An email I received from an unsuccessful trader yesterday got me to thinking about the daily losses spot traders are suffering so I did a little research. Admittedly, I’m no statistician so if anyone can help quantify these loss projections, I’m all ears. Drop me an email and I’ll do my best to correct the numbers and assumptions I’m about to blither on about. Please cite authoritative sources if you do.Most everywhere one looks there’s a reference to the “fact” that $1.9 trillion dollars are traded on the foreign currency exchange every weekday. Of that total trading volume, one source reports $600 billion of it as spot trading.
Now here’s where it gets interesting.
Let’s assume that mini trading only accounts for 1% ($6B) of all daily trading. If the average mini trader uses 200:1 leverage and 85% of them aren’t succeeding, then we’re looking at actual trading losses of $25,500,000 a day. If on the average they only use 100:1 leverage, that figure naturally doubles.
Now I don’t know about you, but the math seems to speak pretty much for itself. At the very least it helps me understand why dealing desk brokers are reluctant to talk very much about the hazards of foreign exchange trading. Sure, everyone has that obligatory risk disclosure posted on their site. The same disclosure appears in the contact traders have to sign to before they set up their trading account. But, considering the immensity of these daily losses, is that really enough?
This brings up our exit question for the day.
If mini traders are collectively losing $25,500,000 - $51,000,000 a day, where is all that money going?
Home
