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About those 95% or: some research to discuss

  • #1
  • First Post: Jan 27, 2008 9:10am Jan 27, 2008 9:10am
Just to put this into a context that actually has real world research as a background.

To discuss, dispute and let people realize how easy "making a living trading" really is

And to spare me reading the usual "the retail end cannot win/big bank conspiracy/exploitation of the feeble enduser traders" diatribe that springs forth from these articles, I am posting this here to at least cut down on the noise.

Personally my emphasis here isn't on the number itself, but some details that imho matter.

Quote
It is achieved as the result of a developmental process, not as the uncovering of any magic setup or indicator.
http://traderfeed.blogspot.com/2008/...among-day.html

Also the usual head to head of "can it be done" was topic again, so I thought I might throw it around a bit here on a higher level for those that are bored enough to spend time on it(due to not knowing what to do while their profits accumulate hehehe)

I'm afraid this stuff is mostly stock market geared, but imho there's still some relevance.
The other posts on it such as
http://traderfeed.blogspot.com/2008/...ndividual.html

and other linked articles can/should be taken in as well.

I've no real interest in making this thread "mine", I just thought some folks may not have come across this stuff yet and might find it an interesting read, and, being in a forum, discussion material.

I just wanted to mention it, not really discuss it.

Toodles.
Trust price. Know yourself.
  • #2
  • Jan 27, 2008 9:41am Jan 27, 2008 9:41am
Is this a depressing finding? I do not find it so. Would the distribution of elite talent look any different for musicians, basketball players, research scientists, or chess players? A high and sustained level of success in any of these domains is rare, but it *is* attained and attainable. It is achieved as the result of a developmental process, not as the uncovering of any magic setup or indicator. The single greatest challenge for traders and trading psychologists alike is to harness this developmental process. Are you on a learning curve that can lead to the acquisition of expertise? I can think of no more important question for self-evaluation.

Very good info.......In my Real Estae career, 20% of the agents made 80% of the money....80% of all small business start ups will fail within 2 years.......as a teacher, I have found that MOST of my students want me to do the work and they will trade off my research......the ones that make it are the ones that challenge my findings when thiers does not line up.......now, I believe you don't have to be elite, to be successful......someone trding FX may only be needing to suppliment income or recieve gains on capital that exceed what they can get for a return elsewhere..that person is also a success in my book........
  • #3
  • Jan 27, 2008 10:56am Jan 27, 2008 10:56am
Quoting Learntocount

.......now, I believe you don't have to be elite, to be successful......someone trding FX may only be needing to suppliment income or recieve gains on capital that exceed what they can get for a return elsewhere..that person is also a success in my book........
Good point. There are many levels of success in any endeavor. Take acting for example. There are many, many actors that play small parts. We never recall their names, but we see them often and if we check their profiles on the web, we find they've played in 100's of movies. They're certainly successful, though they don't play leading roles. They know how to choose an agent, audition and how to work with their directors etc. They've achieved and maintain the high level of competence needed to be successful. Though we don't know their names, they are very close to the top of their profession and represent a very small segment of the overall field.
  • #4
  • Jan 28, 2008 6:03pm Jan 28, 2008 6:03pm
Quoting SeekingLight
Just to put this into a context that actually has real world research as a background.

http://traderfeed.blogspot.com/2008/...among-day.html
awesome post man, gotta love real research

did you notice that the sample here was ALL pro traders that trade at prop firms? so basically the study says 80% of professional day traders lose money, and these are the guys who do it day after day, AND have a huge support network of good traders. and only 1% really make it big. very interesting

havent we been trying to find something like this for a long time btw??
Relax and be happy.
  • #5
  • Jan 28, 2008 6:42pm Jan 28, 2008 6:42pm
Quoting merlin
awesome post man, gotta love real research

did you notice that the sample here was ALL pro traders that trade at prop firms? so basically the study says 80% of professional day traders lose money, and these are the guys who do it day after day, AND have a huge support network of good traders. and only 1% really make it big. very interesting

havent we been trying to find something like this for a long time btw??
If you mean empirical data on the %, then yes, indeed. I posted it for this reason, since we already have a "please, 95% of traders don't lose their account"...turns out it's MORE!
(Or not?)

Anyhow - really just wanted to point to the existance of these studies at all; if someone truly is interested they are advised not to consume these interpretative summaries(always a no-no) but to consult the original data material and research instead.

I always find stats and figures interesting..especially if you can also find out more about correlations etc, too.

To me it just seems pretty incredulous(that so little traders "get there"); and it also makes me feel all the more special about my own progress(and hopefully everyone else over at "our little place" who has achieved the "crossover" as well).
Trust price. Know yourself.
  • #6
  • Jan 29, 2008 10:48am Jan 29, 2008 10:48am
seeking, now that we have some research, what do ya say we come up with a new slogan that is actually based in fact? maybe we can become famous for starting it LOL.

how about this one...

99% of daytraders never make it big
source: http://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trade%20040330.pdf
Relax and be happy.
  • #7
  • Jan 29, 2008 11:16am Jan 29, 2008 11:16am
Quoting merlin
seeking, now that we have some research, what do ya say we come up with a new slogan that is actually based in fact? maybe we can become famous for starting it LOL.

how about this one...

99% of daytraders never make it big
source: http://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trade%20040330.pdf

Oh dear. Add in some "optimistic posts" and I'm starting to feel like maybe snubbing the burger flipping job at the McD maybe wasn't such a good idea after all!
(I am kidding of course...I wouldn't apply to work at a place I wouldn't even eat at )

How about "Abandon all hope all ye who register here" on the registration form, in bold print
Trust price. Know yourself.
  • #8
  • Jan 29, 2008 2:34pm Jan 29, 2008 2:34pm
Hi guys, interesting post to say the least, and important too I believe.

I have to agree with Bill, not only because he is the man....but because he is right. So is the other post about people making supplemental income.

First thing is that you have to define "success". Some would call any positive return a level of success. I don't know if I would call a 1% return after a year success, but it isn't failure either.

Take the following scenario:

I start out trading with an account funded with 10,000 USD. After 10 years, it is now worth 21,000 USD. Not outstanding returns, but I take that 31k, 21 of which was profit, and use it to make a down payment on a home. (Ignoring tax payments...I would consider it a success. Especially if I never traded again, and became net positive for my career.)

What if you were patient enough to trade 1,000 USD into 90,000 USD over several decades, just to add to retirement income? Again, success in my opinion, as someone doing this is probably doing other things like mutual finds, etc. to find wealth.

Also, different groups probably have different statistical patterns. I wonder what ours is at James16 group? I am up after my first three and a half months. This is great, can I do it forever? I don't know....time will tell.

I also wonder what the stats are within specific firms?

Plus, there seems to be this stigma that you need to make a billion dollars in Foreign Exchange. There are people out there that do it as a hobby. A nice, cozy 12% return a year on a small account is probably more or less for fun....but a success in my opinion.

I think it is all in how you look at it, and what your goals are.

Clockwork
  • #9
  • Jan 29, 2008 3:08pm Jan 29, 2008 3:08pm

Well I think merlin and I were starting to settle not on the failure terminology, but instead on the "who really makes so much it stands out/actually "matters" enough" for the time spent on it and who is just "getting by" or actually losing cash thing.

I've posted this before, and it is my belief still - regardless of all the people who repeat over and again that it's either impossible(to make profit) or likely to fail(attempting to generate profit in the long, long run) if you just try to believe yourself into a dark pit hard enough(I wonder if they'll ever realize that whatever you manifest for yourself WILL come true..ironically Robert Merton's self fulfilling prophecy is illustrated by him with a banking crisis in his book..oh, the irony and impeccable timing of this coming up ;p ) - :
If I felt there weren't extremely mindboggling numbers to be made in this business with at the same time incredibly small risk(read: get 3-10% out of 1% risk open at any one point in time per position), then I wouldn't be spending another minute on it.

I still have my old targets - 1-5% a month, 1-5% a week eventually.
I'm not going to go into more personal details(as in how far along that road I am already; how much of this is already a reality now, etc pp); suffice it to say that I feel I "know for sure" that this is a very achievable, possible low end estimate IF you know what you are doing, where when and how.

I am neither one nor do I want to be one of the "just smack on high enough risk often enough and you can make 100% in no time".
I am however a firm believer in the fact that just a bit below 2% a week on average will generate 100% ROI in a year.
I'd rather be modest and have upside surprises than the other way around.

How impossible is it to make one trade a week at 1% that spits out 2% a week, on average?
IMHO this "idea" is the sensible version of this stupid "just 10 pips a day" myth nonsense that gets perpetuated around forex beginners that still haven't yet grasped that it is NOT pips, but r/r and %R that will make or break you / your trading.
Nobody cares about the pips as pips have no meaning and "xxxxx pips" is just another way of saying look how big my wee-wee is. I know because I've abused it like that before as well!
What matters is how much did you have to put out to get those back in and how much does all of this come out on top on average=> r/r, %R.

Disclaimer: Personal opinion/rant, not god's final words of wisdom on trading. Completely drifted off there, but just had so many occurences of all this again lately, it just had to go somewhere....now I wonder whether I shouldn't just press delete again.
Trust price. Know yourself.
  • #10
  • Jan 30, 2008 9:21am Jan 30, 2008 9:21am
Quoting SeekingLight
How about "Abandon all hope all ye who register here" on the registration form, in bold print


so if it is true that "99% of daytraders never make it big" (still trying to think of a better way to phrase it), then the next logical question i have to ask is...what separates the 1%?? what exactly do they have that the other 1% dont?

btw, this research hits close to home for me. once upon a time i was a trader on a wallstreet prop desk, and there was one guy on the desk who made more than everyone else combined. we all looked up to him in awe. i once saw him make a half million bucks in a single day and i still remember it like yesterday. we used to huddle around his computer at the end of every day to hear him talk about his positions, hoping to gleam a bit of insight. he was so incredible that i remember being extremely nervous talking to him the first few times. he was like a celebrity. and ya know what??...after a year of trading with this guy, just 4 seats away, i never could figure out how he did it. it was like magic. many years later i found my own magic, but i am yet to find the source of it. i usually chalk it up to experience, but there is definitely something more to it. i think it has to do with getting in the rhythm with the market, always thinking ahead rather than behind. but im still trying to figure it out to this day.
Relax and be happy.
  • #11
  • Jan 30, 2008 10:53am Jan 30, 2008 10:53am
...hmmm

interesting discussion.

Personally, I have no idea where the percentages for above-average traders stand these days and who qualifies for any such survey in the first place - but I work for a UK Prop. firm which was founded like many others here by extremely successful ex pit-traders from the LIFFE. We are all daytraders and there is a fair amount people who generate at least a five figure income per week; some more, and some less.

The only point that goes alongside with what has been noted in the thread so far, is the fact that the company churns through a good amount of trainees every year to pick the odd winner after training them and letting them live trade the companies capital. It is no news that most fail - but the ones who make it, do very well.

I can only speak for myself and I have to say that these statistics have not much use imo.

When I started trading, people used to say to me "its a tough job" - that's it.
I think there are only a handful of top brain surgeons on the planet - I think the dedicated students who posess the skill and will to become one of these are not deterred by statistics that predict a high faliure rate.

Check your P&L, and you know what side you're on.

regards
daytrading
Enter Signature
  • #12
  • Jan 30, 2008 11:53am Jan 30, 2008 11:53am
Quoting SeekingLight
...just another way of saying look how big my wee-wee is.
Is that the official, medical term?
Mr. Trend
  • #13
  • Jan 30, 2008 12:46pm Jan 30, 2008 12:46pm
Maybe the 1% are lucky.

And participants in the 1% club may change from month to month....

So if you are in the 99% club most of the time, you might be lucky every 2 to 3 years for a month.

All the short term lucky streaks are pooled together to make 1%, which is really just the luck that everyone is bound to get from time to time.

Quoting merlin


so if it is true that "99% of daytraders never make it big" (still trying to think of a better way to phrase it), then the next logical question i have to ask is...what separates the 1%?? what exactly do they have that the other 1% dont?
  • #14
  • Jan 31, 2008 9:51pm Jan 31, 2008 9:51pm
Quoting daytrading
but I work for a UK Prop. firm which was founded like many others here by extremely successful ex pit-traders from the LIFFE.
awesome, always cool to see guys like you at FF

Quoting daytrading
We are all daytraders and there is a fair amount people who generate at least a five figure income per week; some more, and some less.
so you are saying you have more than 1 guy on the desk making 5mil per year? how many break that threshold??
Relax and be happy.
  • #15
  • Jan 31, 2008 10:43pm Jan 31, 2008 10:43pm
Quoting merlin


so if it is true that "99% of daytraders never make it big" (still trying to think of a better way to phrase it), then the next logical question i have to ask is...what separates the 1%?? what exactly do they have that the other 1% dont?

btw, this research hits close to home for me. once upon a time i was a trader on a wallstreet prop desk, and there was one guy on the desk who made more than everyone else combined. we all looked up to him in awe. i once saw him make a half million bucks in a single day and i still remember it like yesterday. we used to huddle around his computer at the end of every day to hear him talk about his positions, hoping to gleam a bit of insight. he was so incredible that i remember being extremely nervous talking to him the first few times. he was like a celebrity. and ya know what??...after a year of trading with this guy, just 4 seats away, i never could figure out how he did it. it was like magic. many years later i found my own magic, but i am yet to find the source of it. i usually chalk it up to experience, but there is definitely something more to it. i think it has to do with getting in the rhythm with the market, always thinking ahead rather than behind. but im still trying to figure it out to this day.
It's mostly sub-consious, that "magic" part. I am not ancient in the market and even I have trouble sometimes pinpointing why exactly I am in or out. You brain understands patterns in a bizarre manner, stores them away, and recognize them later even though there is no precise science about it. I would hate to have to code my trading :

PS: did the successful traders you mention ever talk about fundies in their positioning? If they did, did they sound convinced, or were they trying to convince themselves?
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #16
  • Feb 1, 2008 2:44am Feb 1, 2008 2:44am
Quoting merlin
awesome, always cool to see guys like you at FF


so you are saying you have more than 1 guy on the desk making 5mil per year? how many break that threshold??
Merlin hi,

I take your fist comment as a compliment, thank you.

To your question: we have the two owners (one of them still trades and he is beyond that threshold you mentioned)

Otherwise, we're around 40 people (approx 30 traders and 10 trainees). Half a dozen of us generate anything between £10k and £15K per week individually. That puts us into a £480k to £720k bracket per annum before tax. Some of us have to pay a percentage to the company for being backed financially. (that % decreases when your account increases).

So, even when talking in us$, we are not quite at the 5million mark yet...but like most good traders, with increasing acc size, we increase position size - and vice versa.

regards
daytrading
Enter Signature
  • #17
  • Feb 1, 2008 12:52pm Feb 1, 2008 12:52pm
Quoting Plutonite
PS: did the successful traders you mention ever talk about fundies in their positioning? If they did, did they sound convinced, or were they trying to convince themselves?
the trader i am talking about in that story was 100% fundies day trading. he was basically trading the daily news information. he was a master at understanding the "human element" of the market that i too talk about so much (ie who is buying, who is selling, and why).
Relax and be happy.
  • #18
  • Feb 1, 2008 12:57pm Feb 1, 2008 12:57pm
Quoting daytrading
Merlin hi,

I take your fist comment as a compliment, thank you.

To your question: we have the two owners (one of them still trades and he is beyond that threshold you mentioned)

Otherwise, we're around 40 people (approx 30 traders and 10 trainees). Half a dozen of us generate anything between £10k and £15K per week individually. That puts us into a £480k to £720k bracket per annum before tax. Some of us have to pay a percentage to the company for being backed financially. (that % decreases when your account increases).

So, even when talking in us$, we are not quite at the 5million mark yet...but like most good traders, with increasing acc size, we increase position size - and vice versa.

regards
daytrading
hey thats not bad! sounds like you guys have a really strong firm! from my expereince this is an above average desk you are trading on, most desks are lucky to even have more than 2 or 3 guys bringining in 7 figures USD per year.

are all of you trading the same basic strategy, handed down from the founder of the firm? or is it more of a freestyle thing?
Relax and be happy.
  • #19
  • Feb 1, 2008 1:16pm Feb 1, 2008 1:16pm
Quoting merlin
hey thats not bad! sounds like you guys have a really strong firm! from my expereince this is an above average desk you are trading on, most desks are lucky to even have more than 2 or 3 guys bringining in 7 figures USD per year.

are all of you trading the same basic strategy, handed down from the founder of the firm? or is it more of a freestyle thing?
Merlin hi,

There are quite a few similar successful firms around in London.

Most of the guys trade the same strategy (which is the old pit trading style transitioned into electronic direct access trading), but on a variety of different instruments, although 99% futures.

That is because our trainees are being taught the way of the founder as you have correctly guessed.

People (including myself) who join(ed) as traders at a later stage, have the freedom to trade their own style if certain conditions apply.

One condition could be that you have you bring your own risk capital - so there is no need for the company to dictate your trading style because you are not risking their money.

Another way could be that you need financial backing and if that is the case, the firm will let you trade your style on the simulator for a month or two and give you a small limit after that to see how you do. If you do well, they are very keen and quick to increase your trading limits since they will earn a percentage of your profits in exchange for fronting the capital.

Its relatively simple - if you lose too much, your out....if you make money you have the chance to make more and more...etc.

regards
daytrading
Enter Signature
  • #20
  • Feb 2, 2008 2:26am Feb 2, 2008 2:26am

The statistic is actually.


95% of all traders fail in the first 6 months.


NOT


95% of all traders fail, lose or are unprofitable.

If you make it past 6 months, as trader, your in a position that better than 95% traders that started before you. You can truely pat yourselves on the back, at this point.

But it is totally false that 95% of all traders fail, as a whole. Because the ones who make it past 6 months usually have a lower dropout rate.

The second statistic is false data, and needs to be rectified, because i see a lot of people with ambition and passion coming across people promoting the latter statistic and giving up all hope, or dampening any hope they have.

http://www.hereinmaine.com/currency-trading/

under "system"

just wanted to get that point across.

Cheers

Rusty.
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