Portfolio Boss

The 90/90/90 rule

dan-murphy
Dan April 30, 2024
0 Comments

Corona Del Mar, CA 

Howdy Ellen!

 

A notable study called "Day Trading For A Living," tracked 1,600 Brazilian day traders for over a year.

 

Remarkably, only 3% of them were profitable.

 

This percentage is likely even lower, as the study only included traders who were active for more than 300 days (so there's a survivorship bias).

 

There's a 90/90/90 rule in day trading: 90% of traders lose 90% of their account within 90 days. Furthermore, it's important to note that only a small fraction, specifically 1.1%, of these day traders made more than the minimum wage.

Firms on the other side of these trades, like Citadel, make billions per year. 

So what's going on? Why do most active traders bleed money?

According to eToro, 89% of their traders use technical analysis for trading decisions.

Most TA is subjective and not back tested by computer. Practitioners are in fact being fooled by randomness.


Think about it: I can go to a website like Tradingview and for free start drawing lines, adding Fibonacci retracements, dozens of indicators, and even do some simple backtesting.

 

They have over 60 million users and a $3 billion valuation.

 

Never has it been so easy to get your hands on software that used to cost thousands of dollars back in the 90's when I started.


So I have one question: Why are so few of their users making money?

Earl Nightingale said: "Whatever the majority of people are doing, under any given circumstance, if you do the exact opposite, you will probably never make another mistake as long as you live.

 

Well, as it turns out, of those that practice TA, only about 15% ever go through the trouble of programming trading rules into the computer and running a backtest.

 

And of that group, an even smaller percentage (15%?) know anything about statistical significance, and out of sample testing for verification. They end up creating over-fit monstrosities that perform terribly in the real world.

 

And out of that small group, fewer still have ever attempted to use weird data for trade signals. (15%?) Heck, I didn't try that until 2006. Why? Because it was difficult.

 

If each stage of profitable technical analysis only consists of 15% of the prior group (15% * 15% * 15%), then only .34% of traders make it to that level.

 

That's where fortunes are made.

 

To sum things up, it has never been easier to get started with TA. The charts have never looked so gorgeous. But those aren't the tools that make money in the markets. The lack of results for millions of traders speak for themselves.

 

Do you know what other industry has practically zero barrier to entry, is associated with glitz and glamour, and millions lose? Casinos!

 

Take this as a friendly reminder: You can't have outsized results doing what everyone else is doing.

 

Follow The Boss on Twitter for more frequent (and ornery) updates >>

Trade smart,

Dan "Prince of Proof" Murphy

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EARNINGS DISCLAIMER: I like to provide full transparency and not blow smoke up your behind, so listen up.100% Club members in general are seeing between 91%-100% winning months in back tests just using the Instant Start templates I created for them. These results are out-of-sample (unseen in the optimization phase), so I put a lot of weight into that fact.

I don’t yet have a statistic for the average member as far as gains are concerned. There are a lot of variables because this is not a cookie-cutter program. I do have dozens of brokerage statements on file, and the majority are looking positive.

There were a couple outliers that weren’t good because they went off track. I believe I convinced them of where they went wrong and they are back on track (too much leverage, and some over-fitting to the past). That’s my job :)

There are other factors in play as well such as: Are you actually making the trades? Account size. Is your broker any good or are they fleecing you? Are you using all the leverage available to you, or are you dialing it back like I recommend?

Simply put, I believe the reason we’re seeing the highest preliminary success rate of any program EVER is because:

a) you’re selecting from 100+ supercomputer-built strategies, and the odds of them all failing at once are extremely low.

b) the strategies take advantage of highly unusual edges that very few if any know about.

c) Our Meta ML technology is completely unique in the trading world. Very few understand that all strategies have cycles, and that there are opportune times to trade them. This allows you to treat trading more like a business rather than a hobby.

d) The daily instructions are brain-dead simple to follow, and can be accomplished in just a few minutes.

Government required disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.

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