MajorMagnuM
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good question
Jason Rogers
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Hi Sniper,
I see that 90% figure mentioned a lot on the forums, but without any real supporting evidence. Some have mistakenly attributed those percentages to one of our surveys, but it's not true. The real findings from the DailyFX Profitability Studies are as follows:
"Research shows that the amount of capital in your trading account can affect your profitability."
The same studies show that FXCM client accounts with a balance of $10,000 or more had a profitability rate of 44.09%. The data is in line with quarterly reports that US brokers have to file with the CFTC which show that roughly 30% of retail traders are profitable while over 40% of retail traders are profitable at brokers that have a $10,000 account opening minimum.
Why the strong correlation between account balance and profitability?
Some traders with larger account balances might be more experienced/sophisticated and thus more confident in their trading strategy to be able to take larger positions. Other traders with larger account balances might have gotten to that point by growing their accounts to that size from smaller balances.
Still is their anything useful new traders can learn from profitable traders, even if they don't have a large balance to start?
The DailyFX researchers believe there is:
"What we have found out through the analysis of thousands of trading accounts is that traders with larger account balances tend to be profitable on a higher percentage of trades. We feel this is a result of the effective leverage used in the trading account.
"Traders with at least $5,000 of capital tend to utilize more conservative amounts of leverage. Traders should look to use an effective leverage of 10-to-1 or less."
"What we have found out through the analysis of thousands of trading accounts is that traders with larger account balances tend to be profitable on a higher percentage of trades. We feel this is a result of the effective leverage used in the trading account.
"Traders with at least $5,000 of capital tend to utilize more conservative amounts of leverage. Traders should look to use an effective leverage of 10-to-1 or less."
So to answer your question, if you want to increase your chances of becoming one of the profitable 30% then consider limiting your leverage to 10:1 even though you have the ability to use much more. An analogy would be that if you want to increase your chances of reaching your destination safely then stick to the speed limit even though your car is capable of going 200 kph.
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sniper012
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Hi Sniper,
I see that 90% figure mentioned a lot on the forums, but without any real supporting evidence. Some have mistakenly attributed those percentages to one of our surveys, but it's not true. The real findings from the DailyFX Profitability Studies are as follows:
"Research shows that the amount of capital in your trading account can affect your profitability."
The same studies show that FXCM client accounts with a balance of $10,000 or more had a profitability rate of 44.09%. The data is in line with quarterly reports that US brokers have to file with the CFTC which show that roughly 30% of retail traders are profitable while over 40% of retail traders are profitable at brokers that have a $10,000 account opening minimum.
Why the strong correlation between account balance and profitability?
Some traders with larger account balances might be more experienced/sophisticated and thus more confident in their trading strategy to be able to take larger positions. Other traders with larger account balances might have gotten to that point by growing their accounts to that size from smaller balances.
Still is their anything useful new traders can learn from profitable traders, even if they don't have a large balance to start?
The DailyFX researchers believe there is:
"What we have found out through the analysis of thousands of trading accounts is that traders with larger account balances tend to be profitable on a higher percentage of trades. We feel this is a result of the effective leverage used in the trading account.
"Traders with at least $5,000 of capital tend to utilize more conservative amounts of leverage. Traders should look to use an effective leverage of 10-to-1 or less."
So to answer your question, if you want to increase your chances of becoming one of the profitable 30% then consider limiting your leverage to 10:1 even though you have the ability to use much more. An analogy would be that if you want to increase your chances of reaching your destination safely then stick to the speed limit even though your car is capable of going 200 kph.
That may be what they say. I trade with FXCM and I truly just view them as a necessary evil. I don't trust or believe anything they say because our broker is our adversary. When we win, they lose so it's not in their best interest to help us. Now with all due respect, if you wish to show me a study that was conducted independently and not by any broker or affiliate, I would be more likely to believe it.
Jason Rogers
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I'm sorry you feel that way, Sniper
If there were any doubts before, it should be clear to everyone now that FXCM does not profit from your losses on our No Dealing Desk (NDD) forex execution model. Nor do we lose from your profits. Instead, we offset each of your orders one-for-one with the best available prices from competing liquidity providers and make our money from your trading volume.
Therefore, it's in our best interest for you to be profitable so you continue trading. That's why the DailyFX research team conducted that series of profitability studies to highlight the best practices common to successful traders.
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alexaherself
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Different here ...
Given their own current financial difficulties, loan obligations, and history of regulatory encounters and fines, I view them as an unnecessary evil and don't trade with them.
I won't argue with you, there.
Jason Rogers
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Hi Alexa,
Since we are a publicly-traded company (NYSE ticker: FXCM) the details of our finances including the loan from Leucadia are well known. In fact, in our most recent quarterly earnings presentation, we clearly outlined how we plan to repay this debt.
Over the past few years, FXCM has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. We are now looking to sell some of these non-core assets; But, we are not in a rush and are looking to get the highest valuations for these assets. We are considering closing or selling smaller regulated entities that require large sums of capital requirements, but that offer increasingly low return on capital.
We recently announced the sale of FXCM Hong Kong for $36 million: http://ir.fxcm.com/releasedetail.cfm?releaseid=915260
This follows the sale of FXCM Japan for $62 million in April. FXCM is pleased with how our debt reduction plan is proceeding. With all the increased attention to our other properties, we are expecting robust and competitive auctions for the other non-core assets we have targeted to sell. We have repaid $81.6 million of the Leucadia loan as of today with $228.4 million principal remaining. We believe that in the near term we can pay down a majority of the loan, and that's our goal.
Despite the events of January 15, 2015, FXCM remains in a strong competitive position. As of the latest publicly available data, we have over $200 million of excess regulatory capital worldwide and over $300 million in operating cash. By contrast, most other forex brokers are privately-held companies, so it's hard to know how much debt they have on their books or the state of their finances.
sniper012
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By no means am I trying to single out FXCM. I haven't had any issues with you guys and I've been with FXCM for many years. Perhaps I don't understand all the nuances and intricacies of what you do and how it's done. My focus is on trading.
Jason Rogers
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I'm glad you've had a positive experience with us. Thanks for being a long time client of ours.
alexaherself
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They are.
I appreciate that, just as I'm sure you appreciate that there are still many people who prefer to trade with companies that don't need to "outline how they plan to repay their own debts". Not to mention with those who don't have your company's history of regulatory fines over issues connected with how you treat your customers.
And when you step in to a forum thread here that wasn't about FXCM and post in it bit.ly-concealed links to another forum owned by your company, you're going to get people pointing that out, too.
