What is the
article about?




You will see results of an interesting survey of more
than 1500 traders done a year ago at a webinar which I attended. Such a large
number of participants in a survey makes the survey results rather valid and
credible. Please note traders were trading various markets not only forex.





The focus of the survey was to determine how much
money people had for trading and what their expectations were from trading in a
financial sense.





Participate
in a survey





BEFORE YOU WATCH THE VIDEO or read the rest of the article, please write your view/answers to the
following questions in the Comments section:

  1. How much do you believe traders have in their trading accounts on
    average?




  2. How much profit do they expect to make per month in % terms?






A VIDEO
version of this article is available on YouTube at http://www.youtube.com/watch?v=-N8BJzjyUnk



Note 1: If
clicking on the video link doesn’t work just copy the link into your browser.



Note 2: The
text below is not an exact transcript of the video.






1st
survey question: How much money do you have?





This question addressed the overall financial
situation of the respondends i.e. in life in general, not just in trading.





  • Enough or plenty:              54%
  • Not enough:                       21%
  • Can’t make ends meet:   24%













We can see that 1
in 4 traders
came into trading with the hope of earning money for living
which they could not make elsewhere. This is rather alarming because we all
know that trading is a risky business! Betting your life on it isn't reasonable to say the least.








2nd
survey question: How much capital can you use for trading?





  • Less than $1000:    11%
  • $1000-$2.000:        
     5%
  • $2000-$5000:            7%
  • $5000-$10000:        12%
  • $10000-$50000:      30%
  • More than $50000:  35%












 



If you remember answers to 1st question you
can see that many webinar attendees had a lot of money. In fact, there were many
pensioners present at the webinar. They wanted to make more money with their savings. So it
comes as no surprise that many attendees had or intended to have large trading accounts.







3rd
survey question: How much money do you want to make from trading per month?





  • Less than $1000:    13%
  • $1000-$2000:          17%
  • $2000-$3000:          16%
  • $3000-$5000:          18%
  • $5000-$10000:        21%
  • More than $10000: 15%
















 



We can see that the majority of people didn’t intend
to become rich from trading as they were targeting relatively low amounts in
absolute terms.



However, 1 in 7
traders
intended to make a very good living from trading if $10,000 per month
can be taken as such an amount that guarantees that.







Performing
an analysis of the data so far shows …





Note: As the
exact distribution of survey data isn’t available I performed a linear interpolation
to derive the numbers below. While the exact numbers cannot be known they don’t
impact the final conclusion which is valid in my opinion.





65% of the traders with large trading accounts.



  • Had on average $50000 in their
    trading accounts
  • Wanted to make $7033 or 14% per
    month




 35% of the traders with smaller trading accounts:



  • Had on average $3642 in their
    trading accounts
  • Wanted to make  $1208 or 33% per month






The numbers show that traders with larger accounts
want to make less profit in relative terms
per month than traders with smaller
accounts. This makes sense as a lower percentage of a large account is a large
number in absolute terms.





Getting 14% or 33% per month is surely possible.
Dukascopy trading contest winners make a few hundred and even more than one
thousand percent per month.





However, there is a more important conclusion that we
can make. Assuming that the spectrum of various strategies will be more or less
the same across all traders than traders with smaller amounts must risk
approximately 2.5 times per trade more
than traders with larger accounts.





It is reasonably easy to enter a trading contest with say
$5000 that one can lose and their life will not change. Then one can enter with
say 10% risk per position and if all goes well there is a huge profit at the end of
the month.





But if one doesn’t have enough money to make ends
meet…what can that person do? How much can they risk to make such profits?





There was one last question in the survey. The answers
will shock you and show you the trading world of a small trader in a different
light.





The last survey
question: How much starting capital can you lose in trading?



  •  None:                     23%
  • 25% of capital:       17%
  • 50% of capital:       16%
  • 75% of capital:       18%
  • 100% of capital:     21%










 
 



This is no joke! These are true results!!!



1 in 4
traders cannot afford to lose ANY money!!!

And 1 in 5
can lose very little!!

How mind boggling is that?


What is the FINAL CONCLUSION?





If we are to believe the numbers (I can assure you
that they were really taken from the webinar) then the numbers speak for
themselves:





   approximately 1 in 3 traders wants to

   make more than 30% profit per month

   with zero or little  risk!





Is it possible? Yes, anything is possible in this universe.



Is it probable? No, it is not very probable.



Is it reasonable? This is a subjective question. My
opinion is that it is not reasonable. It doesn’t make sense. We can clearly see
how people end up destroying their lives
with trading due to unreasonable expectations.



My opinion is just my opinion. It is subjective. You
surely have yours. It is subjective as well. So lets look at something
objective to be able to see how reasonable those expectations were.







What do
professional traders make?



 





This guy is Peter Brandt. He has been a professional
trader for decades. He trades various markets, currencies as well.





On his web site there is a publicly available audit of
his trading done by IRS for the periods 1981-1995 and 2007-2009 which is 18
years of trading.







The audit shows that:





  • 14 out of 18 years were profitable
  • 4 out of 18 years were losing years
    i.e. his capital at the end of year was lower than at the start!
  •  His
    compounded
    annual growth (i.e per year!!!) was 41.59%.








And our aspiring traders with very little money who can’t
make ends meet want to make almost this much per month. Reasonable?







Somebody here doesn’t have a good understanding of
trading. Either Peter should have been a zillionaire by now or the aspiring traders got
it wrong. What is your view?



What is the
implication of this survey for YOUR trading?





YOU know YOUR own expectations from trading. And YOU
know YOUR own financial situation. So YOU can see where YOU fit in compared to
other traders in the survey.





Have you noticed the word YOU(R)? This is because
nobody else will make the final decision. No trading guru, no trading webinar,
no trading book and no trading article. YOU alone!





Here comes the crunch! Are you objective enough to be
able to say whether you are overly optimistic in your expectations from trading?
Or whether you risk too much in trading? Can you make appropriate adjustments
to your trading?





Time will tell. Some surveys show that on average
small trading accounts get empty within 3-6 months. Make sure you don't become
part of this statistic due to unreasonable trading expectations.

 



Until the next article I wish you prosperous trading
resulting in a high monthly return



Robert




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