90/10 Statistic the Obvious- For New Traders - Psychology and Money Management | futures io social day trading
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90/10 Statistic the Obvious- For New Traders
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90/10 Statistic the Obvious- For New Traders

Super Moderator
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Ozquant View Post
Only brokers know the true stats of retail traders and for obvious reasons they dont make this available . 90/90/90 sounds about right to me . You enter trading as a gambler and where you end up after that is up to you . Maths is the answer

Some in the industry do share


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Trading for Fun
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I dont believe that for 1 second , i know guys who work in brokers and what they tell me is 100% polar to that . Get back to me with stats on 20k and less accounts , thats real newbie retail size

Market Wizard
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Salao View Post
So if...

1. 90% of traders fail and failure is defined as a negative expectation and...
2. Futures trading is Zero-Sum (ish?)


1. A very small group (~10%) drinks the milkshake of the many (IE positive expectation) and...
2. The ubiquity of failing participants create a situation that...
A. Only requires a small edge for a meaningful positive expectation and would present a wonderful opportunity for an enterprising individual or group OR...
B. The small group of winners have the game completely crushed and exist to basically destroy dreams and whatever else.

Now is the assumption of a zero-sum game correct? If it is correct and the failure rate being what it is...it would seem there is a great opportunity for anyone able to develop only a sliver of an edge. At this point I think the truth is the failure rate is most likely less than 90% and the edge needs to be more robust to make a living. Are my assumptions correct? Too narrow?

I can't comment about the 90/10 statistic. I don't really know. (Although it wouldn't surprise me.)

I would like to address the "zero sum" issue though, because it's not always clear what is meant by it.

Every contract that is held long also has a corresponding contract held short by someone else. You aren't buying and selling existing assets, you are entering into contracts to buy or sell them at a later date. To enter into a buy contract, you need someone else to enter a contract to sell. So for every long there is a short, and overall the total losses and profits for all the accounts participating in the exchange are exactly equal.

At the end of each trading day, or when a trade is closed, all accounts are "marked to market:" the profits are actually realized by having the account receive a credit or a debit. Overall, the credits and debits are always equal: every dollar of profit is someone else's dollar of loss. This is a zero sum game by definition.

The futures market allows producers and sellers of commodities (or holders or financial assets) to hedge their actual positions by holding the opposite position in futures, which means that the value of one goes down by the same amount that the other goes up, and on balance they have neither a net profit or loss from market movements. It's a mechanism to offload market risk from those who don't want it to those who are willing to take it on (those who are not hedged.) The unhedged traders will be subject to market profits and losses, and that is what they are in it for.

The futures market is zero-sum by design. This does not imply anything about how the profits or losses are distributed (except that, obviously, not everyone can be winners.) It also is not either good or bad. And it doesn't mean anyone is ripped off when they lose. It's the same as at a poker table: the winners get their money from the other people at the table.


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@bobwest the most no-nonsense definition of zero-sum, if ever there was one

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Trading Apprentice
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With poker, if you play heads up against your friend at your own house it is a zero sum game.

If you play at a casino or online it is not because the casino is going to rake the pot.

Futures trading and all trading is not a zero sum game because of transaction costs.

A zero sum game has a precise mathematical definition of x loss is exactly y gain and vice versa. That is the zero sum part.

Market Wizard
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Assuming you are trading to make money not for the thrill of watching your money disappear. (some complain that trading is boring)

First of all you have to define success. My definition is outperforming a passive index ETF.

If you cannot outperform the index you should not be trading. Or rather your money would be better off in a passive investment.

Using that definition I would not be surprised that 90/10 is fairly close to reality.

When you talk you are only repeating what you already know. When you listen you might learn something new
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The more I learn about this statistic, the more it seems like 90% failure rate is in the right ball park. That being true, doesn't it stand to reason that you only need a sliver of an edge to do pretty well? At any rate, it is certain that most people will lose lots of money.


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