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Traders with 5-10 years of experience but still not profitable
If you have a series of 10,000 samples the chances of this happening at least once is 99.257%
So as always it comes down statistics in a fat tailed world. Due to the zero sum nature of intraday futures trading, the distribution is probably going to follow a pareto distribution. There's going to be a small number of people 5-30% that are successful just from pure random chance.
The best studies on day trader profitability center around a dataset from the Taiwan stock exchange because you get to see the performance of every participant in a market over a 15 year period. The study "Do Day Traders Rationally Learn about Their Ability" in particular looks at how experience relates to trader profitability:
The study never gets into traders that have been trading for 5 or more years though. Probably because there's not enough of them to get reliable statistics.
Thank you for the information. one of the findings of this paper is that there is evidence of learning. I think that reinforces the idea that trading can be taught, rather than being due to chance.
With regards to the 5-30% being successful, when you repeat the same experiment 100 times, if this is by chance alone,I would expect the top 5-30 percent performers to be different traders with each iteration of the experiment. I could be wrong, but I think, that if we repeat the experiment 100 times, we will likely find the same 5-30 % of traders coming up as top performers.
They might not be keeping good records of all their trades so it is harder to work out what to fix up if trades keep losing. Not going for larger trades to help offset risk.
There is an element of luck in every field, but consistent trading for considerable time is unlikely be the result of a chance. Has anybody ever thought why in poker tournaments it's the same ten guys ending up at the final table every year, even though poker is supposed to be a game of chance. Cards you get are impossible to predict, but how you manage the hand and and the position size is completely up to you. There is also a huge mental component to poker - fold when you have a great hand, push with nothing, and while it is not directly relevant to trading, there are some elements of it in the markets as well.
You cannot compare medicine and trading. Medicine is highly predictable, and a specialist in the field can predict the outcome with considerable certainty. If you get pneumonia, for example, and I prescribe you ampicillin, there is a 98% chance you will be fine in a week. The numbers are worse if you are old, immunocompromised, have bilateral pneumonia, have underlying lung disease and so on, but in every case the odds of things going south have been researched. Dammit, 1:1000 chance of an adverse effect is considered high risk in critical care! So yes, studying medicine is hard, but the result is predictable. Studying trading is hard as well, but the result is nowhere as predictable as that of medicine. How many traders end up making money at the end of their studies? What is it, 20 - 25%? How many doctors end up getting a salary? 100%.
I can tell you that once the right diagnosis is established, the outcome can be predicted, just like you say. The issue arises in the process of establishing the diagnosis. The certainty of a diagnosis can range from 60 to 80 percent( depending on physician experience). I read a paper in medical school that claimed it takes the consensus of 8-9 physicians( with an average of 3 years of experience) to establish the right diagnosis with 89-90 percent certainty. One physician alone establishes the diagnosis on average about 64 percent of the time. Medicine is not as clear-cut as most people think.
Trading does not guarantee a salary because is like owning a business. To a business owner, a salary is never guaranteed. Physicians can also own a business and be net negative at the end of the day, just like any other business. If a trader does not work, only he does not make money. If a Physician does not work, he and his employees do not make money.
Also, a typical physician, coming out of school may have a debt ranging from 250K to 500K( may vary). All that money to pay for their education. Imagine taking a similar amount of money and placing it towards learning how to trade, with proper education and mentoring. I think one would do well with that kind of resource.
the reason why " 1:100" chance of adverse effect may be considered high risk is because a physician deals with human life. If a mechanic messes up a car part, he/she gets another part, and nothing happens to the car. It is pretty obvious that the same does not apply when dealing with patients.
The parallel I was trying to make, is that going through the process of learning something new is difficult in trading, medicine, or any other profession and that fears of uncertainty are normal in any profession. it is hard in trading due to a lack of formal education. One learns from trial and error. Some people may be lucky to get a mentor, which shortens the learning curve. For those of us who were not that lucky, it may take us longer to get the hang of it.
You seem like an intelligent young person eager to learn and at some time become profitable. But do you really want to
sit at a monitor 4 through 8 hours a day waiting for "The Setup" ?
Why thank you... I think. You're wrong about one of your adjectives. Hopefully, you're not wrong on both . (I am NOT a "young person").
I don't understand the point of your question. I don't sit 4 hours waiting for a setup. But, even if I did... what's wrong with it if I did "want to?" I actually like watching and reading the market, analyzing my progress and learning.
. (I am NOT a "young person").