Where does the "95% lose" adage come from?

[Adamus]

I need to find a reference, e.g. an academic paper, a government report, an FSA article etc, which shows data on how many speculators fail, give up or lose their trading capital.

I'm writing an article and have just spent the last couple of hours scouring the internet for something quotable.

I do sometimes have major problems choosing the right search words, so I'm hoping that there really is something out there.

I guess I could fudge it and say something like "popular wisdom states that 95% lose..." but I'd like something solid.


Thanks!

 

[BeginnerJoe]

I'd say 99% of people who lose go all quiet. So if the statistics say 95% are losing then that's the 95% of the 1% who admit they are losing.

It's not in the interest of institutions to give real statistics on people losing either. Then why would people go there with their money given such high probability of losing ?

You are unlikely to get anything solid. Whatever you end up writing and publishing will probably get used by people as real statistics in the future.

 

[spreader_legger]

The stats vary but I believe derived from broker info concerning accounts blown
95% is on the highish side (the range from what I recall was around 80 --> 90%). But you must also bear in mind that people could own numerous accounts .... so blowing one does not mean they give up altogether

I'd say 99% of people who lose go all quiet. So if the statistics say 95% are losing then that's the 95% of the 1% who admit they are losing.

It's not in the interest of institutions to give real statistics on people losing either. Then why would people go there with their money given such high probability of losing ?

You are unlikely to get anything solid. Whatever you end up writing and publishing will probably get used by people as real statistics in the future.

 

[forker]

Checkout one of the recent threads I started is called something along the lines of 95% fail myth. It references a site that you can purchase the stats you require from.

 

[Adamus]

Forker, thanks for the pointer. I'll just grab that image if you don't mind. I'll have to check out forexmagnates to see what it's all about but I might be able to get away with just using the image. We'll see.

It's pretty consistent around 70% losing accounts.

I can't think of any reason not to extrapolate that to 70% lose their trading capital or give up.

 

[nunrgguy]

Failure also has to be defined as it isn't cut and dried. When the 95% number is bandied about I think a lot of people extrapolate that to "95% lose ALL their money", which it does not mean at all.

Makes less than inflation = fail
Makes less than sticking it in a mutual fund = fail
Makes money but not enough to live on and gives up = fail
Makes money but not the 100% a year was expecting so puts money into the hands of managers = fail
Break even = fail
Goes into 5% drawdown and gives up = fail
Blows small account but starts another undercapitalised small account = fail
Blow whole account = fail

etc


There are a lot more ways to fail than there are to succeed

 

[Adamus]

The figure was quoted even in old publications like Market Wizards. Maybe if I read Reminiscences of a Stock Operator, it will be in there too.

I just figured there might be some actual research behind it.

I emailed Forex Magnates who put that table together to find out whether their reports and research on the subject has library citations or even ISBN numbers but I don't want to buy their report for $250 just to be able to say "x% lose" in my article. It's easier not to mention the subject.

I think defining the number is simple enough - what percentage do not make enough profit each year to be able to carry on?

The percent that fail equals 100 minus the percent that succeed in doing that.

 

[DashRiprock]

tbh I think its probably folk lore. Most people lose I can accept because the thinking changes are quite hard to make and require sustained effort.

the 95% figure i rekon will be from people who haven't got where they aimed looking for consolation. I wouldn't feel bad if I failed the cambridge entrance exam, but I would if I failed the 11 plus. So I tell everyone I failed the entrance exam.

 

[enragedcow]

either folklore as dash said or brokers combined attempt to make the general population believe trading is so hard that they need to buy expensive seminars and training to do it.

don't forget, 80% of statistics are made up

 

[nunrgguy]

either folklore as dash said or brokers combined attempt to make the general population believe trading is so hard that they need to buy expensive seminars and training to do it.

don't forget, 80% of statistics are made up

That would be 85%

 

[15 min tlb]

It is a zero sum game , after commissions/costs of gambling, it is a negative sum game.5 % brokers and services win , rest lose due to negative sum game.Period.

95 % are traders/gamblers , 5 % are services.

 

[tomorton]

This statement is bandied about all the time - I just read it again in the weekend FT. Any number between 80 and 99.9 seems to be given in various versions. But it depends on what is meant by trader, loser, over what time period, in what markets, using which instruments etc. and these are never fully explained so it's a meaningless statement.

All I know is that if the industry, whilst run legally, requires fresh cannon fodder to remain viable and pay me profits, it seems likely that the higher the casualty rate the better - as long as it does not include me.

 

[brettus]

This statement is bandied about all the time - I just read it again in the weekend FT. Any number between 80 and 99.9 seems to be given in various versions. But it depends on what is meant by trader, loser, over what time period, in what markets, using which instruments etc. and these are never fully explained so it's a meaningless statement.

All I know is that if the industry, whilst run legally, requires fresh cannon fodder to remain viable and pay me profits, it seems likely that the higher the casualty rate the better - as long as it does not include me.

I think the 95% losers is probably right. I don't think 95% lose on this forum however, but i think more than half do. You'll be amazed to know how a typical client trades or their mindset. Clients call you up, talk to you like they know and understand the market except they are down 500k since they opened an account 5 years ago and never had a winning month.

Most think TA is BS.

 

[lamog7]

95% is about right but it don't matter anyway. If you add opportunity cost it goes up to 99.99%