90% of traders fail? Who says?

[tomorton]

We’ve all heard the regular cautionary advice - 90% of traders fail. Sometimes its 80, 94, 95, 97 or even 99. Sometimes its traders, sometimes its daytraders who are doing the failing, but the message is clearly meant to be a deterrent to short-term speculation on the markets.

This advice might be true or it might not, but it certainly isn’t a deterrent. And we don’t exactly know what ‘fail’ means in this context. Anyway, I am interested if we can track down who was the first person to put an actual number to such failures. I’d like to know how they got that number, and why they went searching for it in the first place. I’d like to know what they were selling when they published this.

Who knows the earliest published form of this advice?

 

[BoarDome]

Most businesses fail for their first year, I think the statistic is 80%. Trading is a business. Most people after a failed year give up, increasing numbers to the 90% region. Yes this statistic is pulled out of thin air but it is a lot more probable that 10% of people make money than the other way around.

I think it would probably be in a VERY old publication, it'd be interesting to see if someone tracks it down.

 

[gamma]

Doing a google search comes up a lot of "why 90% of traders fail "and then there is some selling like you mention. I nearly become one of the 90% until I found the XYZ system
It certainly does not show any concrete evidence of failure numbers

 

[0007]

I''ve yet to see an agreed definition of failure - until that is established it is difficult to have a meaningful discussion. I also suspect that there may be many different ideas of what constitutes failure.

Eg Was J Livermore a failure?

 

[Trader333]

the message is clearly meant to be a deterrent to short-term speculation on the markets.

Why is it ?


Paul

 

[Lightning McQueen]

found this Success Rates of Traders

lots of pointers to what appear proper studies in this field, looks worth a further search from there for those interested.

 

[Black Swan]

found this Success Rates of Traders

lots of pointers to what appear proper studies in this field, looks worth a further search from there for those interested.

Good read that LM, nails a few myths with a bit of science/study...more importantly who made you T2W's king of 'spacies' and asteroids...?

 

[DaveJB]

BBC News | UK | Counting on the figures

Comedian Vic Reeves once said 88.2% of statistics were made up on the spot.

It's a blarney statistic - a pure guess - how on Earth could you begin to count it otherwise...it's not as if SB companies are going to publish monthly figures showing the percentage of their clientele who've blown up, is it?

I bet it REALLY IS around 90%+ though, and my definition of failure is 'lost everything you put in (times x, where x is an integer that somebody will later equate to your own personal pain threshold), and decided to quit'.

In fact I bet it is well over 90%, you only have to read most threads on here to realise that :-

A) the people who make it as far as a serious discussion on a trading BBoard are actually probably no greater than 50% of those who set out to trade for fun and profit, (a fair number posting on here are so obviously disinclined to work - "'Please tell me the indicators that work, on a free datafeed" - for it to annoy even the most saintly amongst us), and

B) Most serious threads (a pretty small percentage of the total) are pretty standard in appearance - one, or a very few 'gurus' who do all the serious posting, and a small army of followers desperate to mimic what they percieve to be the performance they all wish to emulate. Some are lazy, and deserve to fail frankly, as they flit from instant fix to instant fix, others gradually discover that you need to really put the hours in just to spot the BS, so you can concentrate on the good stuff.

Does everyone who works hard at this end up a winner? Sadly, no. Again just my opinion....but one shared by 79.385% of the top 10 fund managers!

Dave

Dave

Dave

 

[tomorton]

Why is it ?


Paul

In the context in which this is quoted, the message usually is '90% of traders fail, so let us manage your money', or '.....so buy our signal service' or '.......so sign up for our expensive training'.

None of these parties that I have seen quote '90% of traders fail, so jump right in'.

But whenever statistics (or 'scientifically proven facts') or whatever are thrown at us, we should always have the right to know who is quoting them and who paid for them to be derived.

 

[tomorton]

found this Success Rates of Traders

lots of pointers to what appear proper studies in this field, looks worth a further search from there for those interested.

Good find, interesting.

 

[virtuos0]

I'm fairly sure this can be traced back to Richard Wyckoff, publisher of "The Magazine of Wall Street" who said in 1910..

"..the percentage of stock market failures traceable thereto would be about 90"

And if anyone's interested his three reasons for failure were lack of capital, incompence, and overtrading. That about covers it!

 

[0007]

I'm fairly sure this can be traced back to Richard Wyckoff, publisher of "The Magazine of Wall Street" who said in 1910..

"..the percentage of stock market failures traceable thereto would be about 90"

And if anyone's interested his three reasons for failure were lack of capital, incompence, and overtrading. That about covers it!

.... and if you overtrade or trade when undercapitalised - that's incompetence anyway, in my book!

 

[LostPigeonCoo]

I used to belive 90% of traders fail 10 years ago, Now with better Internet access and better TA Software, better instant trading now, for the public, trading with Pros for good market prices etc.
I belive surely the odds have to be better than 90%.

They should put all this in perspective and more, cause i don't belive its 90% anymore.

 

[BoarDome]

I used to belive 90% of traders fail 10 years ago, Now with better Internet access and better TA Software, better instant trading now, for the public, trading with Pros for good market prices etc.
I belive surely the odds have to be better than 90%.

They should put all this in perspective and more, cause i don't belive its 90% anymore.

Surely this allows more numpties to gamble easier?

 

[LostPigeonCoo]

Surely this allows more numpties to gamble easier?

Yes but theres more TA weath of wisdom, people can be taught of others mistakes online, Theres a weath of info on this site,there was dozans of traders in the tech boom, most of them had no internet back then, but that did not stop them trading.
Are people using these Software packages realy making money?

 

[goose4]

90% is money in the bank for the successful traders.

I dont know why people find these topics so interesting.

With betfair I read only 3% are pro.......

I like these figures its a healthy sign of the ethos.

 

[A Dashing Blade]

Gotta feeling in my water that the stat comes from a study commissioned by one of the US exchanges (CBOT maybe), it's the one where there's a lot of info about options/stratagys etc available to download.

Fwiw, I's guestimate from my time on the Liffe floor in the early '90's that the fold rate of locals was 15-20% per year.

 

[montmorencyt2w]

I used to belive 90% of traders fail 10 years ago, Now with better Internet access and better TA Software, better instant trading now, for the public, trading with Pros for good market prices etc.
I belive surely the odds have to be better than 90%.

They should put all this in perspective and more, cause i don't belive its 90% anymore.

I think in the old days of little or no technology and trading by the seat of your pants, then about 90% failed.

These days, with computers, automated charts, trading software, indicators, instant news and all the aids that money can by, I'd guess that, oh, up to about 10% succeed.

 

[dforant1]

I like the way Forex Brokers walk a newbie like myself along. It is not a complex task. History repeats itself over and over. If one uses even chart patterns for example and has discipline and much patience, one can be successful easily. From what I can see the UK Brokerages have it all over the US. For many reasons.

I think in the old days of little or no technology and trading by the seat of your pants, then about 90% failed.

These days, with computers, automated charts, trading software, indicators, instant news and all the aids that money can by, I'd guess that, oh, up to about 10% succeed.

 

[PualoP]

Just from my personal observations, when talking about individual traders I've come to my own conclusion that the market breaks down like this:

60% Lose everything. Idiots who simply burn their money. Undercapitalized, un-educated, no discipline, on the search for the Holy Grail and have all possible psychological problems you can think of. They should never have even considered trading as a hobby/career. After a short period of time the money is gone and so are they, never to return to the industry.

35% Break even. I think this group is the most interesting and least observed. They’ve moved beyond the Holy Grail search and have been trading for quite a while. This group has studied and worked hard to find their method/system/trading style and develop some sort of edge. However, they chop around break even for their whole trading lives and never attain long term consistency. They may have a couple of good years/months/days but it all goes tits up for some reason and they're back to where they started. They haven't blown up so they're not out of the game but they have also not moved forward. They continue to persevere extremely hard with their trading trying to break into the ‘5% club’.

5% Make consistent profits year in year out. Highly experienced traders, well capitalized, know what they’re doing.