{"id":8886,"date":"2021-04-14T16:22:08","date_gmt":"2021-04-14T20:22:08","guid":{"rendered":"https:\/\/optimusfutures.com\/tradeblog\/?p=8886"},"modified":"2021-04-14T16:22:08","modified_gmt":"2021-04-14T20:22:08","slug":"futures-trading-success-rates","status":"publish","type":"post","link":"https:\/\/optimusfutures.com\/blog\/futures-trading-success-rates\/","title":{"rendered":"Futures Trading Success Rates | How Not To Be Just Another Statistic"},"content":{"rendered":"

This article on futures trading success rates is the opinion of Optimus Futures.<\/p>\n

\"futures<\/a><\/p>\n

The Odds, Taken At Face Value, Are Dismally NOT In Your Favor<\/h2>\n

The statistics may not yield infallible evidence, but the consistency over time makes it clear.<\/p>\n

90% of all day traders lose money!<\/strong><\/p>\n

There are numerous variations to this statistic as there are also numerous sources.<\/p>\n

For instance, Forbes states that 10% of day traders actually make money. Most of us already know that. Tradeciety<\/a> provides clearer and more time-specific futures trading stats–namely, that 40% of all futures day traders quit in 4 months, 80% quit within a year, and that only 7% are able to last 5 years or more.<\/p>\n

Bear in mind that among the 20% who last over a year, not all of them are profitable, just persistent.<\/p>\n

The Fallacy of the 10% Stat Points to Economic Mobility<\/h2>\n

Of course, no day trader wants to be a \u201ccasualty stat.\u201d Nobody wants to be among the 90% who\u2019ve failed. But have you ever thought about this hearsay statistic and what it might mean?<\/p>\n

The 10% is a \u201cfixed\u201d category. Categories are fixed, but people are mobile.<\/strong><\/h4>\n

This points to a common fallacy in economics.<\/p>\n

Among the 20% who are the wealthiest in society, the people who comprise the upper echelon change over time. A family that was once poor becomes rich. Some families who are considered rich may, over time, find themselves in the less-wealthy categories; some have even become poor.<\/p>\n

It\u2019s called \u201ceconomic mobility.\u201d<\/p>\n

So, before we discuss how to prevent yourself from becoming a casualty stat, let\u2019s first talk about the stats themselves and this concept of mobility. Don\u2019t be fooled by fixed statistical categories. There\u2019s much more mobility in the markets (and in life) than you think.<\/p>\n

Questioning Day Trading Stats<\/h2>\n

How long<\/em> do people occupy the top 10% category?<\/strong><\/h4>\n

Are we talking weeks, months, or years? If you\u2019re able to make money–that is, not lose money to the extent of being forced out of the game–for two months straight, then you occupy that 10%. Perhaps you end up with a winning year. Perhaps you have some winning and some losing years, but overall, you came out a winner.<\/p>\n

Reread that last sentence. It\u2019s a key sentence.<\/p>\n

You will experience periods of losses. It\u2019s inevitable. The difference is that those who end up winners are able to continue trading. And to continue trading, you need a 1) reasonably-favorable trading system; and 2) the ability to trade below your means.<\/p>\n

Let\u2019s do a few thought experiments spanning a 10-year period.<\/p>\n

Would you consider yourself a successful trader if\u2026<\/p>\n

    \n
  1. You lost or broke even for eight straight years but made a fortune well over your losses in the last two years?<\/li>\n
  2. You made a fortune for nine straight years but lost more than everything you gained in the last year (say, due to overleveraged naked short options positions)?<\/li>\n
  3. You made and lost money every other year only to profit by a decent amount in the end–a small fortune once you have deducted your losses and trading costs?<\/li>\n
  4. OR, are you thinking of a scenario wherein every year, you make more and more, accumulating gigantic compound returns like a successful hedge fund?<\/li>\n<\/ol>\n

    Let\u2019s tackle each scenario one by one.<\/p>\n

    If you consider A) to be a favorable scenario, then what accounts for the first eight years when you were losing hand over fist? If you occupied the top 10%, it would have to be over time. Either you came out on top through sheer luck or you developed skills to become more profitable.<\/p>\n

    How you did it: you traded well below your means (enough to continue) and eventually found a way to increase your positive payoff over your negative payoff.<\/strong><\/p>\n

    If you chose B), then you were among the top 10% who thrived only to lose it all. Futures trading systems<\/a> can work for lengthy periods of time. But if every other trader discovers it, the system may not perform as well as it did when you were one of the few who took advantage of the opportunities it presented.<\/p>\n

    How you did it: you found a system that worked and you traded it consistently. Unfortunately, when it stopped working, you didn\u2019t adapt to the markets and lost everything (think Richard Dennis of the famed Turtle Traders).<\/strong><\/p>\n

    If C) is a favorable \u201cwinning\u201d scenario, then you did well for yourself, more or less. But you didn\u2019t achieve the kind of win that most traders dream about. Still, there are a few caveats to consider:<\/p>\n