95% Lose in FX is a Myth: % Profitability in the US last year | Forex Factory

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95% Lose in FX is a Myth: % Profitability in the US last year

  • #1
  • First Post: Edited 7:37am Jun 12, 2014 7:01am | Edited 7:37am
In an effort to deal with this lingering stink we constantly hear about how this mythical 5% of FX traders are profitable and the rest are all losers, I have discovered a public document with some VERY interesting statistics.

I have long been an advocate that this 5% rumour cannot be accurate as every trader I know personally is in profit and I have finally found a reputable report that kicks the 5% in its nuts. I do not have info on exactly HOW profitable they are, the numbers only indicate IF the account has turned a profit in the previous year.

I have shaded the brokers for obvious reasons:
I********** B****** - 45.3% in Profit
O**** - 32.5% in Profit
F*** - 29.9% in Profit
I** - 23.1% in Profit
G*** C****** - 27.0% in Profit
I***/T*********** - 30.2% in Profit
F*** - 28.0% in Profit
C***** - 42.0% in Profit
M* T****** - 26.8% in Profit

The sample is from over 90,000 active FX accounts in the US last year.

There is ZERO indication that 95% of FX traders lose money, in fact it seems in some cases its almost 50% MAKE money!

I hope this goes some way to dealing with the perpetual anguish we read every day.

HP
In life you get 3 types of people, those who can count and those who can't.
  • #2
  • Jun 12, 2014 9:10am Jun 12, 2014 9:10am
you need to think long term man, especially if you want this to be a career. just cause you made money 1 year does that mean you will make money for 25-40 years?

I believer the 95% thing applies mainly to people who try to make this their main source of income/live off only trading profits.
Luck is what happens when preparation meets opportunity
  • #3
  • Jun 12, 2014 10:40am Jun 12, 2014 10:40am
Quoting ShanghaiMoon
you need to think long term man
Hi ShanghaiMoon,
Thank you for your response. Given you're a new member I'll assume you haven't been following the "Its impossible to make any money/Everyone Loses/Its all lies/Dont give up your day job" threads that pervade these forums. This report is the first, factual, evidence-based study that torpedoes the principle that everyone who does this loses.

If it makes you feel any better, the year before that the stats were even more impressive, 2012:
46.5% - 16,712 Accounts
43.0% - 610 Accounts
40.5% - 21,704 Accounts
36.0% - 10,566 Accounts
33.0% - 3,726 Accounts
31.0% - 9,828 Accounts
31.0% - 20,379 Accounts
30.1% - 3,929 Accounts
27.6% - 5,242 Accounts
22.7% - 2,076 Accounts

The test was out of 95,701 accounts.

The year before was even better. But I sense you have missed the point. I didn't say you should leap in and make this your solitary income stream, what I did say is that the facts are that a dramatically different % of traders ARE making money on FX. Saying that the 31% of FXCM clients (6,317 of them!) can't survive on the profit they make is as amusing a statement as "95% fail". You might just find that they can and do.

The point I am making is WELL ABOVE 5% of traders in FX MAKE MONEY. If you recognise yourself in the 50%+ who lose, then so be it.

It reinforces my opinion that I have been attacked for, that the most vocal are the biggest losers, and the winners will tend to keep to themselves, creating a false impression of doom and gloom.

If this serves to encourages anyone to be serious and contemplate making a career out of it, then perhaps they will be in a better position to evaluate it fairly with a 40% success rate over a ridiculous, made up 5%.

HP
In life you get 3 types of people, those who can count and those who can't.
  • #4
  • Jun 12, 2014 10:43am Jun 12, 2014 10:43am
The 2011 figures:

43.3% in profit
41.0%
38.1%
36.2%
33.0%
33.0%
30.3%
29.9%
29.0%
26.9%

99,207 accounts evaluated.

I may sound a little evangelical about this, but I see no sign of 5% profitable. The figures I have show CLEARLY that AT LEAST for the last 3 years (which many commentators have described as the worst) significantly more than a 3rd are profitable.
In life you get 3 types of people, those who can count and those who can't.
  • #5
  • Jun 12, 2014 11:02am Jun 12, 2014 11:02am
There's some dirty little secrets that the brokers don't tell you that enable them to misrepresent their numbers without lying.

1. If you made one penny profit you are a profitable trader

2. Many brokers pay a small amount of interest on your cash sitting in your account so after you give up and go dead broke with 50 bucks left in your account the following year when that account is $50 and one penny(from that little interest to you didn't even know you are getting) you are now a profitable trader.

I'm sure the other ways that I don't know about.

I believe the 95% number is incorrect. I would say the number is more like 99%. Just visit any forum from the many that are out there including this one. And look at how many new aspiring traders there are and how many come and go that are trying to trade a live account and don't have one iota of what they're doing.

Now let's delve into this a little deeper. Almost all retail Forex traders are trading with a broker that trades the B market. If you don't know what the B market is, it is where the orders you place do not go to any banks for transactions. All transactions are handled through the broker with them taking the other side of your trade. Brokers don't stay in business with winning traders. They need that constant churn of new money coming in for them to take. Allen
  • #6
  • Jun 12, 2014 11:07am Jun 12, 2014 11:07am
There is a reason why FX only used to be reserved for large banks and people with a lot of money. Same goes today. Trying to trade a 1 mil account with only 10000 doesnt work. 95% of traders are not prepared properly to trade.
All posts are my personal opinion
  • #7
  • Jun 12, 2014 11:08am Jun 12, 2014 11:08am
Quoting fx_man
There's some dirty little secrets that the brokers don't tell you that enable them to misrepresent their numbers without lying. 1. If you made one penny profit you are a profitable trader 2. Many brokers pay a small amount of interest on your cash sitting in your account so after you give up and go dead broke with 50 bucks left in your account the following year when that account is $50 and one penny(from that little interest to you didn't even know you are getting) you are now a profitable trader. I'm sure the other ways that I don't know about. I believe the 95% number is incorrect. I would say the number is more like 99%. Just visit any forum from the many that are out there including this one. And look at how many new aspiring traders there are and how many come and go that are trying to trade a live account and don't have one iota of what they're doing. Now let's delve into this a little deeper. Almost all retail Forex traders are trading with a broker that trades the B market. If you don't know what the B market is, it is where the orders you place do not go to any banks for transactions. All transactions are handled through the broker with them taking the other side of your trade. Brokers don't stay in business with winning traders. They need that constant churn of new money coming in for them to take. Allen
Yeah right Maybe you should say 100%, hell let's go to 200%..when you lose all your money you have to pay that more to your broker just because he let you use his services.. Get a grip of yourself man! What HedgePiglet posted is true and more in line what others are saying these days. Those 95% numbers were invented by those traders who lost their money trying to overcome their incompetence.
  • #8
  • Jun 12, 2014 11:16am Jun 12, 2014 11:16am
Quoting HedgePiglet
It reinforces my opinion that I have been attacked for, that the most vocal are the biggest losers, and the winners will tend to keep to themselves, creating a false impression of doom and gloom.
I can't have said it better ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #9
  • Jun 12, 2014 11:21am Jun 12, 2014 11:21am
Quoting fx_man
There's some dirty little secrets that the brokers don't tell you... Allen
Hi Allen,
The results were calculated on the basis that each account had to be traded a minimum quantity of times in order to be counted as 'live'. This should address the interest element. None of the figures are 'roll-overs'.
The B market argument is absolutely valid. Here in London I had lunch with a senior member of a very large high street bank who surprised me with how infrequently they actually went to market to fill their retail orders. However, the rates they were providing and filling were at market. I say if they want to carry a $4 billion book overnight, good for them.

The point of this post is clear, to dispel the myth of the 5%. Hell, it might be 10% but it most certainly is not 5%. The fact is, even with the thousands that 'everyone' insists come into this game and stay for a week while they burn cash, still contributes to significantly higher profit results than this 5% urban legend.

I have been fortunate to work with a large Japanese retail outfit with over 1,000,000 users. I can assure you, they are somewhere in the 40% also. At last I have evidence that its not an isolated result.

Again, we can tear this down until the cows come home, but the bottom line is, many more than 5% of retail accounts in the US are profitable. If you choose to redefine profit to undermine this statistic, that is your prerogative. I believe 95% of the folks in here are capable of interpreting what profit means.

Me, and the team of 5 I am in are consistently profitable and I do not believe we possess any unique qualities or skills that I don't see represented here every day. I have admitted I have struggled to accept this '5%' and I am pleased I have found a valid document that disproves it. Thats it.
In life you get 3 types of people, those who can count and those who can't.
  • #10
  • Jun 12, 2014 11:47am Jun 12, 2014 11:47am
I think you make a mistake in logic.

The 95% refers to the number of traders, not the increase of accounts as a whole.

5% of the profitable traders fill the trades because 95% of the traders lose.
In the end the accounts still existing have grown of course.

Reminder:
Forex can't create money, it only changes the owner.
  • #11
  • Jun 12, 2014 11:52am Jun 12, 2014 11:52am
Quoting mvp77
I think you make a mistake in logic.
Hi mvp77,

I have not applied any logic. These are statistics. Out of almost 100,000 live, actively traded accounts for the last 3 years, pretty much a third of them are in profit. The sample was of every single account registered with a broad sample of brokers. They didn't only choose the winners, they evaluated every single one, and up to 46% of them (with some brokers) were profitable.

I do note that every year I have available, there is a single broker who tops the 'charts' every year by a relatively impressive margin. I can't tell you why this would be and I don't want to be accused of promoting one over another. I'll check the rules and if its ok post the results by broker under the broker forum.

To summarise. The statistics of every single retail account registered in the US with a handful of brokers was evaluated. And nowhere NEAR 5% are in profit. Its well over 30%. Not sure how this can be anything other than what it is.
In life you get 3 types of people, those who can count and those who can't.
  • #12
  • Jun 12, 2014 12:00pm Jun 12, 2014 12:00pm
Quoting HedgePiglet
{quote} Hi mvp77, I have not applied any logic. These are statistics. Out of almost 100,000 live, actively traded accounts for the last 3 years, pretty much a third of them are in profit. The sample was of every single account registered with a broad sample of brokers. They didn't only choose the winners, they evaluated every single one, and up to 46% of them (with some brokers) were profitable. I do note that every year I have available, there is a single broker who tops the 'charts' every year by a relatively impressive margin. I can't tell you...
Hi HedgePiglet,

i only say that more people lose than win.
Otherwise, would forex and even capitalism, life itself, not work. It's simple.
  • #13
  • Jun 12, 2014 12:08pm Jun 12, 2014 12:08pm
This really is amazing how so many broker stay in business handing out all their money to the profitable traders. I guess they're doing it for charity or maybe just to be nice. Get real people. As I stated before just open your eyes and look at the forums full of the brains full mush coming into this market everyday thinking they're going to make a fortune. There is a never ending supply of them being led the to financial slaughter by the trolls of sellers that seldom dreams disguised as indicators and EA's and other crap that could never be used for actual trading. Although there are a few reputable brokers out there, the majority are simply modern-day bucket shops. Happy trading from the 1%, Allen

PS. Trade well because if your broker doesn't take your money. I will
  • #14
  • Jun 12, 2014 12:08pm Jun 12, 2014 12:08pm
Quoting mvp77
{quote} i only say that more people lose than win.
Hi mvp77,
Yes, there I can agree with you 100%. Sadly it does seem that annually, over 50% lose. This isn't a fantastic statistic in any sense, but it does sound a bit better than 95%!
In life you get 3 types of people, those who can count and those who can't.
  • #15
  • Jun 12, 2014 12:43pm Jun 12, 2014 12:43pm
Great thread Hedge, and so nice to see an attempt to dissuade the naysayers with some facts. I'm sure the 2 Doomsayers (you know the "M" Brothers!) will troll along here and spew the same old garbage about 99.6% losing and that it's a fact!
  • #16
  • Jun 12, 2014 12:56pm Jun 12, 2014 12:56pm
I get that about 50% are making more money now but does it last is what Im saying. I also don't think its actually 95% but I think its a majority lose. They say the same thing about owning a restaurant or business, 95% of them are closed in 5 years because they can not stay profitable. again it probably isn't 95%.

I also think it is relative in the sense that it only applies to the now.

for example

jesse livermoore was a technically profitable trader multiple times, till he lost it all on bad trades multiple times. He ended up losing all his money and killed him self dying an unprofitable trader. so would you consider him a profitable trader or no? I mean he did make millions twice.... but in the long term he went bust!
Luck is what happens when preparation meets opportunity
  • #17
  • Jun 12, 2014 1:03pm Jun 12, 2014 1:03pm
Quoting fx_man
Brokers don't stay in business with winning traders. They need that constant churn of new money coming in for them to take.

I disagree, a bit. Sure, they make money off losers. But you are forgetting the spread, which is their main income. I believe that the #1 'desire' of all brokers is simply to fill as many trades as possible. They don't concentrate on holding outstanding positions much at all. They sell to one guy and 1 second later they buy from another. They are net zero most of the time, focusing only on just harvesting pips from the spread.

The spread is a near-zero risk money maker for them. Holding positions is much more risky and costly (they have to hire pros to trade). It is risky because even though they can move the market around a bit for a while, the larger world can still push the market further and longer than they could. So why would they even try to make money 'trading'? Just work that spread baby. EZ money every damn day.

Imagine that you opened your own brokerage. Job #1 is "don't go out of business by making risky trades". You probably would not even mess with that at all until you had been running for years. You would push the market a bit when it came close to lots of stops, of course. But that is JUST TO GET THEM FILLED! Not to do 'gotcha' trades. Brokers want volume to legitimize their whole little 'mini-market' they have set up. Volume = $$$ to them, gotcha trades are less important and probably happen infrequently.
  • #18
  • Jun 12, 2014 1:05pm Jun 12, 2014 1:05pm
Quoting ShanghaiMoon
I get that about 50% are making more money now but does it last is what Im saying.
I have been trading for several years and am consistently 'profitable'. Every one of our team are profitable. I trade a set profile with obsessive money management. At the end of each month, I have more in my account than when I started. I take a % and I start again. When I hit a certain threshold, I spend on something I have on the plan. A property, a holiday. I'm no Jesse Livermoore.

The bottom line is the urban legend of only 5% being profitable appears to be overly applied. Turns out more than half fail. I'm not exactly thrilled at the news but profitable accounts are as high as 45%+ in some cases, thats a fair bit better than 5%.
In life you get 3 types of people, those who can count and those who can't.
  • #19
  • Jun 12, 2014 1:13pm Jun 12, 2014 1:13pm
it's amazing. even with your statistical data of close to 100,000 accounts that you still get replies telling you that you're wrong
  • #20
  • Jun 12, 2014 1:19pm Jun 12, 2014 1:19pm
Quoting justin7
it's amazing. even with your statistical data of close to 100,000 accounts that you still get replies telling you that you're wrong
I just laughed out loud.
In life you get 3 types of people, those who can count and those who can't.
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