What are your questions about trader performance?

Rhody Trader

Senior member
2,620 266
I think it is detrimental for the experienced and vice versa for the inexperienced. Though it doesn't hurt for the experienced to take breaks too. Besides,they could get more ideas from others too.

Part of my PhD thesis is looking to see whether unsophisticated traders (inexperienced, negative return history, small accounts) or sophisticated traders (experienced, positive return history, upper quartile account balance) see any impact from joining the network. The hypothesis is basically that the former gain from an educational perspective while the latter maybe can get some kind of informational edge (improved strategies, sentiment, etc.). It's looking like the unsophisticated folks do benefit, but the sophisticated ones take a serious hit.
 

Rhody Trader

Senior member
2,620 266
What level of balance would qualify as upper quartile?

For the sample I'm using in my thesis it's about $7500 and up. There's obviously a huge potential range to the "and up" part of that. Gives you a pretty good idea, though, about how small retail forex traders tend to be. I've got over 4 million daily account balance observations for about 7200 traders. Half of them show a balance of less than $575.
 

f2calv

Experienced member
1,318 278
OK sounds a reasonable limit.

So presumably if these are live account balance readings i.e. updated daily, you can/could determine after a significant "black swan" event (such as SNB CHF floor removal) who won, who lost and who got wiped out? That would sure make interesting reading :)
 

Forexmospherian

Legendary member
39,928 3,301
For the sample I'm using in my thesis it's about $7500 and up. There's obviously a huge potential range to the "and up" part of that. Gives you a pretty good idea, though, about how small retail forex traders tend to be. I've got over 4 million daily account balance observations for about 7200 traders. Half of them show a balance of less than $575.

Interesting info

What's your take on the total number of retail traders - is it still under 1 million world wide or in the 2 -3 million as some sources have suggested - bearing in mind guestimates with unregulated and fairly unknown brokers - who might provide for countries where trading is still illegal ?

If its over a million - then are you happy you have a fair and representative cross section - ie say for over 10 or 20 countries and at least 25 different brokers etc etc.

OK you would expect only the more serious or experienced traders to have balances over $25 and $50k - and then you would think that must represent less than say 10% of the 7200 traders - as they might be the ones with at least some positive cash history

All fascinating info - really look forward to you sharing more


Regards


F
 

Rhody Trader

Senior member
2,620 266
So presumably if these are live account balance readings i.e. updated daily, you can/could determine after a significant "black swan" event (such as SNB CHF floor removal) who won, who lost and who got wiped out? That would sure make interesting reading :)

Yeah, live accounts and the daily entries are date/time-stamped, so there is definitely the potential to look for major market events. That's a whole other line of research from what I'm doing now, but could indeed be an interesting project down the line somewhere.
 
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Rhody Trader

Senior member
2,620 266
What's your take on the total number of retail traders - is it still under 1 million world wide or in the 2 -3 million as some sources have suggested

Tough question. I've seen quite a bit of stuff on volume estimates, but not much on trader counts. The CFTC-mandated reporting by US brokers puts the number of active accounts right around 100k each quarter. I know of one bit of research that pegged Japanese traders at 120k, but that was back in 2007. I think the deciding factor on over/under a million is probably China. If forex has become active there then they could dwarf the rest of us without much trouble.

... are you happy you have a fair and representative cross section - ie say for over 10 or 20 countries and at least 25 different brokers etc etc.

Whether the data is representative is always open for debate. Yes, there are loads of different brokers - about 70 of them. Yes, there are traders from all over the world. I've only got US, Europe, and Asia/Pacific, and "No Entry" as geographic indications because of the way the profile data was collected, but there is good representation from each. Europe is the largest at 35%. Time frames vary. Trading frequency varies. Preferred trading style is all across the spectrum.

The catch is that it's a bunch of traders who self-selected into a social network. As such, you can challenge how fully representative it is on the basis that there may be some commonality between these traders.

OK you would expect only the more serious or experienced traders to have balances over $25 and $50k - and then you would think that must represent less than say 10% of the 7200 traders - as they might be the ones with at least some positive cash history

Going back to the account balance breakdown I brought up above, 90% of the entries are about $16,000 or less, with the 95% cut coming at about $42,900, so the $25k value falls somewhere in the lower 90s. These are based on daily observations, though, not on people, so the percentages don't necessarily translate directly across. My guess is they actually overstate things because in general the data shows bigger traders being more active than smaller ones.

In terms of the sample I'm using, about 10% of them fall into the sophisticated category. That means at least $7500 in average monthly account balance before joining the network, a positive average monthly return pre-network, and an indication of having at least 3 years experience in their profile data.
 
 
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