I just dont get this its something I have dipped into before but then stepped away from because I realized I need a lot more education on a lot more things before I can hope to do this successfully.
However I keep hearing things like you go broke you will lose everything 85% or 90% lose everything etc.
This I just cant get my head around. If I make a trade on company X in a day company X will typically move up or down 1% or so.
now assuming I have no idea what I am doing and I am worse then just pure random guessing then maybe I lose 0.1% per trade on average. Assuming I start with 100,000 but then Even in this spot I am going to win some of the time. I could see someone losing a lot over a period of time but surely under this model it would take ages to go broke. surely by the time you dropped to say 50,000 etc something would click and you would go okay I dont know what I am doing.
I say 0.1% because factor in regular traders will pay 13.90 to enter and exit a position. £5.95 each side plus £1 of that other charge.
which rounded to £14 is 0.014% then typically the bid ask spread (difference between buying and selling margin) would be typically 0.05%.
So we need to overcome 0.065% Approx to break even. So if I was going on pure guess work I would expect to lose 0.065% per trade on 100,000
so 0.1% loss rate would be huge and appalling performance.
Now to get below 50000 eg the point when I have lost over half my investment It would take 694 repetitions.
surely at this point anyone would have to admit to themselves that they actually cant do this, and stop?
I understand a lot of people who do this use spread betting instead of straight trading but surely if spread betting is such higher risk (which i assume it is) then straight trading would be more attractive.
short of someone getting absolutely reckless and deciding to leverage their net worth 10 fold or a hundred fold I just cant see people doing this to broke.