A word on trading success rates

Can you be successful position trading while working a full-time job? I believe so, but many would argue that if you want to trade you should trade full-time. “They” say that 90% of traders fail, that the game is rigged, that markets are efficient, etc.

I have two points to make about these types of statements. First, always question the validity of a statement that begins with “they”. It’s a weird pet peeve of mine, but I have always wondered who these mythical all-knowing beings are that are simple known as “they”. I digress. My second point is that the statistics often cited, while quite possibly true, I believe are taken out of context a bit. It probably includes amateurs who have just a passing interest in the stock market, put little to no research into it, and only buy stocks whose products they are familiar with. If the statistics were narrowed down to those that take it seriously, then the success rate I believe would drastically improve.

I am not trying to make the claim that the success rate of this group is astronomically high either. It is my belief that much of the fear mongering that takes place is done so to scare people away from trading, and instead they are encouraged to give their money to an “expert”. I imagine these experts are possibly from the mysterious “they” group.

I do plan to take a deep dive into the statistics of trading success in a future blog post. One of my goals of this blog is to assuage some of the fears that are propagated towards new traders. I believe that the powers that be push this to ensure the ultra corrupt system continues on. I want to encourage people to make their own financial decisions versus giving their money to the greedy, corrupt wall street denizens. It is not easy, but it is also not nearly as hard as some would make you believe. The average return of a mutual fund is incredibly anemic, and beating those atrocious returns is not impossible. The vast majority of mutual funds under-perform the market.

Beating the market averages is also do-able for the average person. I am sure I will get some flack from some that I am trying to say trading is easy. It is most certainly not easy. But if you do take a look at the statistics, and again I plan to expand upon the data that is available at some point, you can see some things that we can use to our advantage. One, most of the studies done look at day trading success rates. The small amount of statistics available shows that longer term traders and investors do better on average. Another thing to consider is that the system we have set up pumps money into the system via people’s retirement accounts. Every pay period people dump a bit of their paycheck into the stock market. This creates an upward bias in the market that we can use to our advantage if we target longer time periods. The markets are almost always higher over long time intervals of 5-10-20 years. With this in mind, in theory it should be possible to be profitable as a position, or medium to long-term, trader. It does not mean that more than 50% of people will be. Many will not put in the time necessary to get there. You really do need to be diligent and put some serious effort into this to make it work.

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