What Percentage of New Traders Fail? (Part 2)

Today I continue with excerpts from a 2013 Forex website forum discussion. The initial post (#1), which tries to rebuke traditional wisdom, is seen here.

Forum content is never scientific and always open to scrutiny. Do your own due diligence and buyer beware.

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• Post #6, Raz:

     > Even if 99% isn’t accurate (let’s say it’s actually 90%:
     > doubtful though) I believe it’s better for a newbie
     > to hear the number 99%. Those who can make it
     > already know they are in the 1%, and for the others I
     > believe it’s good for them to realize Forex is not a
     > sure thing and not to quit their day job over.
     >
     > Of course scammers like you would like people to
     > believe they can make 9000$/day (NO EXPERIENCE,
     > NO WORK REQUIRED, right?) but that’s just not true.
     >
     > I’m sick of Forex ads that say “Hi, i’m Rosie and a
     > week ago I used to clean toilets… but then I found out
     > about Forex. Now I drive a Ferrari! You can do it too!
     > Quit your job, sell your house, fill your account and
     > sooner then you know it you’ll be a billionaire too!”
     >
     > It’s a disgrace for brokers and for traders: makes it
     > all seem like a scam.

Enter mention of scam. This is commonly seen in forum posts and often discussed on my blog as well. The possibility is out there and the likelihood exists: people just choose to ignore it.

• Post #7, Bab:

     > It’s said that failure is not when you fall per se.
     > Failure is when you fall and fail to get up again.
     > The perception that 90% of traders failed is that
     > they blew up but did not rise again or did not “try,
     > try, till you succeed.” The 10% successful are those
     > who rose after falling. They might have fallen many
     > times and learned valuable lessons each time to move
     > forward. Failure is experience that can lead to
     > success. The brokers figures, if true, might portray
     > active traders with a huge amount that have not
     > gotten up and therefore gone inactive. This might
     > further dilute the successful in a ratio of 1:9.
     >
     > If these figures are depressing to the new trader,
     > then make use of demo accounts to fail virtually.
     > Read, learn, understand, and practice for days,
     > months, or years on the DEMO. Get experienced and
     > succeed with your strategy on DEMO. Eventually, go
     > live in small steps, risk only what you can afford
     > to lose, and apply strict money management. You
     > too can be an elite success.
     >
     > Good Luck to all who pursue this trading endeavor
     > and to those who have almost reached success.

I think there are some good recommendations here.

• Post #8, prak:

     > From what I understand the % winning is based on
     > balance increase over the quarter. As Oanda pays
     > interest on accounts, any account sitting there
     > doing nothing went up and therefore is profitable.
     >
     > The results do not show the trader that makes
     > money in one quarter but then blows up the next.
     > Just because 20% made money in one quarter does
     > not mean any are profitable overall.

• Post #9, jean:

     > If any of you are wondering about the NFA retail
     > broker client profitability calculation, instead
     > of guessing just read this.
     >
     > After consultation with CFTC staff, NFA provides
     > the following information:
     >
     > “The calculation, including determining the total
     > number of non-discretionary retail forex customer
     > accounts maintained by the RFED and FCM that
     > quarter (Q), should include only accounts that
     > executed trades during the Q and/or had an open
     > position at any time during the Q. Accounts without
     > trades or open positions during the Q should not be
     > included in the calculation regardless of whether
     > the account maintained a cash balance and/or was
     > paid interest or charged any fees during the Q.”

• Post #18, Ekl:

     > It will be interesting to see the profitability with
     > the filter of at least one trade during the Q. I
     > would suspect many accounts are profitable on
     > account of accrued interest and not winning trades.

To be continued…