make good are bad traders fail this business.
Trainee at UBS Investment Banking
  • #12
  • Nov 6, 2007 5:15pm Nov 6, 2007 5:15pm
Quoting MattL4417
So, I was wondering why 95% of forex traders are on the losing side.
I'm pretty sure Matt made an innocent semantic error. What he meant to say was (correct me if I'm wrong, Matt), "I was wondering why 95% of forex novices are on the losing side."

Who knows how the "95%" statistic originated? I'm just guessing but it likely started centuries ago in the earliest days of centralized commodity speculation. It's simply become a meme too firmly entrenched in the culture. Repeat something often enough and it becomes true.

Just for grins, google '95% traders lose' and see what comes up. I found it interesting to see philmcgrew's thread very near the top of the list.

"There are three kinds of lies: lies, damned lies, and statistics." - Mark Twain
  • #13
  • Nov 6, 2007 6:47pm Nov 6, 2007 6:47pm
Thanks a lot for the responses. I shouldn't of assumed the 95% statistic was real, sorry about that, I've just seen it used a lot I suppose. Thanks for the advice guys
  • #14
  • Last Post: Nov 7, 2007 2:35pm Nov 7, 2007 2:35pm
Yeah I think 95% is just a marketing gimmick picked up by system sellers, that said a lot of people do fail in trading, just the same as a lot of people fail at online gambling, casinos and the like. Control when trading is one of the hardest things to master.
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