95%/5%

[tech/a]

Tell me to the exact point then if they are "quantifiable".

Tax time would be a good start.
If you keep good business records and your trading then you should you'll know instantly if your consistently profitable.
In this example we are talking trading ie 5% are consistently profitable.

In general wether its 5% or 20% its clear---well to me anyway that few reach the level I have suggested in my base reply.
Does it matter if it 9.275%.
There is a level with most things that most never achieve.
Ask a Pilot,Race driver,Pro golfer,plastic surgeon.Billiard player,Physist,programmer,dog breeder,author,painter,in all there is that top 5 or whatever %.
Beyond proficient,striven for by others.Benchmarks to some.

 

[prawn_86]

player,Physist,programmer,dog breeder,author,painter,in all there is that top 5 or whatever %.
Beyond proficient,striven for by others.Benchmarks to some.

That comes back to the original post of this thread.

What are the actual %'s, and why is it that 95/5% is used so often? Beyond the fact that it is a nice number.

Its all well and good to say "im good/very good at what i do" but its a totally different matter to say you are in the top X % without public records/numbers/studies etc

 

[Trembling Hand]

As for day traders, I have posted this study else where but its the only empirical evidence I have ever seen that day trading talent is a lot rarer than even the 95%/5% stat.

we provide a comprehensive analysis of the profitability of all day trading in Taiwan over a five year period. During an average six month period, we identify over 130,000 investors who transact at least $NT 1.5 million in day trades and over 9,000 who transact at least $NT 90 million in day trades. To do so, we use a unique and remarkably complete dataset, which contains the entire transaction data, underlying order data, and the identity of each trader on the Taiwan Stock Exchange (TSE) – the World’s twelfth largest financial market. With these data, we provide a comprehensive accounting of the profitability of day traders during the period 1995 through 1999.

Our main empirical findings can be summarized succinctly. Heavy day traders appear to trade at favorable prices, but only a select few are sufficiently savvy to consistently earn profits net of their trading costs. More than eight out of ten day traders lose money in a typical semiannual period.

only two out of ten make money; fewer do so consistently.

 

[chops_a_must]

Tax time would be a good start.
If you keep good business records and your trading then you should you'll know instantly if your consistently profitable.
In this example we are talking trading ie 5% are consistently profitable.

What if they are in the top 5% of skilled tax evaders?

Previously you said: "You'll know." in regards to calculating your % position.

I didn't want this to turn into a pissing contest, but I guess it has to come to that, and I'm probably an interesting case study.

I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.

So that is close to 250% in 18 months. Or something like that.

Do I think I am in the top 5% because of that? Nope. Because I GENUINELY believe there would be more than 5% of people in the markets who have made more than that in that period of time. Is that a correct or incorrect assumption? Whether or not you are in that 5%, apparently, is contingent upon that very assumption.

But do I think I've been successful? Yep, I sure have. Most is down to pure ****, for sure, but I've gone from being someone dabbling and a hack, to someone having enough money to be damn serious about trading.

See, you seem to equate being in the top 5% with being successful. It just doesn't work like that. If you trade long only, and your goal is not to lose any capital in this bear market, and you achieve that, then that is very successful. Stuff it if 5% of people make more than you!

I do not care if I am in the top 5%, if you can even measure your place. What I do care about is not losing money, beating indexes, and maximising my profits. And so long as that is done, the rest is just BS.

 

[IFocus]

I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year, since.

So that is close to 250% in 18 months. Or something like that.

Chops end this year with that record and you will be some one special in the game of retail trading a very Rare Chop indeed.

 

[lesm]

TH,

The study you are referencing, although empirical, has produced similar findings to a range of studies related to day traders.

The consistently profitable day trader long-term appears to be a rarity according to any of the published studies to date.

Cheers.

 

[chops_a_must]

Chops end this year with that record and you will be some one special in the game of retail trading a very Rare Chop indeed.

Mmm... most of that is due to futures trading of late, and then that reinvested.

The problem is, futures will take just as easily as they give. If I get another draw down like I did in a week in Jan, repeatedly, that figure would drop quite a bit. However, I only trade opens and gaps on them now, so it has been much more consistent.

Cheers.

 

[brty]

Hi,

In a discussion about the 5% compared to the 95%, I would like to ask about the following characters.

1. Jesse Livermore. Died broke. Was he in the 5 or the 95?

2. Victor Niederhoffer. 5 or 95?

Or were they both in the 5 then changed to the 95 when they self destructed?

Or were they back from the 95 to the 5 when they remade fortunes after losing them??

Or are they aberrations that just don't count??

bye

brty

 

[Trembling Hand]

TH,

The study you are referencing, although empirical, has produced similar findings to a range of studies related to day traders.

The consistently profitable day trader long-term appears to be a rarity according to any of the published studies to date.

Cheers.

Just to put some $$AUD to that study. The average income for the very small group of profitable was $70,000 BUT the median income $9,000. That's after brokerage but not before other expenses and tax!

Obviously there was a very very small group cleaning up that lifted the average way above what most profitable were making.

 

[wayneL]

Haha great question.

How about John Elliott, the LCTM mob etc etc.

 

[MichaelD]

The confident have no need to validate themselves by assigning themselves some BS incalculable rank. To do so smacks of insecurity.

Whoa there a second, Wayne - you're the one who introduced the arbitrary 95/5 which many respondents, myself included, simply translated into "losing trader/consistently profitable trader".

The precise % is ultimately irrelevant. The question of groups within groups is a far more interesting point of discussion.

I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.

So that is close to 250% in 18 months. Or something like that.

Do I think I am in the top 5% because of that? Nope. Because I GENUINELY believe there would be more than 5% of people in the markets who have made more than that in that period of time. Is that a correct or incorrect assumption?

Your assumption that more than 5% of market participants would have made more than that is almost without a doubt incorrect. (Bit of a tongue twister there).

There are some qualifiers, however;

- what element of this return was due to luck? - eg overleveraging and getting lucky with the run of wins, excess risk taking, picking a bubble stock by luck - versus good management of trades. If you're in the 5% you'll KNOW what was luck and what was not. If it was luck and you don't realise it, you'll give it all back sooner or later. The 5% KNOW what their edge is.

- open equity should not be counted.

(this in no way is meant to disparage your trading results, just to fuel discussion).

 

[theasxgorilla]

By retaining his humility,
the talented person who is also wise,
reduces rivalry.

Hands up who here can claim to have this on their charter?

Thankfully, I'd say most.

 

[wayneL]

Whoa there a second, Wayne - you're the one who introduced the arbitrary 95/5 which many respondents, myself included, simply translated into "losing trader/consistently profitable trader".

The precise % is ultimately irrelevant. The question of groups within groups is a far more interesting point of discussion.

No I didn't. They were rhetorical questions based on the promulgation of the 95/5 cliche' on other threads. A philosophical analysis of the need for some to continually bring it up.

No insult was intended to anyone, and particularly to you (I know what you were doing and my comments don't apply).

Cheers

 

[chops_a_must]

Your assumption that more than 5% of market participants would have made more than that is almost without a doubt incorrect. (Bit of a tongue twister there).

What I base that on, is that more than 5% would have lost more than what totalled up to that percent. Therefore, more than 5% would have made that on the opposite side. But I guess if I'm not going to claim to be in the 5%, anyone with less returns wont be claiming that either. So we are stuck.

There are some qualifiers, however;

- what element of this return was due to luck? - eg overleveraging and getting lucky with the run of wins, excess risk taking, picking a bubble stock by luck - versus good management of trades. If you're in the 5% you'll KNOW what was luck and what was not. If it was luck and you don't realise it, you'll give it all back sooner or later. The 5% KNOW what their edge is.

- open equity should not be counted.

(this in no way is meant to disparage your trading results, just to fuel discussion).

A lot of it was to do with luck. As I said, a lot was pure ****. My first four trades from memory were with TLSCA, AED, QGC and MCR. I only remember two losing trades in my first month or two. So I probably couldn't have had a better start.

I didn't use margin to begin with, never used CFD's. I've never traded U stocks, except shorting ERA.

It was only after reading about trading, I realised why I had had the gains. I had been inadvertently trading breakouts. But after proving to myself I could manage positions, I got into margin. I've been gradually reducing my margin position the last few months, and as of yesterday, I have no margin being used. I have a large amount of funds available however.

I only have 3 open positions, and 2 will be closed in the next few days.

But you are right. The longer I've been here, the more conservative I've become, and the less volatile my gains have been, although steadier. A lot of my gains were flukes, but there was a reason for those gains, and I've just incorporated that into my trading with proper management.

Whether or not that makes me in the top 5%? I don't know. Even if I was, I wouldn't claim it. Maybe I'm just not that sort of person? I assume there are others like that as well.

 

[MichaelD]

A lot of my gains were flukes, but there was a reason for those gains, and I've just incorporated that into my trading with proper management.

Whether or not that makes me in the top 5%? I don't know. Even if I was, I wouldn't claim it. Maybe I'm just not that sort of person? I assume there are others like that as well.

Pretty much by definition, you've answered your own questions. Your mindset is well and truly in the "5%".

It is said that the $ don't matter to the very best traders - the $ come as a byproduct of the intrinsically interesting process of trading. How do you feel about that statement?

 

[nizar]

Hi,

In a discussion about the 5% compared to the 95%, I would like to ask about the following characters.

1. Jesse Livermore. Died broke. Was he in the 5 or the 95?

2. Victor Niederhoffer. 5 or 95?

Or were they both in the 5 then changed to the 95 when they self destructed?

Or were they back from the 95 to the 5 when they remade fortunes after losing them??

Very good post.
And interesting questions.

From what I understand about Victor Niederhoffer, he was a gun trader, making excellent money for years. He had a sound understanding of risk and everything like that. But the reason he lost is because for him, who was a competitive squash player, trading was like a game in which he had to win.

But ultimately, he blew up.

So which category is he in?

Does it count if the reason you blew up is due to a black swan?
But -- that said, very conservative traders, eg. those that take 0.5% risk, if unleveraged, can still trade on after a black swan most likely.

Michael, do you have any comments about the above?

 

[nizar]

Your mindset is well and truly in the "5%".

Is being in the 95/5 about mindset and understanding the theory?
Or about practical trading results that are beyond random?
(Obviously you could achieve the former through luck).

How about if you have the mindset and understanding but your (recent) realtime trading results are absolutely sh**house (Like mine! ), what does that mean? LOL.

 

[Porper]

I didn't want this to turn into a pissing contest, but I guess it has to come to that, and I'm probably an interesting case study.

I doubled my money in just over 6 months, the first 6 months I was trading. Since, I am up close to 30% on that in the nearly year.

So that is close to 250% in 18 months. Or something like that.

Unfortunately that's exactly what this thread has become.

Oh, look at me I made this much more than you, blah, blah.

The fact is nobody knows who is in the 5% and who isn't, what we do probably know is that the posters who do nothing but mention their heroic achievements are not in that so called 5%.

If we are treating trading as a business or a proffession, and we should, then it is exactly the same as making money cutting lawns for a living or not as the case may be, or whether you are a good enough mechanic to work for Mercedes as a technician or whether your limit is fitting spark plugs and doing oil changes at the local garage.

You are either long term profitable or you aren't.I would hazard a guess that most of us on here haven't been trading long enough to know.I only know of 2 or 3 on here that definitely are profitable long term, there are obviously others, but I bet not many.

 

[MichaelD]

Livermore: A great intuitive trader for picking and exploiting edges to their limits (eg trading in the bucket shops), but incapable of realising when the edge evaporated - hence repeated blow-ups. Probably addicted to trading.

Trader Vic: Don't know enough about his style to comment.

Blowing up: You can't blow up if you limit your risk correctly. You can take a black swan or three and it will hurt, but you won't blow up.

Terrible results in current market: Irrelevant if the positive expectancy plan is still within specification.


Being in the 5% is ALL about mindset. With the correct mindset, EVERYTHING else simply logically falls into place;

Stop losses - illogical to trade without them
Written down trading plan - illogical to trade without one
Following the trading plan - illogical to deviate from the plan
Backtesting the trading plan - illogical not to backtest any plan
Paper trading the plan - illogical to engage the market with real money before validating a plan
Predetermining the maximum expected drawdown of a plan/expected runs of losses - illogical to trade without this information

 

[brty]

Hi,

Trader Vic is Victor Sperandeo not Victor Niederhoffer.

MichaelD, Would you say these characters are not in the top 5%??,because they blew up.

Or were they in the top 5% before??

bye

brty