Unexpected Online Trading Statistics: 18 Surprising Insights

It's not easy, especially for those who are just starting out, to comprehensively understand the dynamics of the world of online trading, Forex included. After all, the markets are influenced by an incredibly high number of economic actors and investors who differ in knowledge, skills, and financial resources. However, the aura of mystery or the ambiguity that is often perceived regarding the world of speculative investing can be narrowed down if objective data is sought out and researched. The famous blog Tradeciety.com has done this, listing 24 statistics related to the world of trading, which primarily explain why traders tend to lose a lot of money.

The statistics that explain the world of trading

80% of novice traders leave the market within two years. This is a staggering statistic. Especially because it suggests a bitter truth: those who start trading have only a one in five chance (on average) of developing a career, of transforming speculative investing into a medium-to-long-term activity. 40% of novices stay in the market for only one month. This data is, in a sense, complementary to the first and serves to deepen a very important dynamic: the difficulty of overcoming the entry barrier. However, it also reveals a certain inability to react to negative events. Especially since, regardless of performance, one month is too short to understand if one is suited for trading or not. Three years after starting trading activity, only 13% continue to invest daily. After five years, only 7%. This data completes the previous two and shows how narrow the bottleneck is. Only 1.6% of traders manage to generate "clean" profits, net of commissions and expenses. This truly meager percentage serves to understand, once again, how narrow the bottleneck is for those who want to earn with trading. Those who make a profit are more active than those who do not. To be precise, 12% of the total amount of positions are opened by traders who manage to generate profits. This is an interesting fact, which in some way reveals that yes, trading "often" does not negatively impact the final result and does not reduce the hopes of profit. Traders with aspirations far greater than their current economic conditions tend to take greater risks. This is a fact that has to do with psychology and, at the same time, with risk management. It helps to understand how a certain personal feeling, or a condition of emotional suffering, can negatively affect risk management. In this case, it is not entrusted to rational elements and techniques, resulting in less effectiveness and indeed compromising. Men trade more than women. This fact has two interpretations. One lies in the dynamics of trading, which would marry a typically masculine approach. The other concerns a question of inclusion, if not discrimination. Single men trade more than married men. It's difficult to interpret this data. In truth, the reasons could be numerous: from less time available to a lower risk attitude, determined by the onset of family responsibilities (especially when there are children and the need for stable income is clearly felt). Individuals who are in a worse economic condition, who live in urban areas and are part of minorities tend to invest more in high-risk instruments, whose mechanisms are reminiscent of gambling. It could be a problem of education, social education or a reflection of the data regarding the gap between current situation and aspirations. Within any type of trader (day, swing, scalper etc.), individuals with low risk attitude perform better than individuals with high risk attitude. This data is certainly indicative. Specifically, it reveals that risk must be managed, and that a prudent attitude is always to be preferred. In 2002, in Taiwan, the number of traders dropped by 25% after the state introduced the lottery. This is local data, which logically cannot represent the world of trading in its entirety. However, it makes you think. Specifically, it suggests that a portion of traders (regardless of their numerical consistency) confuse, at least at the unconscious level, trading with gambling. In periods when public gambling games (e.g. lottery) record the highest jackpots, overall trading activity becomes less frequent. This data sends the same message as the previous one: by some, trading is seen, unconsciously or not, as a kind of gambling. This is clearly a wrong approach, and one that can lead to ruin. Traders tend to sell a security they have previously sold for a profit, compared to securities they have previously sold to trim a loss. This means only one thing: that trading is an activity full of unknowns, and therefore investors are usually - perhaps unconsciously - trusting what they know or referring to habits (rather than rational analysis). Again, we are faced with data that unequivocally demonstrates how significant and impactful the psychological component is, which in this case manifests itself in the need for control. Increases in analysis and research activity are often followed by higher profits in the following two weeks. This data is very interesting as it clearly demonstrates that one of the keys to practicing profitable trading activity is studying the market. What is most striking, however, is the time horizon. The effects of an increase in analysis would be seen, in fact, after only two weeks. Traders invest in a more measured way if their recent trades have been successful. This statement demonstrates a certain prudence on the part of profitable traders, as well as a marked self-control. In theory, the generation of profits should be followed by a certain euphoria, potentially dangerous for trading activity. Winning traders, however, tend to shield themselves from these risky dynamics. In Taiwan, the sum of investors' losses over the course of a year is on average equal to the GDP produced by Taiwan in the same reference period. Again, we are faced with local data, which cannot have an overall value. However, it demonstrates how deep and extensive losses in trading can be. It is a fact that certainly invites caution. Traders overestimate the stocks that refer to the sector they work for. This is a very interesting statistic, as it reveals a certain gap between perception and reality, a certain difficulty in seeing things as they are. This dynamic is potentially very dangerous as it can distort analyses, with all the consequences of the case on the profit front. Investors with the highest IQs invest more in managed savings and diversify more. The message is obvious: diversification is necessary and is good for investment activity. Nonetheless, if carried out with prudence and caution, even risk sharing (as happens in managed savings) can represent a reason for success.

What these statistics tell us

Some of these statistics persist in sending the same message. Upon closer reading, it is possible to isolate three different messages, or reasons that cause the ruin of traders. Trading is an extremely difficult activity. This is demonstrated by the numbers. As we have seen, only 7% of novices continue to trade after five years. The bottleneck is very narrow, and only the best make it. This leads to a corollary: expecting to get rich overnight is a senseless attitude, the quickest way to lose money and leave the market. The psychological element counts a lot. Although the winning trader is seen as a cold and calculating individual, almost devoid of feeling (at least when investing), the psychological element is characterized by a certain disruptiveness. It is a truth that one must come to terms with, in the hope of bending the psychological element, governing it, and ensuring that it causes as little damage as possible. Trading is still seen, in part, as a gamble. Risk is always present, danger lurks, and the odds of defeat are high. Yet there is nothing - or there should be nothing - more distant from gambling than online trading. The problem is that some, perhaps unconsciously, as shown by some "local" data, tend to associate the two things. Trading is still a male activity. Probably, the reason does not lie in an alleged - and perhaps imaginary - incompatibility between the female approach to trading. Simply put, trading has historically been a male world, and is still considered as such today. Incidentally, the percentage of women engaged in trading is increasing day by day.