Trading Success Rate and Comparison with Other Professions
Professional trading is a career that many people are interested in, but do not have the tools and training to crack into. We often have discussions with aspiring traders about the chance of success and sustained profitability in the financial markets. Many people are curious about trading success rates, and if it's worth investing the time and energy to learn how to trade. Lots of people do not have a realistic understanding of the facts of what it really takes to become a day or swing trader. Some people think it should be easy to enter into the market and get rich quickly as a trader, especially if they can find a profitable trading system where others have had success. However, others believe it is not possible to make money as a day trader, and the financial markets are rigged. In this short video, we would like to provide you an overview of trading success rates and how the probability of being a successful trader stands in comparison to other high-paid top performers, like professional athletes in the NFL.
Interesting Trading Success Facts:
- Successful traders and non-profitable traders have been surveyed on their time spent trading and how many methods they have tried, and the results are below. This information is from a survey conducted by Peter Davies, from Jigsaw trading which was presented in 2018, and you can take a further look at the details of the study here.
- The majority of traders spent a long period of time trading, ranging from 5 to 10 years
- Many traders have changed their trading systems and methods between 2 to 10 times
- About 77% of these traders are unaware of their performance because they never bother to measure it
- More than 80 percent of these aspiring traders are still not profitable trading in the market, with a trading success rate of 18%
- This study shows the importance of creating a trading system which involves tracking your performance. Keeping a daily journal to track your trades is vital to learn from your mistakes to improve your odds of making money in the financial markets.
Trading Success Rate of Day Trading:
- Professional traders need to have dedication, patience, and discipline, to have consistent profits in the financial markets. Trading isn't easy, and new traders must overcome the psychological elements of entering the financial markets, which we discuss in further detail in Human Psychology Conflicts. The success rates below are from a study conducted by Vantage Point Trading, and further details can be found here.
- The majority of traders enter into what they think is a easily profitable trading market, dreaming to get rich fast
- About 40% of traders lose money during their first month
- About 80% quit trading during the first 2 years
- Only about 7% are still trading in the market after 5 years
- In the long term, only about 5% remain consistently profitable. These profitable traders make a fortune in the market consistently for many years
- Since about 5% of traders are able to reach a professional level, this suggests that the market is not rigged and successful traders exist- they just need the right training and mindset to be consistant
Rates of Trading Success Compared to Becoming a Professional Athlete:
We know that the odds of reaching the professional level in any elite performance field, whether it be the NBA, NFL, or Olympic sports are much less than about 5%! The trading success rate of aspiring long-term profitable traders is higher than that of becoming a professional athlete, which is shown in this study here.
The Odds of Becoming a Professional Athlete:
- Basketball High school seniors drafted by NBA: 0.03%
- Football High school seniors drafted by NFL : 0.09%
- Baseball High school seniors drafted by MLB : 0.5%
- Ice Hockey High school seniors drafted by NHL: 0.4%
- Soccer High school seniors drafted by MLS: 0.08%
What Turns Aspiring Learners to Elite Professionals?
This question attracted performance coaches and researchers to study the Science of Expertise. They studied top performers and traders for decades to understand:
- Who are these people?
- What knowledge and experience do they have?
- What trading system do they use?
- What are their success secrets?
The Science of Expertise lead to the discovery of the “Cycle of Excellence!”
The studies conducted on the Science of Expertise helped distinguish a common pattern amongst top achievers, and lead to the discovery of the Cycle of Excellence. In the past two decades, the Cycle of Excellence has had a significant impact on many fields to accelerate the development of professional experts, including traders. We will explain this, along with its relation to practice drills, more in detail later.
For now, here is the summary of the surprising research outcomes:
- Top performers are not born but made
- Spending time alone on a subject is not enough for mastery
- Top performers engage in Deliberate Practice
How do Amateurs Turn into Professional Traders?
How do amateurs and professionals spend their time which results in different outcomes? These are important questions which we will address in detail in “How Professional Traders Spend their Time and Talents", in the next blog post.How Professionals Traders Spend Their Time and Talents