Forex Facts......that you have been avoiding

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jungles

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614 67
Fact 1

A recent study undertaken by Ph.D researcher John Forman, reveals that 99.6% of retail forex traders are unable to achieve more than 4 back-to-back profitable quarters.
Note: Statistically, any person marketing themself as a forex "teacher" will fall into the 99.6% group. NEVER give money to a forex "teacher" for training unless they can verify unequivocally that they are not in the 99.6% group. And remember, the "teachers" online reputation does not constitute verification.

Fact 2


There are some outstanding hedge funds, however the Barclay Hedge Fund Index, measuring the average return of all hedge funds in the Barclay database, reveals that the average yearly return from 2008 to 2012 was just +3.17%. Which is less than most term deposit rates offered by your local bank.


Fact 3


Traders achieving percentage returns outside of the normal distribution*, in almost all cases, are doing so because they trade in a high risk fashion. Which also means their risk of ruin is high and in virtually all instances, if excessive risk-taking behaviour continues, is CERTAIN!!

The traders you read about on forex forums or at Zulutrade, for example, who achieve extraordinary rates of return, are almost certain to blow-up their account when using standard lots and real money, due to the high risk manner in which they trade.

Innumerable forex accounts at Zulutrade illustrate this. The forum is strewn with examples of once high return-high risk accounts that have either exploded spectacularly or will soon do so.


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*Industry standard for traders at Trading Houses or Prop firms is a +10% monthly average. (This ROI decreases as account size grows). More than
a +10% monthly average is a signal to professional risk managers that normal risk parameters may be being exceeded.

In Summary


These are Forex Facts that in all likelihood you have not encountered because the people you have met online or in person, either do not know about them, do not want to know about them, or do not want you to know about them.

You need to be aware of these facts so as to avoid being mislead by your own dreams and other people's dreams.

In so doing you give yourself a better chance of making it to the incredibly elusive 0.4% of people who "succeed" in retail trading.

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aparoid89

Active member
146 1
Can't someone still be profitable and make a loss on one quarter out of 4? Therefore the percentage shouldn't be as low as 0.4%
 

BeginnerJoe

Senior member
3,329 350
There are some outstanding hedge funds, however the Barclay Hedge Fund Index, measuring the average return of all hedge funds in the Barclay database, reveals that the average yearly return from 2008 to 2012 was just +3.17%. Which is less than most term deposit rates offered by your local bank.

Hedge funds are for institutions and people with lots of money. Above inflation return on a large amount of money is very impressive. You can't compare that to a regular joe putting £100 in for one of those special bank offers, which usually have a stupidly low limit on how much you can deposit.
 

wackypete2

Legendary member
10,229 2,055
Hedge funds are for institutions and people with lots of money. Above inflation return on a large amount of money is very impressive. You can't compare that to a regular joe putting £100 in for one of those special bank offers, which usually have a stupidly low limit on how much you can deposit.

I disagree. Most hedge funds take excessive risk also and like the zulu accounts that the OP references the arena is also littered with hedge funds that have blown up. That 3.17% profit doesn't justify putting large amounts of money at such risk levels. HOWEVER, a mutual fund with much lower risk strategies making that percentage would be outstanding in today's market.

Peter
 

VielGeld

Experienced member
1,421 179
While I agree with the OP in principle, I can't say I agree with the idea of measuring profitability by consecutive winning quarters. What if you have three losing quarters, but one hugely profitable streak that keeps you in the green for the year? The most this win/loss streak shows is that consistency is very difficult to achieve.

All props to John for taking the time to dig through all that info, though. It can't be easy to datamine 8000 accounts' worth of info. I simply believe that this metric is a bit too simple for reality.
 

AuthenticFX

Junior member
18 0
Good article. One of the best and most successful professional forex traders I know constantly cites the figure of 20% per annum as being a very respectable return for any fund trader to make. A sobering thought to those about to quit their jobs and trade for a living on their ten thousand dollar account.

Erron
 

jungles

Guest
614 67
Can't someone still be profitable and make a loss on one quarter out of 4? Therefore the percentage shouldn't be as low as 0.4%

While I agree with the OP in principle, I can't say I agree with the idea of measuring profitability by consecutive winning quarters. What if you have three losing quarters, but one hugely profitable streak that keeps you in the green for the year? The most this win/loss streak shows is that consistency is very difficult to achieve.

yes, the definition of a "successful" retail trader is a subjective one

You can't compare that to a regular joe.....

they are different beasts, but whether or not a retailer can reasonably extrapolate some persepective from Fact 2,
I'll leave for each to decide

Very interesting. What´s your source?

Prop Trader managers I have spoken to when exploring my options.

.
 

pboyles

Legendary member
8,072 1,303
I'd hazard a guess that almost nobody here makes more than a spotty oik flipping burgers in McDonald's. There might be a few people in denial about that but I'm pretty sure that's the case.
 
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