There is no secret. Most traders lose and we know exactly why. They ignore all advice and persist. So they deserve to lose.
The AMF (the french "regulator", not sure what they are exactly), they looked at FX & CFD brokers responsible for half the volume of active investors, between 2009 and 2012. According to them: - In any year 84% of active clients lost money (83.8 - 84.2) - Over 4 years 89.4% clients lost money - Of those that traded for the whole 4 years, 87.56% lost money - The average loss per tx was around 25 euros, with the average tx size at least 50,000 euros (loss <= 0.05%...)
The Polish regulator found similar results with 82% of losing clients in 2011. Brokers now publish their clients results and in any quarter the percentage of losers is around 75%, there is a famous broker with "only" 60-65% losers but its clients famously copy LONG-TERM stock portfolios. Less day traders = Less losers.
The Bank of Japan has a report available: In 2015, based on the transaction data of FX firms which are the members of the Financial Futures Association of Japan, and excluding positions carried over more than 1 month, 86.1% of accounts are "intraday". boj.or.jp/en/research/wps_rev/rev_2018/data/rev18e03.pdf
You have to take that into account! Remove the day gamblers and the stats shoot up. Remove the bagholders going all in dreaming of 100X and the stats go even higher.
Broker FXCM published its own interesting article. They looked at their clients over a year in 2014-2015. Among the interesting things we can get out of it: - 53% of clients with a reward to risk equal or greater than 1:1 had profits - 17% of clients with a reward smaller than the risk (< 1:1) turned a profit - 40% of clients with a leverage equal or lower than 5 were profitable - 17% of clients with a leverage equal or higher than 25 were profitable - Their clients average winners and losers were around 2/3 the daily ATR - The worst performances were made on the easiest most obvious trending pairs!
I bet if you backtested a mindless trend following system with just a few conditions, and with a risk to reward of 1 to 3 or better it would end up green. Because markets trend. Literally just pick any 3 or more (daily) green candles and see, when it is followed by a red candle, how often that is a small pullback and how often it's not. And code a 3 to 1 RR, can't be that hard. Over 20 years it's sure to be green. Very volatile, but green. To deal with the volatility that's where some diversification comes in. If over 3 months you took 20 trades, 17 losers, and one 3R + one 11R + one 7R your history is all red you eat losers all the time but you still are up 4R.
Markets simply trend. That's the way it is. The whole idea is to catch trends. Warren Buffett buys fairly valued or even cheap stocks hoping they will trend (for years). Georges Soros sells the British Pound in a range hoping the peg will break and the GBP will trend (for weeks) or he's selling the Yen and buying the Nikkei when it's ranging around its lows and not popular anymore hoping it will wake up and trend (for months or years). There is nothing more to it. We investors, regardless of asset or time horizon, are all trying to catch these trends. And hedgers that are forced to have an exposure as to per their business activities are trying to dodge those trends, by taking an opposite position to "cancel" their exposure.
Brokers and "social sites" show their users aggregate positions and it's always the same story:
Day Trading and Insisting on Being on the Wrong Side of the Trend. That's it.