There is a guy on Twitter with over 500K followers, posting screenshots of his $70M portfolio. He makes money off a $500 subscription he has on Telegram. I've seen many of you guys talk about his predictions. Maybe you joined his group. Perhaps you are considering it now. What you haven't seen is the 10,000+ people who followed him and have blown up their portfolios. They aren't posting about their experience. They've deleted their accounts. They've gone back to work and are no longer talking about trading. They are invisible. This is survivorship bias, and it may be the single most expensive cognitive mistake in trading that you will ever make. I'll give you a bit of a reality check on this topic. Researchers at the University of Sao Paulo did an interesting research that no one else had ever done (at least not in Brazil). From 2013 - 2015, they tracked each person who began day trading Brazilian equity futures. They tracked all of them, not a small sample size. The Brazilian futures market is the third largest futures market in the world by trading volume, so this wasn't some backwater exchange. During this time, they watched 19,646 people who made their first day trade. The results were awful. 97% of people who continued trading for more than 300 days lost money. Not broke even, they just lost money. After a year of trading every day, 3% of people made money. Only 1.1% of those people earned more than the Brazilian minimum wage ($16/day), and only 0.4% earned more than the starting salary of a bank teller ($54/day). The highest performing trader in the study earned an average of $310/day with a standard deviation of $2,560. On any given day, he could be up $3,000 or down $2,000. That was the top performer. The researchers called their paper “Day Trading for a Living?” and the authors concluded that it is very difficult for anyone to day trade for a living. However, the most interesting finding was that they found no evidence of improvement over time. None. The learning curve that every trading book says exists does not exist in the data. People who traded for 300 days were just as bad as people who traded for 50 days. If 97% of day traders lose money, then why do all of the day traders on social media appear to be profitable? Because the losers stop trading. They delete their accounts and remain silent. The few who remain continue to post their successes and continue to sell courses and gain followers. That is literally how survivorship bias works. You only see the planes that returned from the bombing run. You do not see the ones that were shot down. During World War II, the U.S. Air Force was having problems with its bombers being shot down over Europe. The Air Force wanted to add armor to the planes to protect them from enemy fire; however, armor adds weight, and adding too much weight would cause the planes to become unable to fly. Therefore, the Air Force needed to determine where to place the armor. They hired a statistician named Abraham Wald to analyze the bullet hole patterns of planes returning from missions. The data showed bullet holes clustered in the wings, fuselage, and tail of the planes. There were very few bullet holes around the engines. The Air Force decided that they should add armor to the wings, fuselage, and tail of the planes. But Wald disagreed. He said that the Air Force should add armor to the engines of the planes. Why? Because the planes that Wald analyzed were the ones that made it back. The bullet holes in the wings and tail of the planes showed areas of the plane that could take real damage and still allow the plane to return safely to base. The reason there were no bullet holes around the engines was not because the engines were not taking damage. It was because the planes that were damaged enough to get bullet holes around the engines never really returned. The Air Force only saw the planes that made it back. But the real information was in the planes that were shot down and did not return. You may think that survivorship bias is only a day trading problem. Actually, it is not. Survivorship bias exists in every area of investing. In 2011, Vanguard released a study on mutual funds that covered the period 1997 to 2011. The researchers looked at the performance of the mutual funds over this 15 year period. During this time, 46% of the mutual funds either closed or were merged into another fund. Almost half. Gone. And here is the interesting part. Most of the funds that were closed or merged were the worst performers. 87% of the funds that were merged into other funds were underperforming before they were merged. Fund companies were not closing their high performing funds obviously. They were closing their low performing funds. Why does this matter? Because when you review the performance of mutual funds, you are only reviewing the performance of the funds that are still available. The poor performers were closed, merged, or renamed, and are no longer listed as separate entities. And as a result, the average performance of mutual funds is naturally skewed upward after you eliminate the poor performers. John Bogle, the founder of Vanguard, said it clearly. “What we think of as the typical mutual fund's returns are just grossly overstated.” Another study, conducted by Savant Capital Management, reviewed the performance of Morningstar rated mutual funds from 1995- 2004. The researchers included both the surviving funds and the closed funds in their analysis. They found that if they only included the surviving funds in the Large Blend category, the average annual returns were 10.8%. If they also included the closed funds, the average annual returns fell to 8.9%. That is almost a 2 percentage point difference. Over 20 years, compounded, that is the difference between doubling your money 4 times vs 3.5 times. Research on the performance of individual traders pretty much gives the same results. Two finance professors, Brad Barber and Terrance Odean, obtained trading records from a major online discount brokerage firm. The records were for 66,465 households and contained 6 years of trading data from 1991 - 1996. They found that the average household was trading 75% of its portfolio annually. That is a lot of trading. The market returned 17.9% per year during this time. The average household earned 16.4% per year, a loss of 1.5 percentage points, mainly due to the transaction costs. However, the most active traders, the top 20% of traders by trading frequency, earned 11.4% per year, a loss of 6.5 percentage points. To show you the impact of excessive trading, let's assume you start with $100,000 and hold the market for 20 years at 17.9% of returns. At the end of the 20 years, you will have approximately $2,800,000. However, if you actively traded and earned 11.4%, you would have approximately $870,000. Over 20 years, the active traders lost $1,900,000, and that is simply the cost of overconfidence. Barber and Odean also found that the more successful the traders became in the short term, the more likely they were to continue trading excessively. Success gives you overconfidence, and overconfidence makes you trade more, which eventually leads to poor performance. The cycle just continues to repeat itself. I found a similar study conducted in Taiwan from 1992 – 2006 where researchers used complete trading data for the entire stock market for 15 years. Less than 1% of day traders were able to produce predictable and reliable positive returns. Though the top 500 day traders in Taiwan were able to get good returns, most of the day traders simply just lost money while trading. The researchers also discovered that if you only studied the top 500 traders, you would conclude that day trading is extremely profitable. You would attempt to reverse engineer the strategies of successful traders. However, you would almost certainly fail, because you would only be analyzing the survivors. The Financial Industry Regulatory Authority reported that in 2020, 72% of day traders lost money during the year. Additionally, 40% of day traders quit trading within the first month. Only 13% of day traders remained active in trading for more than 3 years. But despite the high failure rates, the industry continues to grow. More retail traders than ever before are trading. The record number of new exchange accounts were opened in 2020 and 2021. Now, let's talk about the money flow in the trading education industry. A trading guru with 100,000 followers creates a course worth $500. If 2% of followers purchase the course, that is 2,000 sales and $1,000,000 in revenue. Does this guru need to be a profitable trader? No, he needs to be a skilled marketer. He needs to provide screenshots of winning trades. He needs to create credibility for himself through content. This is how the scam works. You trade on a demo account or a small live account. You take hundreds of trades. Some win big, and some lose big. You show the wins and ignore the losses. Or, you do something even easier. You join 10 signal groups and start taking the calls. When one group gives a 500% ROE trade, you show it to your audience and say it was your call. Since no one can verify where the signal is from, you can just lie. Or, even better, you use Photoshop. You show fake account balances, and it takes less than 30 seconds anyway if you know what you are doing. The Securities Exchange Commission investigated trading education companies in the late 1990s. Their report found that the promotional claims of 80-85% customer profitability were not substantiated by the firms' own data. The overwhelming majority of customers lost money, usually quickly and in large sums. That was 25 years ago. The advertising techniques have simply gotten better over the years, and the real alpha in this business model is in the wallets of retail traders. If you are someone who actively trades, I want you to do something. I want you to think of every trading education product you have purchased. Every course. Every Twitter guru. Every YouTube video. Every strategy you have learned from someone else. I want you to ask yourself. Did any of these people show you their verified, confirmed track records? Not a screenshot. Not a demo account. A verifiable statement or data from an independent exchange or broker? I am willing to bet that the answer is no. You have been learning from the survivors without any ability to verify whether they are truly the survivors. The profitable trader you are attempting to copy may just be lucky. They may currently be in the middle of a hot streak that will end next month. They may be fabricating everything. You have no way to find that out. Even if they are making legitimate profits, their strategy may not be transferable. It may be dependent on the current state of the market. It may require a level of capital that you do not have. It may require a psychological makeup that you lack. There are so many variables involved here. The reality is that, for an average retail trader, the most common outcome (i.e., median) is to lose money. In other words, you are much more likely to lose money than win money. And this isn't my opinion - this is the consensus from almost every study ever conducted on this topic. And those few individuals that do find ways to win money on a regular basis have developed some distinct habits over time; being able to identify and trade with some very unique edge, being obsessed about managing risk, continuing to trade until they are profitable, and treating trading like a serious business, rather than entertainment. Even among those people who meet the above criteria, the profit margins are typically extremely low. It is a fantasy for nearly everyone to expect to achieve consistent yearly profits of 100%. Many of the world's top professional traders working at hedge fund funds will typically settle for a profit margin of around 15-20% per year, with what many would consider reasonable levels of risk. So, why do you think you'll be able to achieve the same results on your phone, and that too in a month? That does not mean that you should not trade. I trade. What I am saying is that you should trade with your eyes wide open. Treat every trading educator as guilty until proven otherwise. Require proof of verified track records from educators. If educators will not provide that proof, you should walk away. Study the failures as well as the successes. Learn about how other traders blew up. Learn about how other hedge funds have blown up. Learn why these failures happened and why they were successful in the first place. Be honest with yourself regarding your performance. Keep a record of every trade that you take. Calculate your actual returns using all costs. Compare your performance to a simple benchmark like SPY. If your performance is worse than that of the benchmark, you have a problem. Trade in position sizes that allow you to survive for a full year even if you continue to be wrong. That’s one of the reasons that so many new traders blow up when they start trading - they bet too big too quickly. Also, keep in mind that if you continue to lose money consistently, the right thing to do is not to increase your aggressiveness. The right thing to do is to pull back and find what you’re doing wrong. Survivorship bias is not only a statistical issue but also a psychological issue. Most of us want to believe that we can be successful. We want to believe that the people who are winning know something that we can learn. We want to believe that there exists a shortcut. There are thousands of people willing to sell you that illusion. They’ll show you the pictures. They’ll tell you the stories. They’ll make it appear to be within reach. They will not let you see those shattered dreams. They will not tell you about the 97% that have attempted to make it and have failed. They will not let you see the majority of people who have given up everything, playing his game. So, next time you are fascinated by a trader flexing their profits on social media, keep Abraham Wald and his bullet holes in mind. The planes that were shot down and returned to base aren’t the only part of the story. The real story is of planes that never came back.

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Every new trading strategy is just old TA with a fancy rebrand these days. Support & Resistance? Nah bro, it is Liquidity Grab Zones. Call it order blocks and everyone listens. Call it support & resistance and they scroll calling you old school. And most beginner traders don’t even want simplicity, they want good packaging. A fib retracement sounds boring until you call it Golden Pocket Theory or Institutional Footprints and suddenly everyone is ready to buy a $5000 course. In our industry sadly innovation has become an illusion and no one is even trying. What should have happened is genuine exploration like developing better models of market behavior, integrating psychology with data, or inventing fresh concepts to explain things. I don’t know if in quant finance guys are doing the same thing or not, but at least in technical analysis, it’s been nothing short of a disappointment.

Just saw a trading guru on YouTube drop the classic “You can be profitable with just a 50% win rate if your RR is high” cheat code. Now, it sounds nice in theory until you actually run the math, so I decided to debunk this. With a 50% winrate system, the probability of having at least one 10 loss streak is around 62% over 1000 trades and around 99% over 5000 trades (calculated using runs in Bernoulli trials, probability theory for consecutive failures). At 5% risk per trade, one such streak equals roughly a −40% drawdown which would then require a +67% gain on the reduced balance just to go breakeven. So, in other words, long losing streaks are not an unlikely event, infact they’re mathematically inevitable. And once you recover from one, statistics say another will follow very soon. And even if somehow you work out the math in your favour, what about the psychology part? How many of you are honestly going to continue trading the same system after 10 losses in a row even if you know statistically it’s fine to have that? You are most likely going to cut sizes at the worst time, skip the next big winners, revenge trade or change your system entirely before you reach the positive expectancy part. So, expectancy looks good on paper but remember that trading is not lived on a spreadsheet, it has so many real life variables that you cannot control and having a higher winrate certainly helps alot. For an 80% winrate system, probability of 10 losses in a row is around 0.00001% for every 10 trades and over 1000 trades, chance of at least one 10 loss streak is practically 0%. Even over 5,000 trades, the probability remains extremely small. And this is exactly why you don’t just need a system with a high RR, you also need a strategy with a higher winrate to make it both profitable and psychologically sustainable in a longer run.

CPI RELEASE AND WHAT TO EXPECT! US stock futures declined a bit on Tuesday, giving back some of the gains from Monday’s strong rally that was mainly driven by a temporary U.S.-China trade truce. The pullback comes as attention is towards the highly anticipated April Consumer Price Index (CPI) report, which is expected to provide fresh insight into inflation trends and the potential impact of recent tariff changes. S&P 500, Dow Jones, and Nasdaq futures were all trading lower in early premarket action, with the S&P 500 down about 0.4%, the Dow off 0.2%, and the Nasdaq declining by 0.4%. Monday’s rally was fueled by news that the US and China agreed to a 90-day reduction in tariffs, which had sparked hopes for easing trade tensions and a lower risk of recession. The April CPI report, scheduled for release at 8:30 a.m. ET (1:30 PM UK Time) is expected to show annual headline inflation holding steady at 2.4%, matching March’s figure. On a monthly basis, CPI is forecast to rise by 0.3%, rebounding from a 0.1% decline in March. Core inflation (excluding food and energy) is also projected to remain at 2.8% year-over-year, with a 0.3% monthly increase. Economists are watching closely for early signs of inflationary pressures from President Trump’s recent tariffs, although most analysts expect the full impact to take several months to materialise. The market’s attention is sharply focused on whether inflation will remain contained or show signs of acceleration, which could influence the Federal Reserve’s monetary policy decisions. Current expectations are for at least two 25-basis-point rate cuts by the end of 2025, with the first likely in September. However, a higher-than-expected inflation reading could reduce the odds of imminent rate cuts. The Federal Reserve has signalled that its policy path will depend on incoming data, and officials are scheduled to speak later this week. A reading in line with expectations could support the case for future rate cuts and stabilise markets, while a hotter-than-expected print may reignite concerns about persistent inflation and tighter monetary policy, putting further pressure on markets. The data will also offer the first look at how recent tariff changes might be affecting consumer prices, an issue likely to remain in focus in the coming months. Tech stocks, which led Monday’s rally, were among the early decliners on Tuesday, with Amazon, Meta, Apple, and Nvidia all down in premarket trading. Notable movers include Coinbase Global, which jumped after news it would be added to the S&P 500, and Boeing, which is rising on reports that China lifted a ban on its plane deliveries.