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Percentage of profitable FX Traders
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Percentage of profitable FX Traders

  #1 (permalink)
Elite Member
Auburn California
 
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Percentage of profitable FX Traders

Forex Investors Take a Bath - SmartMoney.com


"SmartMoney.com examined the recent disclosures of the four biggest retail forex brokerages, representing 95,000 accounts and the majority of the retail forex universe: Of the 16 firms registered with the National Futures Association, only five have more than 10,000 accounts. In the fourth quarter of 2010, only 33,000 accounts at the four firms examined made money 35% of the total. The results vary widely: Oanda, one of the five biggest brokerages, had the highest winning percentage, with 43% of its 48,866 accounts making money. FXCM had the lowest, with 23% of its 18,000 investors making money."

--They claim these numbers are bad? I think they look pretty good for Forex. Now, are they long term profitable? Why does Oanda have such a high winning percentage?

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  #2 (permalink)
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  #3 (permalink)
Market Wizard
Cleveland Ohio/United States
 
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AuburnTrader View Post
Forex Investors Take a Bath - SmartMoney.com


"SmartMoney.com examined the recent disclosures of the four biggest retail forex brokerages, representing 95,000 accounts and the majority of the retail forex universe: Of the 16 firms registered with the National Futures Association, only five have more than 10,000 accounts. In the fourth quarter of 2010, only 33,000 accounts at the four firms examined made money 35% of the total. The results vary widely: Oanda, one of the five biggest brokerages, had the highest winning percentage, with 43% of its 48,866 accounts making money. FXCM had the lowest, with 23% of its 18,000 investors making money."

--They claim these numbers are bad? I think they look pretty good for Forex. Now, are they long term profitable? Why does Oanda have such a high winning percentage?

Compared to most people's perceptions (making money in Forex is as easy as 1-2-3, red light, green light), I think these numbers are bad. Most "Joe On The Street," late Sunday night infomercial watchers would stay far away from Forex if they knew this data beforehand.

The results would be a ton worse if they were over a year or 2 year period. Almost anyone can be profitable over a short period, just due to luck, but over a long period the "vig" grinds down all accounts.


As far as differences from broker to broker, some of that MAY be due to calculation method. I know at one point, one brokerage was giving interest to dormant accounts, and then counted these as "profitable." I bet a lot of legal games are played in reporting the results.

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  #4 (permalink)
Elite Member
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Well, I think a 35% overall win rate is quite good considering everyone talks about only between 2% - 5% of traders are profitable. But you are right, that is probably just for the year. But if true, I think that is quite good as a whole for retail trading—once again, given the numbers are true….

ps- I moved from futures to spot Forex to manage my money properly and keep from going broke quicker.....It has been a good thing on my part. I don't see any reason to trade futures starting out.


Last edited by AuburnTrader; December 14th, 2012 at 05:47 PM.
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  #5 (permalink)
Market Wizard
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AuburnTrader View Post
Well, I think a 35% overall win rate is quite good considering everyone talks about only between 2% - 5% of traders are profitable. But you are right, that is probably just for the year. But if true, I think that is quite good as a whole for retail trading—once again, given the numbers are true….

ps- I moved from futures to spot Forex to manage my money properly and keep from going broke quicker.....It has been a good thing on my part. I don't see any reason to trade futures starting out.


Hi Auburn -

What, in your experience, makes forex better than the equivalent futures? I trade 6E, and it usually has 1 tick spread, so with commissions the cost is usually around $20, or 2 pips in Forex. So, I don't see a significant cost difference (I am swing trading for days, though).

I can definitely see the position sizing benefit of micro and mini forex lots, but maybe there is something else I am missing...

Thanks

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  #6 (permalink)
Identify Evaluate Execute
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AuburnTrader View Post
Forex Investors Take a Bath - SmartMoney.com


"SmartMoney.com examined the recent disclosures of the four biggest retail forex brokerages, representing 95,000 accounts and the majority of the retail forex universe: Of the 16 firms registered with the National Futures Association, only five have more than 10,000 accounts. In the fourth quarter of 2010, only 33,000 accounts at the four firms examined made money 35% of the total. The results vary widely: Oanda, one of the five biggest brokerages, had the highest winning percentage, with 43% of its 48,866 accounts making money. FXCM had the lowest, with 23% of its 18,000 investors making money."

--They claim these numbers are bad? I think they look pretty good for Forex. Now, are they long term profitable? Why does Oanda have such a high winning percentage?

@AuburnTrader

This raises a few points:

1. As we know any disclosure statements from brokers that have not been independently audited by a reputable firm can be taken with a grain of salt. Think PFG. It is in their interests to make these look as attractive as possible and there are numerous ways to "fiddle" the numbers.
2 The vast difference between the numbers published by Oanda and FXCM makes no sense at all which suggests Oanda's numbers are false as they are so different from "hearsay" results of trader performance.
3. The other problem is a profitable trader is defined as someone making $1+ a year in profit which is not great. I'd be more interested in knowing the % of those people who made $10,000 or less. If say the FXCM number is accurate at 23% and 15% of those people are making $10k a year that would leave only 8% above $10k.

Now $10k a year doesn't look too attractive. If you cleaned the toilets at walmart you would make a whole lot more. I also agree with Kevin's point snapshot numbers are pretty much meaningless.

Cheers
DJ

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  #7 (permalink)
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kevinkdog View Post
Hi Auburn -

What, in your experience, makes forex better than the equivalent futures? I trade 6E, and it usually has 1 tick spread, so with commissions the cost is usually around $20, or 2 pips in Forex. So, I don't see a significant cost difference (I am swing trading for days, though).

I can definitely see the position sizing benefit of micro and mini forex lots, but maybe there is something else I am missing...

Thanks

Yeah, I agree with what you are saying. I am trading micros until I become profitable. I lost a lot of money starting out in futures. I wish I had started out in spot Forex. I can control my risk and position size properly. Trade on larger time frames, and have reasonable stops. I could not do that with futures without risking more than I was willing to lose while learning. When/if I become profitable, I will move back to futures. Although, I do like all the different currency pair options available for trading with great liquidity. But yes, commissions are cheaper with futures for larger accounts that can practice proper money management.

Thanks

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  #8 (permalink)
Elite Member
Auburn California
 
Futures Experience: Beginner
Platform: TOS, Ninja Trader
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djkiwi View Post
@AuburnTrader

This raises a few points:

1. As we know any disclosure statements from brokers that have not been independently audited by a reputable firm can be taken with a grain of salt. Think PFG. It is in their interests to make these look as attractive as possible and there are numerous ways to "fiddle" the numbers.
2 The vast difference between the numbers published by Oanda and FXCM makes no sense at all which suggests Oanda's numbers are false as they are so different from "hearsay" results of trader performance.
3. The other problem is a profitable trader is defined as someone making $1+ a year in profit which is not great. I'd be more interested in knowing the % of those people who made $10,000 or less. If say the FXCM number is accurate at 23% and 15% of those people are making $10k a year that would leave only 8% above $10k.

Now $10k a year doesn't look too attractive. If you cleaned the toilets at walmart you would make a whole lot more. I also agree with Kevin's point snapshot numbers are pretty much meaningless.

Cheers
DJ

I almost opened an account with PFG a week before the scandal.....Now I only keep just enough money in my account to trade. Yes, I wonder about those numbers too. The 25% stats seem reasonable. The article goes on to quote a Taiwanese study I have read before about day trading. The study shows ~20% of traders made money and even less could do it consistently, so those numbers might be true. I would like to see the long term profitability stats and by how much as well.

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