ForexMagnates usually displays a quarterly resume with the statistics showing how many losers and winners there are in the main Forex brokers of the United States.
The results are quite similar from year to year, being quite stable so to speak.
The one I am commenting about here is that of the first quarter or 2015.
Let us have a quick look
Forex accounts results in retail Forex industry first quarter 2015
The broker that stands out is Interactive Brokers with a 45.5% of winning account compared to 54.5 of losing accounts. A good result, without a doubt, and quite similar to that of previous quarter with 44.1 of winning accounts.
Other important brokers had the following results of winning accounts:
- CitiFX: 37%
- Oanda: 32.5%
- FXCM: 33%
- IBFX: 32.5%
- MB Trading: 29%
As we can see the average of winning accounts is close to 34/35.
Let us assume we have a 35% of winning accounts after a quarter.
Does it mean that 35% of traders win doing Forex trading?
No. It does mean that 35% of traders win after three months of Forex trading.
Both things are quite different.
What would be interesting is to know how many traders win after one or two years.
In this respect I have written about what I consider:
- The average duration of a Forex account
- The average duration of a futures account
- The average duration of a binaries account
These results will not vary too much from those in those articles.
I am sure in that case the number of winning accounts would be reduced dramatically.
I see it the next way: the traders that have won in one quarter have a 65% chance of losing in the next one, or at least the majority of them. Assuming there is a small group of talented traders, whom will be not too many.
If this is the case we should multiply 0.35 by 0.35 to obtain approximately how many traders are still winners after two quarters. The result is 12.25% of traders.
If I do that again two times I would obtain the number of winning traders after one year of trading. That result would be 1.5%.
In other words we should not expect to see many more than 1.5% of traders winning in Forex after one year.
Then out of that 1.5% I suppose that 1.5% of that will remain positive another year later, which would give us something like 0.0225%.
Let us say that I am being too pessimistic and out of the 35% of winners in one quarter there are a few that are sort of “consistent” winners, probably those who trade longer frames. However I can tell you: they will be just a few.
Let us see it in another way.
We have 1 million Forex accounts.
One year later we have 15.000 winning accounts and 985.000 losing accounts.
The year after we have 22.5 winning accounts out of 15.000 who were winners the previous years.
One year more and the number of winners may well be less than 1.
For sure you can have day trading traders winning some years but I want to point out that the chance they win next year is very low.
It is just a matter of probability.
We have to understand that there are lots of scalping strategies with a good analysis that discover market inefficiencies and win for a period of time.
However those inefficiencies will not last too long and therefore the scalping strategy will perform very badly when that occurs.
On the other hand, as I mentioned before, there are a group of traders who use longer time frame strategies like carry trade or medium term trading.
They have a better chance to survive longer since the market is “quieter” in the long run.
That is why we find the largest group of “survivors” in the stock markets, since those involve a lot of long term investing.
The case of Interactive Brokers is quite positive but we should see what accounts the broker is using for this case. This is due to the fact that the majority of foreign traders have to maintain “Forex accounts” that are necessary to purchase American stocks, but whom are not really trading Forex.
I am sure that if we analyze those accounts of Interactive we will find many accounts like those.
Anyway, even if we think that interactive data is good, it would mean that only 9.4% of traders would be winners at the end of the year.
I rely more in the data provided by the specialist brokers like FXCM or IBFX, which are closer to 33%.
Forex accounts duration
It is also very difficult to win doing trend or swing trading with Forex in the medium term. A lot more difficult than with stocks for sure.
You do not know very well what is going to happen with Forex and movements of 20% in a major pair are considered something exceptional while that move in stocks is insignificant.
Anyway, it is also possible to do some interesting strategies in the medium and long term with Forex, but it will require a lot of patience and experience.
Besides, I am sure that this data is not very different than that of futures, CFDs or stocks since the market is not the most important factor here.
The most important factor here is if you do day trading or not.
If you try to do very frequent day trading it will be very difficult for you to win in the long run.
Good luck anyway.
Original article: Cuentas ganadoras por trimestre en Forex – Broker PCA