While many people turn to forex trading in search of fast profits, the risk of losing hard-earned money to online trading is still rather high, with 69% of surveyed South African forex-only traders admitting to having lost their money, with the majority losing R9 999 or less.
This is according to a survey conducted by online trading research firm Forex to Stocks, which analysed SA’s online trading landscape.
The online survey was conducted among 838 South Africans from the general population, and narrowed down to 104 actual day traders.
Online day trading has been one of the popular options for anyone seeking to make money online anytime, in the comfort of their home. Some are looking to trade for a living, and others are looking to supplement their salary, notes Forex to Stocks.
Day traders are defined as active traders who execute intraday strategies to profit off of price changes for a given asset.
While there are many bad actors −such as fraudsters − in the online trading industry, even without them, traders are prone to lose money, due to the volatile nature of the industry, notes the study.
The surveyed South Africans were asked to select any of the asset options they are currently trading or have traded before: stocks, forex, crypto, options or futures.
While online trading only appeals to a small population of SA, stocks, forex and crypto-currency are the most popular assets, representing 31%, 31% and 13%, respectively – and slightly more than half of the stocks-only traders said they made money.
The study found the majority of stocks-only traders made R25 000 on average, but the majority of forex-only traders lost R9 999 or less.
“Traders who traded only stocks have a 69% chance of making money and those who trade crypto at 64%, while traders who traded only forex have a 69% chance of losing money,” the study found.
“In other words, stocks-only traders have 2x chance of making money over forex-only traders. One-third of the traders have been trading for more than two years, and the same group also has the highest rate of making money, at 63% – which suggests some correlation between years of trading and positive profit and loss.”
In comparison, out of 69% of forex-only traders that lose money, 64% lose R9 999 or less, 18% lose between R10 000 and R19 999, 5% lose between R20 000 and R39 999, and 14% lose R40 000 or more.
Out of the 69% of stocks-only traders that made money, 50% made R25 000 or more, 14% made between R10 000 and R24 999, and 27% made R2 999 or below.
For new traders especially, forex trading is often the starting point of a later more conventional and stable trading option like stocks. Unexpectedly, crypto does not seem to be as popular despite the considerable price surge since the start of 2020, says Forex to Stocks.
When asked how much they spent on educational materials such as seminar trading courses / tools / newsletters, 63% of traders indicated they spent less than R1 999 on educational material, 12% indicated spending between R10 000 and R19 999, and 9% indicated spending R20 000 or more.
However, this did not necessarily correlate with profit and loss.
“We also compared educational spending with traders that made / lose money. And the traders who spent between R0 and R1 999 have an equal chance of making money than those who spent R20 000 or more,” notes the study.
“Despite the latter having a higher spending amount, both success rates are the same at 56%. Hence, this suggests higher spending on educational materials do not lead to a higher chance of making money.
“Some 51% of the traders have been trading for one year or more, and when we compared trading experience with profit and loss – we found a slight correlation between them.
“Traders who have traded for more than two years have the highest chance of making money and traders who started out with R10 000 or more trading capital have a 68% chance of making money compared to traders who started out with R999 or less, at 44%.
“Does this suggest that the more starting trading capital you have, the higher chance you would have a positive profit and loss? We do not think so. We believe that traders who have started with higher capital may be taking their trading endeavour more seriously than those with considerably lower starting capital – hence, resulting in a higher success rate,” says the survey.
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