If 99.9% are not making money from trading, that means 100 out of every 100,000 are making money. Right? Which means there are around 144 people making money right here, on future.io.

The statistic that is most often quoted is 95% not profitable. This number has been bandied about for 25 years. It originates from a single study done by a single brokerage house in the mid nineties! It means absolutely nothing. It is based on an extremely small data set that is very old.

If you have been around this game for a long time (I started trading in 1984), you know that education and resources for learning have exploded over that time! There is no comparison between today and even the 1990's.

I think a lot of people make money trading for a living. You will not hear from the majority of them because they are busy doing their jobs: trading!

I agree. There are thousands of profitable traders working for hedge funds, banks, brokerages, private trading firms all over the world. No one knows the real numbers for individual retail traders. You would have to have access to data
from dozens of brokerage and prop firms which no one has.

Everyone "fails" in the beginning. That's the learning curve. But like every other profession, if trading doesn't suit you, get out and do something else. And that's what most people do. The ones who stick it out have found an edge
and are probably profitable.

You are absolutely right in that everyone fails in the beginning. Most who blow out their accounts, close them and go off and lick their wounds and never trade again. But some of us are stubborn enough (or stupid enough as some would see it) to return again and again! My older brother, over 20 years ago, called what myself and my other brothers were doing "day trade gambling in the stock market"! Given our results at the time, I had no comeback to that!

The statistic that is most often quoted is 95% not profitable. This number has been bandied about for 25 years. It originates from a single study done by a single brokerage house in the mid nineties! It means absolutely nothing. It is based on an extremely small data set that is very old.

If you have been around this game for a long time (I started trading in 1984), you know that education and resources for learning have exploded over that time! There is no comparison between today and even the 1990's.

I think a lot of people make money trading for a living. You will not hear from the majority of them because they are busy doing their jobs: trading!

If 99.9% are not making money from trading, that means 100 out of every 100,000 are making money. Right? Which means there are around 144 people making money right here, on future.io.

When I say making money, I mean making a living. And I wouldn't be surprised if there were only 144 people here that are consistently profitable enough to do it for a living.

I agree. There are thousands of profitable traders working for hedge funds, banks, brokerages, private trading firms all over the world. No one knows the real numbers for individual retail traders. You would have to have access to data from dozens of brokerage and prop firms which no one has.

Regarding @Joseph Connors comment that this all comes from a single 1990's study, I believe that many FX shops are required to report how many of their accounts make money, and if I recall correctly the numbers are very similar to the 1990's study (which was Refco I believe?).
I think there's several things at play here. First its not a zero sum game. Fees of all types (trading, software etc) mean that if everybody was a 50:50 trader, almost everybody would be a loser because of the fees. Second I think you will find that there are a lot of small(er) losers and a few big winners. Retail/newbees lose money to market makers and the other (small) group of people who have a real edge.


Not sure if it was here or somewhere else but recently saw a similar discussion where making money was defined as making $20k/month. If your making $20k/month that's $250k/year. If your making 10% return on your money, then that means you have $2.5M to trade with. The type of person trading with $2.5M is very different than the retail trader who is looking for the broker who allows the greatest leverage on MES because they only have $1k in their account. (which is something @Kefkas Laugh said earlier in a round about way). With regards to "144 people here that are consistently profitable enough to do it for a living", I'm not sure where the 144 number came from, but I would be very surprised if there that many people here that make enough to live off.

I'm not sure that "hedge funds, banks, brokerages, private trading firms" are what the original OP meant, but I do agree with you. Again big difference between the few individuals making 20k/month off of 2.5M than the people trading with 1k. The latter of which is what makes up the 80%/95%/99.9%n (take your pick) loser number.

Does anyone know where those FX numbers are published nowadays? I have some old ones. The problem is they only show profitability in one quarter. I'd like to see profitability over one year, which would likely be less than in one quarter.

Your conclusion is mostly correct.

In fact I can prove you're mostly correct based on live results rather than backtest results.

I have a leaderboard too. I happen to be a market maker for about 2000+ FX accounts. We know how profitable our counterparties are on every single trade since day 1, so this is over a very large sample size.



While I don't know if the beneficial owners of these accounts are 'retail' or 'institutional', I can distinguish them by account size, and there's a very distinct pattern which is consistent with what you'd expect of retail trading behavior. For example, for all accounts with more than $100,000 cash equity, their trade PnL distribution is almost symmetric, so these accounts are about equally willing to take a $100k loss against us as they are to take a $100k win against us. You'll notice that the orange curve is very asymmetric, meaning that small accounts are willing to take big profits against us but very reluctant to take equally large losses against us i.e. they cut their losses too quickly. This is typical, we see these traders take stop losses much more often.

If you draw a vertical column at $0 gross profit, you'll see how profitable each group generally is when they trade against us:
- For all accounts with less than $100,000 cash equity, they are profitable when they're trading against us for about 21% of the time.
- For all accounts with more than $100,000 cash equity, we become more evenly matched as they make money when they're trading against us for about 50% of the time.

If you consider that most retail traders have less than $100k cash equity, here you have it: most of the retail traders I've encountered consistently lose money.

(Note: Some people may argue that this is unfair. It isn't. I can spread 0.1 pips to a 'retail' trader but 1.0 pips to a more profitable trader, and other market makers are competing for the same flow so I have to give the best possible spread. My decision is maximin optimal for the retail traders because they get to enjoy lower spreads.)



I think you have the causality reversed. The benefits of these are very small to a retail trader. The successful traders find a way to make profit and eventually it becomes sensible for them to make these micro-optimizations to improve their revenue or reduce expenses.

The reason is quite simple really, I agree with @Anagami. Daytrading is like being a stay-home writer, most people lose money and it's not that the system is rigged against stay-home writers, it's just good literature is a very competitive and efficient market.

The horizontal axis is gross (brokerage fees excluded) PnL of individual trades.

The vertical axis is cumulative probability, meaning probability that a trade makes profit of up to the amount on the horizontal axis.

If you see the orange curve, the cumulative probability of making $0 is around 79% for the group of traders in the orange curve. This means that only 21% of trades taken by accounts categorized in that group make positive gross PnL.

I can express this by cumulative profit of individual accounts on the horizontal axis too to arrive at the statistic you asked your broker for, but that isn't as a meaningful as knowing the outcome of individual trades because it's harder to normalize accounts as they have subscriptions and withdrawals, different account length etc.

Trimming it down a lot: 79% of trades taken by small accounts lose money (to market maker). Does this make sense?

This post is an important addendum to mine if you need further interpretation of the results. There's a few things I'll add to Bob's post.

1. The trade PnLs I've posted are against my firm. There's other trades between these accounts and other market makers, and between these accounts and other such accounts, which are not addressed. However most of the trades on such pools are between these accounts and liquidity providers, and it's fair to assume the other liquidity providers are efficient too.

2. As Bob explains, your account can be wildly profitable even if you have 21% probability of your trade making a gross profit. However if that's the case and the distribution remains unchanged, the probability that your account 'survives' converges to 0 as you increase the number of trades. We see that some accounts don't trade at all, but most accounts trade more than once. So it's well likely that the number of accounts that lose money on a gross basis 1 year out is higher than 79%.

3. These trade PnLs are marked out in some way, so due to trade allocation scheme and path dependence, some of these profitable trades to us are also profitable trades to our counterparties. A naive example is if our counterparty takes a trade, it moves 1 tick in our favor, we get out passively, then it moves 2 ticks in their favor; both parties are profitable in the end.

144 people on FIO make enough to live off of? I'd be surprised if there are 144 active real money traders on here! I'm joking a little, but not much.

From the Did you end 2022 with a net gain, or loss? Discuss why in the thread!, 34% of respondents said yes they made money, but only 324 of 144,000 members replied.

@bobwest @Big Mike maybe the next poll should be something on the lines of ....

Are you a profitable trader? (Please make sure you include all trading related costs, including things like software fees, trading related subscription fees (be they signals, trading rooms, or just website subs etc)
1 No, I'm a net loser
2 I'm breakeven
3 I lost money for a long time but have finally turned the corner and think I am now profitable, only time will tell.
4 I'm profitable but trading isn't my primary source of income.
5 I am profitable for multiple years and trading is my primary source of income/I make enough money trading to live off.

If you think there are other good options other than the 5 listed, please reply in this thread here. Also really like @Pariah Carey poll suggestion in the post before that one.

This is pretty close to the current poll question: "Did you end 2022 with a net gain, or loss?" -- as you mentioned in another thread recently....

The present poll is currently running with 50% having a net loss, 34% net profitable, (and 16% not trading live -- probably a lower number than the actual one, sim being what it is ) but there have been only 342 respondents. Not necessarily a scientific survey. I would not be surprised if the more detailed question you propose had about the same results, perhaps from the same members, the ones who are willing to respond.

I do think it is realistic that more traders are not profitable than that are. It is worth knowing this, whatever the exact numbers may be, if for other reason than that it lets people understand something of the odds they have to deal with, and also to realize that they are not alone, if it has seemed that they are -- which it probably often does. It is also important to know that, no matter how things may seem if you aren't doing well, that there are some who are, and it is possible. Realism requires both perspectives.

The main point of the polls is not so much the numbers, which are interesting of course, but also to stimulate discussion in the thread, and perhaps to help someone who reads about other traders' experiences there.

Just my random thoughts on the topic.

Bob.

@bobwest @Big Mike maybe the next poll should be something on the lines of ....

Are you a profitable trader? (Please make sure you include all trading related costs, including things like software fees, trading related subscription fees (be they signals, trading rooms, or just website subs etc)