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Myth 3 of 11 in Myth Busting Series

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The internet is full of statements by so called experts. In this series called Myth Busting we take a look at a number of commonly held beliefs in the market place and query our database to see whether these statements/beliefs are FACT or FICTION.

 

PsyQuation is in unique position to provide a definitive voice on this subject with one of the largest retail FX research databases. We have tried to remain as impartial as possible to the outcome and simply let the results speak for themselves. Let’s get started.

 

DATABASE

DescriptionDetail
Accounts~120,000
Trades~120 million
Date Range20 Oct 2008 — March 2018

 

 

Myth 3.

 

Size Matter’s

 

Lots of people say that it doesn’t matter how big your account is because you can trade micro lots if your account is small and after all if you are comparing performance based on % returns then the size of the account shouldn’t matter. However the statistics tell a different story. Size does in fact count.

 

We have split accounts into 2 groups those with account equity below $50,000 and those above. You can see that traders with accounts below $50,000 produce a median return of -81% whereas accounts above $50,000 produce median returns of around 0%.

 

For the sake of completeness we also produce a chart measuring $ performance on the left chart. What is interesting to note here is that losers of accounts below $50,000 produce loses around the $0 mark whereas accounts above $50,000 are substantially profitable.

 

The simple take away from this study is that you really should fund your account with as much money as you can afford to lose. I know some people hold back the full amount they intend to deposit, choosing to rather deposit (reload) more money when the account balance drops too low. Trading small accounts tends to increase the amount of money risked per trade which plays a dramatic behavioural impact on trader performance.

 

FACT

 

Lessons Learned in a Taxi Myth 2 of 11 in Myth Busting Series