Scams, Myths & Reality Check · Beginner · 5 min

'Most traders lose': what the numbers really say

You can name the main studies behind 'most traders lose', say what they measured and what they did not, and use them as a base rate.

What the studies found

"Most traders lose" is one of the most repeated sentences in finance. It shows up in videos, forums and ads, often with a precise-sounding number and no source: 90%, 95%, 99%.

The sentence is not wrong, but it is often used carelessly. This lesson looks at what the main studies actually measured, what they found, and what they do not say.

Three studies, one pattern

EU CFD accounts. When ESMA restricted CFDs for retail clients in 2018, it cited analyses by national regulators across several EU countries: 74% to 89% of retail accounts typically lost money, with average losses per client ranging from 1,600 to 29,000 euros. Since then, EU CFD providers must show a standardized risk warning with their own recent percentage of retail accounts that lose money.

Brazilian day traders. Fernando Chague and colleagues observed everyone who began day trading Brazilian equity index futures between 2013 and 2015 and persisted for at least 300 days. 97% of them lost money, and only 0.4% earned more than a bank teller's starting pay. They found no evidence that traders learned to do better.

Taiwanese day traders. Brad Barber and colleagues studied day traders in Taiwan from 1992 to 2006. Less than 1% of the day trader population was able to predictably and reliably earn positive returns after fees.

Together, these numbers are a base rate: how often an outcome happens across a whole group, before you look at any individual case. Psychologists have shown that people tend to ignore base rates and focus on the story in front of them, such as one successful trader's video.

What the numbers do not say:

They measure short-term trading, often with leverage. They do not describe long-term investing in broad, diversified funds, which is a different activity with different risks.
They describe groups in specific markets and periods. Exact percentages vary.
They do not say that winning is impossible, only that it is rare and hard to tell apart from luck.

72% lose with this provider

A fictional CFD provider's website shows the required warning: 72% of retail investor accounts lose money when trading CFDs with this provider.

That is the base rate for this provider's clients over the recent period.
A new client who thinks "I will be in the other 28%" is making a forecast about themselves. Without a tested plan, a record and strict risk management, there is little reason to expect better than average.
The figure is also an average. Some losing accounts lost a little, others lost everything.

Starting from the base rate does not mean giving up. It means asking what you would have to do differently from the 72%, and whether you are actually doing it.

Common mistakes

Quoting numbers without sources. "95% lose" is often invented. Use the studies.
Stretching the numbers. Day trading data says little about long-term index investing.
Assuming you are the exception. Most people do, which is part of why base rates stay high.
Ignoring the provider's own figure. It is required for CFDs in the EU and worth reading.

The takeaway

For retail CFD trading and day trading, studies find that most accounts lose. Know which number applies to what you do.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the finding about day traders who kept going for at least 300 days.

Tap the chart.

The Brazilian study followed everyone who started day trading futures in 2013 to 2015 and kept going for at least 300 days: 97% lost money.
2What does a base rate tell you?

Base rates are the starting point for a realistic estimate. Most people assume they will beat them.
3What must EU CFD providers show in their standardized risk warning?

The figure is provider-specific and recalculated regularly, so you can see the base rate for that provider.
4Does 'most traders lose' mean that most long-term investors in broad index funds lose?

The figures come from CFD accounts and day traders. They should not be stretched to activities they did not measure.

of 4 correct.

Sources

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