95% failure rate? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Hedge funds failure rate 26 replies

technical price patterns' Rate of failure. 17 replies

Doing things the "easy" way = failure? 8 replies

Success or Failure...and for how long? 2 replies

Does Failure Motivate You? by Dr Van K. Tharp 0 replies

Attachments: 95% failure rate?
Exit Attachments

95% failure rate?

  • #1
  • First Post: Oct 29, 2008 2:10am Oct 29, 2008 2:10am
Is it a statistical fact the 95% of all traders fail in this business, or is this just some myth made up by some company trying scare you into buying their product?

Also if 95% do fail and FF makes up a small population of traders in the world, then would that make only a hand full of us here successful?

Correct me in advanced if I am wrong I would just like to disprove this myth if in fact it is, thanks….

Happy Trading
  • #2
  • Oct 29, 2008 2:29am Oct 29, 2008 2:29am
Hi,

It is not a myth.

Pardon my analogy because it has a weakness (which I explain in a moment), but think of it this way:

Trading for profits successfully is a science - which can be learned like being a doctor. Now, would you trust a doctor that tells you that all his knowledge about diagnosing your possible illness stems from reading a couple of books and spending some time on a medical online forum? Or worse, would you let him operate on you?

As I mentioned, the comparison has a weakness in that way that if one has enough determination, one can really learn how to trade successfully without going to university - but even with that possibility being real, it is equally hard work to become an outstanding trader....and by the same token, many who attempt to become a top surgeon will also fail.

regards
daytrading
Enter Signature
  • #3
  • Oct 29, 2008 3:13am Oct 29, 2008 3:13am
Quoting daytrading
Hi,

It is not a myth.
Can you please point me in the right direction for the study that came up with this figure of 95%?

thanks
  • #4
  • Oct 29, 2008 3:29am Oct 29, 2008 3:29am
Hi,

I would not ride on the specific number of "95%" - it is more appropriate to look at what this number really means in context: that the vast majority of aspiring traders lose their shirt along the way.

But as I mentioned in my previous message, this is common for many professions that only a relative small amount of people make it to the top.

The difference is that in trading - since it has become such a widespread endeavour - it is more talked about than failures in other professions.

regards
daytrading
Enter Signature
  • #5
  • Oct 29, 2008 3:45am Oct 29, 2008 3:45am
Quoting fxprocessor
Can you please point me in the right direction for the study that came up with this figure of 95%?

thanks
I really doubt that there's a specific study.
If there were I'll bet it's more like >99%.

But, even so, as Daytrading says, it's no different
than anything else that people embark on with the
intention of making a career out of it (music, art, writing,
the list could go on and on). There's going to be a way
higher attrition rate than 95%.

As I'm writing this, on the FF home page, there are
"3,367 Traders Online". Will more than 34 (1%) stick
it out, work their asses off and become proficient?
You know that they won't. But will I? Will you?
That's what counts.

Here's to sticking it out for the long haul!
  • #6
  • Oct 29, 2008 3:50am Oct 29, 2008 3:50am
Another part of this is the low-entry barrier to trading. If you wanted to be a lawyer or doctor and eventually make a 6 figure income every year, you have to pass a slew of gatekeepers beginning with your first four years of university.

Then law or medical school gatekeepers ensure that only those that are academically suited enter the the school. Then during your years in the school, their are numerous tests that judge your emotional abilities to handle the job along with your intelligence.

Once you finish school, you know have to pass another gatekeeper, the licensing boards of each state.

Once you have your license, you now have to join a law firm or hospital which means you have to get by their gatekeepers.

Once you're in, you now have to bust your ass for years to make partner or get to the point where you can open your own private practice.

The end result is that after 7-9 years of universities and 5-7 years of busting your ass for someone else then, and only then, will you consistently make a 6 figure income.

Now, let's look at trading forex. What do you need to become a trader. A frigging computer and $500. Yet everyone thinks they'll be making a consistent 6 figure income in a few months or even years. Forget the fact that the industry is full of some very, very intelligent people who have spent years learning how to be a consistent trader. Forget the fact that you're going up against organizations that have millions of dollars to throw behind their traders in the form of support such as analysis and system testing. Forget the fact that these same organizations are playing on a different field then you are. All you need is a few indicators, a broker that doesn't screw you too much, some money management and in a year or two you'll be living the high-life.

Is it any wonder so many fail?
  • #7
  • Oct 29, 2008 4:03am Oct 29, 2008 4:03am
Quoting Dopey
What do you need to become a trader. A frigging computer and $500.

and in a year or two you'll be living the high-life.
Waaa! I'm seriously laughing my ass off!

Great post(s).
  • #8
  • Oct 29, 2008 4:28am Oct 29, 2008 4:28am
Quoting Dopey
Another part of this is the low-entry barrier to trading. If you wanted to be a lawyer or doctor and eventually make a 6 figure income every year, you have to pass a slew of gatekeepers beginning with your first four years of university.

Then law or medical school gatekeepers ensure that only those that are academically suited enter the the school. Then during your years in the school, their are numerous tests that judge your emotional abilities to handle the job along with your intelligence.

Once you finish school, you know have to pass another gatekeeper, the licensing boards of each state.

Once you have your license, you now have to join a law firm or hospital which means you have to get by their gatekeepers.

Once you're in, you now have to bust your ass for years to make partner or get to the point where you can open your own private practice.

The end result is that after 7-9 years of universities and 5-7 years of busting your ass for someone else then, and only then, will you consistently make a 6 figure income.

Now, let's look at trading forex. What do you need to become a trader. A frigging computer and $500. Yet everyone thinks they'll be making a consistent 6 figure income in a few months or even years. Forget the fact that the industry is full of some very, very intelligent people who have spent years learning how to be a consistent trader. Forget the fact that you're going up against organizations that have millions of dollars to throw behind their traders in the form of support such as analysis and system testing. Forget the fact that these same organizations are playing on a different field then you are. All you need is a few indicators, a broker that doesn't screw you too much, some money management and in a year or two you'll be living the high-life.

Is it any wonder so many fail?
Post of the year !
Measure twice, cut once
  • #9
  • Oct 29, 2008 5:27am Oct 29, 2008 5:27am
Quoting Mioles
Is it a statistical fact the 95% of all traders fail in this business, or is this just some myth made up by some company trying scare you into buying their product?
I don't think any person know the correct numbers or where this 95% come from but if i was going to try a wild guess based on all the small info i have been reading and picking up about it over the years i will say maybe less then 0,5% are really making more or less steady profit over time in trading. 5% is probably a far to big number. But of course it is just a guess.
And another thing is when one say that 95% of all traders fail then i will ask "what is a trader" ?
Is it a person that have a demo acc and are posting a lot on the forums every day?
Or is it a person that have been trading regularly some years on a live acc?
Or is it something else?
One thing i think everybody that have a little bit of experience in trading can agree to is if you say that any person looking in to trading at some point should be included in this numbers and if we also say that to be counted as successful one have to be making profit (real money) at least two years in a row then there is no way as much as 5% are doing that.
Well... that is my opinion anyway.. It is ok if others think different.
Quoting Dopey
Is it any wonder so many fail?
Good post Dopey


Arctic4x
  • #10
  • Oct 29, 2008 5:51am Oct 29, 2008 5:51am
The point of the figure is that it is extremely likely that a beginner who starts to trade will fail. And the rest are only trading until they blow up their account in a drunken orgy of market chasing and revenge trading.
The market reveals who we really are...
  • #11
  • Edited 7:47am Oct 29, 2008 7:21am | Edited 7:47am
Quoting fxprocessor
Can you please point me in the right direction for the study that came up with this figure of 95%?

thanks

In 2 plus years of trading I have never found an actual study that confirms this 95/5 ratio. It may be like a lot of other common ideas - 95% of the people repeat it because they heard 95% of the people repeat it.

The 5% figure does not just put a number on how many succeed. The 5% figure also tells us that the 5% think very differently than the rest. They gauge risk, reward, effort, understand long term vs. short term analysis and see the essential need for preparation differently than the rest.

Persistence is of course key, but it is not the only thing one needs to succeed in any field. I believe that too many people live under the myth that persistence is all you need to succeed.

You can be very persistent in trying to be like Tiger Woods, but if you are using a baseball bat to play golf you will certainly be in the 95% who never make it on the tour. Forex traders need to be honest with themselves when an indicator or EA or method or their trader psych is not working. Admit what does not work. Admit where you did not perform well. Study. Study. Make the necessary corrections. Stopping trying to play golf with a bat.

persistence + personal honesty + skilfull preparation = achievement


.
  • #12
  • Oct 29, 2008 10:05am Oct 29, 2008 10:05am
Why should trading be any different than any other business?
Take a look at the statistics on new business start ups, the failure rate for new businesses in the first year are about 70%, the 5 year failure rate is about 90%.

In trading we are even more likely to blow out due to the emotions involved and the speed at which a trade can move against you, coupled with poor money management, inconsistent trading, jumping from system to system, greed, fear, and the list just gets bigger and bigger as to why people fail at this.
Same Whore .... Different Dress
  • #13
  • Oct 29, 2008 10:47am Oct 29, 2008 10:47am
50% of people are of below average intelligence. If you're stupid you can't expect to be successful.

The majority of people are impatient. Impatient people do not give it the time or energy to develop the skills to be successful.

A large proportion of people are greedy. Greedy people place too much on trades, jump in too early trading live, dick all their money and fail. No sympathy there.

Some people have not got the psychological make up and can't handle the stress and pressure, or the insecurity of not having a stable salary that they can depend upon.

Is it any wonder that so many drop out and fail? I don't believe good traders are born that way, but some people just have not got a clue and they never will do. Unfortunately everyone thinks they're the centre of the universe and that the rules do not apply to them, that is the nature of the human condition. Only the idiots can save themselves, but it depends on the cost of their pride as to how much they are willing to sacrifice before they either change or admit that they are not cut out for it. For the majority, this pursuit will lead to nothing but misery, perhaps with some important life lessons thrown in along the way.
  • #14
  • Oct 29, 2008 2:00pm Oct 29, 2008 2:00pm
Wow thanks guys, I think anyone starting out who comes across this 95% ratio thing should pay a visit to this thread because there are some priceless post here.

Its just like I thought the 95% ratio can be accredited to failures in all realms of life, and its not a study done by a panel related to the forex world..LOL

But how would you categorize traders who have spent years studying, taking trades, busting their asses, reading forums, books etc...and still failing?

Thanks
  • #15
  • Edited 2:51pm Oct 29, 2008 2:10pm | Edited 2:51pm
Quoting birdt
50% of people are of below average intelligence. If you're stupid you can't expect to be successful.

.
birdt,

why you generalise that 50% is below average intelligence? i believe nobody is born stupid. just some "lazy" to think or came from very specific environment or whatever reasons. or not realise.

in my language, there is a saying "the back of a parang if polish it can be sharpen".

G33maroon

p/s: parang is something like knife (not the sharpen both side)..big one, the back is not sharpen..ahh i have difficulty to explain. you understand i hope.

i like your words "For the majority, this pursuit will lead to nothing but misery, perhaps with some important life lessons thrown in along the way."..beautiful words. i may borrow it to say something intelligent to my kids or niece or nephews hehe
I am bored..
  • #16
  • Oct 29, 2008 2:14pm Oct 29, 2008 2:14pm
Quoting Mioles
But how would you categorize traders who have spent years studying, taking trades, busting their asses, reading forums, books etc...and still failing?
Thanks
They are masochists..... the market gives to everyone what they need.
Same Whore .... Different Dress
  • #17
  • Edited 2:39pm Oct 29, 2008 2:21pm | Edited 2:39pm
Quoting Mioles
But how would you categorize traders who have spent years studying, taking trades, busting their asses, reading forums, books etc...and still failing?
Thanks
You can say this about any profession there is. I've met countless numbers of useless doctors, salesmen, chefs etc etc who've done the same profession year out year in without reaching any far and without showing any significant amount of "profession intelligence" despite many years practice.

How would you categorize those ? Example from a real world situation;

My back went straight to hell 4 years ago and I couldn't even move. So I went to the doctor really concerned that it might be something serious. "No no, this is just a small stretch in your back, take this (blue and yellow purple) pills and go to work tomorrow" he said.

I refused to accept he's "term" of the given situation and went to a specialist in this field instead. The specialist took of he's glasses and said this was the worst back he'd seen in he's 35 years long career, giving me medical certificate to stay home for 1 month in a rush, and made my back almost as good as new during this time.

A parallel can be made to any profession;

You want to place money for (a high-yield?) return and seek out your local bank and adviser. "Yes, yes, this contain small risk/high yield, just sign this papers and transfer your money and we'll handle this issue, no problem".

You know how this goes, but you might exclude any happy ending.

My point is; just because someone have a profession, doesn't mean he master it fully.
Measure twice, cut once
  • #18
  • Oct 29, 2008 3:03pm Oct 29, 2008 3:03pm
Quoting Mioles
Wow thanks guys, I think anyone starting out who comes across this 95% ratio thing should pay a visit to this thread because there are some priceless post here.

Its just like I thought the 95% ratio can be accredited to failures in all realms of life, and its not a study done by a panel related to the forex world..LOL

But how would you categorize traders who have spent years studying, taking trades, busting their asses, reading forums, books etc...and still failing?

Thanks

Trying the wrong methods or skills over and over doesn't yield success.

I would say they need to face their failures or move on to something else.
  • #19
  • Oct 29, 2008 3:41pm Oct 29, 2008 3:41pm
Quoting KudzuFX
Trying the wrong methods or skills over and over doesn't yield success.

I would say they need to face their failures or move on to something else.
Or just fund another account to blow out!
Just watch "The Secret", maybe this
time it will be different. LOL
Never mind trying to learn anything.
  • #20
  • Oct 29, 2008 4:29pm Oct 29, 2008 4:29pm
I could not have said that any better Kudzu! I hate hearing 95%..blah blah blah. 95% based on what? a survey of 10 traders in a room? Does that small sampling represent the entire trading population in the U.S.? in the U.K? in the entire world? hardly believable.

Quoting KudzuFX
In 2 plus years of trading I have never found an actual study that confirms this 95/5 ratio. It may be like a lot of other common ideas - 95% of the people repeat it because they heard 95% of the people repeat it.

The 5% figure does not just put a number on how many succeed. The 5% figure also tells us that the 5% think very differently than the rest. They gauge risk, reward, effort, understand long term vs. short term analysis and see the essential need for preparation differently than the rest.

Persistence is of course key, but it is not the only thing one needs to succeed in any field. I believe that too many people live under the myth that persistence is all you need to succeed.

You can be very persistent in trying to be like Tiger Woods, but if you are using a baseball bat to play golf you will certainly be in the 95% who never make it on the tour. Forex traders need to be honest with themselves when an indicator or EA or method or their trader psych is not working. Admit what does not work. Admit where you did not perform well. Study. Study. Make the necessary corrections. Stopping trying to play golf with a bat.

persistence + personal honesty + skilfull preparation = achievement


.
0 traders viewing now