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Scientists Discovered Why Most Traders Lose Money – 24 Surprising Statistics

Sebencapital

Published
11/10/23
SCIENTISTS DISCOVERED WHY MOST TRADERS LOSE MONEY – 24 SURPRISING STATISTICS

The statement "95% of all traders fail" is a commonly cited statistic in the trading world, but it lacks empirical support from research. Investigations into broker data and trader performance have revealed some startling statistics suggesting the failure rate may be even higher. This article will present 24 eye-opening statistics discovered by economic scientists, shedding light on why most traders struggle to make a profit.

SURPRISING STATISTICS

The trading world is filled with surprising statistics that reveal why many traders struggle to succeed:

  • Approximately 80% of day traders quit within the first two years. After three years, only 13% remain after five years, merely 7% remain.
  • Traders tend to sell their winning trades at a 50% higher rate than their losing trades. About 60% of sales are winners, while 40% are losers.
  • The average individual investor underperforms a market index by 1.5% annually, while active traders underperform by 6.5% yearly.
  • Day traders with strong past performance have the potential to earn strong returns in the future, yet only about 1% of all-day traders consistently profit net of fees.
  • Surprisingly, traders with up to a 10-year negative track record continue to trade, even when signals suggest a lack of trading ability.
  • Profitable day traders make up a small percentage of all traders, about 1.6% each year, but they are very active, accounting for 12% of all day trading activity.
  • Poor individuals tend to spend more of their income on lottery investments, and their demand for lotteries increases as their income declines.
  • Investors with a large gap between their existing economic conditions and aspiration levels tend to hold riskier stocks in their portfolios.
  • Men trade more frequently than women and unmarried men trade more frequently than married men.
  • Poor young men living in urban areas, belonging to individual minority groups, invest more in stocks with lottery-like features.
  • Within each income group, individuals who gamble tend to underperform those who do not.
  • Investors tend to trade winning investments while holding onto their losing ones.
  • In Taiwan, trading activity dropped by about 25% after introducing a lottery in April 2002.
  • During periods with uncommonly huge lottery jackpots, individual investor trading declines.
  • Investors are more likely to rebuy a stock they once sold for a profit than one they sold for a loss.
  • An increase in search frequency for a specific instrument predicts higher profits in the following two weeks.
  • Individual investors trade more actively after experiencing success in their most recent trades.
  • Trading with the primary goal of learning is nothing more rational or profitable than playing roulette to learn for individual investors.
  • The average day trader experiences significant losses after adjusting for transaction costs.
  • In Taiwan, individual investor losses amount to about 2% of GDP.
  • Investors tend to overweight stocks in the industry in which they are employed.
  • Traders with high IQs tend to hold more mutual funds and a bigger number of stocks, benefiting more from diversity effects.

Conclusion:

After reviewing these 24 statistics, it becomes clear why many traders fail. Trading decisions are often based on emotions, the desire for excitement, and the hope of striking it rich quickly. What traders frequently overlook is that trading is a profession that demands skills honed over years.

Therefore, it's crucial to approach your trading decisions with mindfulness and a realistic perspective. Don't expect to become a millionaire within a year, but instead, understand the potential and possibilities that online trading offers. Success in trading requires discipline, a well-thought-out strategy, and the dedication to develop your skills.

Written by Sauravsingh

Techpreneur and adept trader, Sauravsingh Tomar seamlessly blends the worlds of technology and finance. With rich experience in Forex and Stock markets, he's not only a trading maven but also a pioneer in innovative digital solutions. Beyond charts and code, Sauravsingh is a passionate mentor, guiding many towards financial and technological success. In his downtime, he's often found exploring new places or immersed in a compelling read.

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