First of all I would like to thank all FX Street members who participated in the "Brief Trading Survey" I put out approximately 2 months ago. I have taken the information you gave me and combined with studies carried out by large Brokers such as FXCM and Oanda along with other independent bodies including some reports supplied by FX Street.
I would like to say that statistics can be used to show near enough anything - depending how you want to "slant them " etc. I have always though that with the Forex Market being unregulated - all the information we are told - might not be all the "whole truth and nothing but the truth" if you know what I mean ;-)
In fact when you start to correlate many of the figures on Industry size and numbers etc etc - they just do not add up. That's maybe because not everyone has to respond or reveal all their info.
Today in the UK we are hearing all the problems in the banking world with manipulation and now money laundering with HSBC receiving a massive fine. In fact many have said that the banks have been propped up in these last 10 years by all the "drug money" and illegal transactions - that have provided important cash-flow. Amazing!!!
Anyway - back to the results. The main conclusions from my findings on why retail traders do not make money on a regular basis is simply down to the fact that their losses add up to more than their wins. - ie most traders are not achieving RRR ( risk to reward ratios) of over 1 on a regular basis.
For example - you can have scalper using a robot who does not realize that even with a 90% success ratio - you can still lose money. ie 100 trades 90 wins at 5 pips + 450 pips - 10 losses at 60 pips = 600 pips - result - 150 pip loss.
For Intraday traders the majority try and use stops under 50 pips and targets over 70 pips+. Sound good - but as soon as you see a few wins at only 36 pips and 48 pips and 71 pips etc - you then start to add up that there real average wins are only 44 pips - but there stops are 50 pips. You then find out that they then move some of their stops and have actually had losses of 75 pips on some trades.
FXCM carried out surveys on over 2 million trades and there results showed the following -
This graph shows the average stops and wins on most pairs with then a common average - ie a win of 52 pips and a loss of 94 pips. They did find most traders can be more than 50% accurate on choosing the correct direction for their trade
The traders who answered my survey seem to be more switched on. They appreciate RR ratios and also understand how to adjust to their targets etc.
According to various sources - 49% of traders are intraday
26% of traders are swing ( targets over 100 pips )
17% of traders scalp
8% of traders are long term / position ( targets over 400 pips)
25% of all trader hedge in some way and 48% of traders use some type of trailing stop.
The "industry" as been really good at not explaining the really important information to potential traders.
It is accepted as the "norm" that you cannot trade "noise" ie under say 20 pips or according to some trainers under 50 pips - so just ignore and allow for the "noise" in your stop size.( lol)
The industry fails to explain "trading efficiency" correctly but cleverly informs all - not to trade too often - ie less is more . The idea is too set up a "slow death" rather than within 3 months knowing all the stats you need to know. The Industry knows if it can keep your attention span for longer than 6 months - you will open up another account or add more and the wins you have been having will fuel more - until that "fatal day" - which for approx 20% of traders never happens
I just cannot find enough information on full time retail Forex traders. Do many exist ? yes I am one - but are their hundreds of thousands or just tens of thousand world wide ?
From what I can see - unless its just an hobby or a part time leisure activity - you have got to find an "edge" to be able to stay in this "game" and make monies. The potential best traders profiles are not what you may envisage and so i will not print them . Like in all walks of life - there will be exceptions to the rule.
I will be interested to here from members here who will admit that their own stats are not keeping to their own expectations - and what plans they may have to get back on track?
If you have to decrease your wins sizes - you need to do the same on your stops. You do need trades with RR's of 2 and 3+ - are you getting them ?