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Nov 10

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Traders’ Methodology and Performance Study…..only 27% are losers ??

(from FX Street and CitiFXPro)

Methodology

Over 3000 traders responded to an online survey that was posted from September 8 to October 8, 2010 on four high-traffic FX websites: FXstreet.com, ActionForex, ForexPros and ForexTV. The 25-question survey took approximately 5 minutes to complete. The survey results are tabulated in two parts, this is part two about Traders’ Methodology and Performance.

Key Findings

  • Traders said (34%) that FX’s potential for return in up and down markets was the best reason to trade FX, with a surprisingly high percentage (16%) saying that FX’s status as the “most interesting and intellectually stimulating asset class” was the strongest reason for picking FX. Other reasons included the 24-hour nature of the market (15%), low initial capital requirements (13%), superior liquidity (12%) and high leverage (9%).
  • The EUR/USD currency pair is by far the favorite pair to trade, with more than half (51%) of traders choosing it. Other frequently chosen pairs included GPB/USD with 18%; EUR/JPY with 6%; and GBP/JPY at 5%.
  • Most traders focus on a relatively narrow range of currency pairs, with 65% saying they trade from 1 to 5 pairs. About 25% trade from 5 to 10 pairs and 6% trade 10 to 15 pairs, with only about 5% trading more than 15 pairs.
  • Traders identified “speculation” as by far their main purpose in trading currencies at 83%, with hedging a distant second at 8%.
  • Traders were extremely diverse geographically, with representation from dozens of countries. Although the survey was conducted in English, only 23% of respondents were from the U.S., 8 percent from the U.K. and 7.5% from India.
  • More than half (53%) of traders employ a combination of fundamental and technical strategies, with 36% saying they use a technical strategy involving tracking trading patterns and only 8% saying they adhere to a strictly fundamental strategy.
  • Half of traders responding to the survey said they employ a short-term trading style. The next most favored styles are swing (26%) and scalp (17%) with long-term the least popular at 7%.
  • Almost half of traders (47%) experience average profits on a trade of between 0 and 5%, with 32% saying that profits average between 5% and 10% on a trade. A sizeable percentage (22%) claim profits above 10% on each trade.
  • More traders (65%) report average losses on a trade of 0 to 5%, with 22% experiencing average losses of 5% to 10% and 13% experiencing losses over 10%.
  • Traders report largely positive net performance over the last 12 months. The largest group (37%) said they experienced net returns between 0 and 25%, with 15% saying that returns were in the 25% to 50% range and fully 10% reporting returns of between 50% and 100%. The top tier (11%) said returns were in excess of 100%. Only 27% reported negative net returns of 0 to -25%.
  • Traders vary widely in their use of leverage. Leverage of 50 to 100 times capital invested was the most common range, with another 18% employing leverage of more than 100 times capital. Low ratios of 1 to 5 times were also relatively common at 20%, with 5-10 times at 13%, 10-20 times at 10% and 20 to 50 times also at 10%.
  • Traders maintain a relatively short-term focus, with trades typically intraday or a few days for 49% of traders and “a few minutes to a few hours” for 42%. Only 4% say they hold as long as several weeks while another 4% may hold for long periods.
  • While three quarters (75%) of traders say they do not hedge, e.g. make the trade opposite to the one that is currently open, hedging is employed by a full 25% of respondents.

See Report with glorious colour charts…whooooooo

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Permanent link to this article: http://intradayforextrading.co.uk/2010/11/10/traders-methodology-and-performance-study-only-27-are-losers/

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