Can you make money trading? Obviously, it can be.
However, if I have intention to start earning money by trading what I have real chances of success?
always heard that that 90% of traders lose much of their capital within 6 months, but how true is it?
seems more logical view that the percentage of traders winners out of 50% as a price can only go up or down, and therefore, we should have a 50% chance of losing or winning.
October 18 came into effect new regulations for foreign exchange brokers in the U.S.. With this new regulation, among many other changes, the brokers are required to publish the percentage of accounts are in profit each quarter. In this post we found a very revealing chart:
A look at the table is to draw a conclusion: in every quarter, only about one in four customers of either of these brokers wins. The only exception is Oanda clients, with a percentage close to 50%, but the explanation is simple and logical: Oanda paid deposit account balances, so that all accounts that are inactive are automatically winning accounts, thanks to the interest received.
Seeing this we have to forget about the assumption of 50% chance of winning. We see that the reality is that the probability is 25%. But beware, 25% in a single quarter. That is, it seems simple that even a bad trader has a good quarter, but winning over four quarters, or at least win the whole year, it seems so simple. In the extreme case, if all traders earn a quarter and lost the other three, would have the same statistical result and there would be a winning trader only in the whole year. Considering the success of winning a quarter as an independent trader in the event of winning the same trader another quarter (which is not strictly true), we would have the statistical results of 0.25 ^ 4 = 0.0039. That is, the probability that a trader wins in the four quarters of a year would be 0.39%. He said that this is not strictly true because we have to accept that they are not independent events, as they often repeat the winning trader profits are more likely than others, plus you do not need to win every quarter to make profit in the whole year. But we have to accept, in view of these results, what that 90% of traders lose is a fairly accurate result with what has to be reality.
words, it is complicated to be a winning trader. The period, the shorter, more unpredictable, so if the aim is to win is to be operated easily in the medium to long term. Gain from investment is simple: just have to buy when others are fearful and sell when others are greedy. Buy and sell in fear to euphoria.
also is not the same bet that a price increase or decrease, that investing in a business that is profitable and we also buy cheap. In the first case, if we bet on the upside and the market gives us no reason, we will have to close out the position at a loss. In the second case, each drop will be a new opportunity to buy at the best price. Is difference between speculation and investing. In the long term, value investors are imposed.
It's really hard to fight every day against the noise of the market tried to scratch something. Instead, go for a penalized by the market value but with solid fundamentals is a far less risky bet, if we wait long enough. The patient investor is not paid by anyone. You are not required a monthly result. You can afford to lose if you know you're on the right side. Here come the results. Markets are inefficient in the short term but long term tend to be quite efficient.
Another issue to consider is the physical and psychological cost of trading. Investment required to be informed and take some time to finding good values \u200b\u200band monitoring. Speculation of day trading requires dedication and psychological wear. The trader is under considerable pressure, while the investor may worry about your portfolio and only serve the market sentiment, a few economic indicators and statistics, in search of opportunity, to try to find auspicious time of sale. In fact, if you have some actions that prevent you from sleeping, the only thing you can do with them is sell them.
Nor is it never to do trading, but only do it when we have a clear competitive advantage in the operation, something we have seen and almost everyone else is not. You can make very good trading operations in specific cases, but it is very difficult is to buy and sell every day and win consistently.
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