Monday, 7 February 2011

Are There More Outliers?

Mrs EL and I are big readers and have moved to both Kindle and iPad for our reading. Very convenient and easy in every way.

I'm currently reading a book called Outliers by Malcolm Gladwell.  His main idea, and he sites references, is that according to scientific research it takes 10,000 hours of practice to become master a skill, be it the arts, sports, computer programming or anything else.  He also states that these people who master a skill to a high level need not be genius smart, but only smart enough and they had to encounter a set of circumstances that gave them an opportunity in their chosen field that may not have been available to others.  But they all required 10,000 hours of practice to become good enough to take advantage of the opportunity. Finally, he says that no one, not rock stars, not software billionaires and not even geniuses -- ever makes it alone. All had help of some kind.

Day trading and trading in general by retail traders has become more pervasive over the last 10 years and I think that if Gladwell's hypothesis is correct, and I think it is, then many more people have hit their 10,000 hours and have received the help needed. Why do I think this? Well, the general wisdom is that more than 90% of traders lose, a wisdom that I have repeated myself as it was the number generally used in the industry.

Well it looks like that number, 90%, is no longer true, if it was ever true. In the quest for more transparency and regulation of the Forex markets in the United States, a new law was passed there requiring, amongst other things, that the Forex broker/dealer publish a statement about how many of his customers were profitable and how many were not profitable. In complying with this law, lots of filings have been now made.

I received a copy of one of these filings in an email from TradeStation that said that just over 20% of their customers were trading FX profitably. Looking at other filings I saw that, with one exception, most forex brokers/dealers reported that between 20% and 26% of their customers were profitable. The exception was Oanda whose profitability figure was almost 50% (because, I believe, they provide forex services as well as trading and that skews the figure). Great news, in a way, 20% profitable is better than 10% profitable, but all in all not a very large percentage.

My first aim when I started with this blog was to use it as a place to keep all the info I wanted Kiki to remember.  As this blog developed, my other aim has been to try and help people shorten their learning curve to CP. I know I am on my way to achieving that with many of you, from the feedback through both this blog and through the training I provided by the webinar/seminar and DVD/mentoring route. But there is still more work to be done. So with that in mind, here is today's trading sequence.

Today's ES was pretty straight forward. It was a bullish day and the market obliged. Here's the vid.

1 comment:

  1. i recommend: "golf is not a game of perfect" by Dr. Bob Rotella. (kindle version available) it helped me and i am not a golfer!