Do 100% Forex Traders Loose: Random Walk Theory?

There is a school of through that belives that in stocks or forex trading you are 100% looser.
Please answer pro-data and logical.

By definition, if you believe in random walk theory, then only 50% would loose the other half would be the lucky ones who were on the other side of the trade.

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I've heard it said that seven trades out of ten lose money in forex; this means that traders hedge their bets on those remaining three, which might be centered around market movers such as interest rate decisions or non-farm payroll announcements.

A lot of studies have examined the track record of professional and amateur traders and have concluded that they lose. Randomness and unpredictability has a lot to do with this.

It's not 100% because, just as in gambling in a casino, the odds guarantee a few winners. Of course, if these winners continue playing chances are that they will lose their winnings.

There are some examples of professional traders who have won money and "kept" their money. Perhaps they quit after a winning streak, or perhaps they're careful not to gamble all their winnings. Of course, this success simply could be the result of luck and chance, nothing more.

The random walk hypothesis says that asset prices are not predictable. It uses a normally distributed random variable in a formula which is used to determine fair value for derivatives. Being a model it's not perfect, it tends to make some assumptions that may not be entirely accurate, but it seems to have worked well for the past forty years.

For information on the theory behind the random walk, see Introduction to Mathematical Finance by Paul Wilmott. If you're an engineer you may want to see The Mathematics of Finance by Wilmott, which is an introduction to the math behind it.

Financial markets are not a true random walk in the mathematical sense. They exhibit certain characteristics of randomness in certain circumstances, while in others they don't. For information on how randomness affects the world of trading see the book "Fooled by Randomness" by Nassim Taleb.

Most people don't understand probability. If they did they wouldn't gamble in casinos or buy lottery tickets. Same thing with trading. If people understood it, they would not trade. Of course, a lot of people think there's a "secret" they can figure out which will make them rich. So they trade until they can't any more. Some of them trade their whole lives even though they have nothing to show for it at the end.

There is a huge difference between trying to trade minute by minute, which is almost totally random, and trying to ride a long term trend, which most certainly is not.

Successful traders like George Soros and Jerry Parker make their money on the trends. Most people don't have the patience and try for short term stuff and lose.

Random walk theory or the probabilityof a toss of a coin. In the long run the distribution of wins to losses, will tend to 50:50. In lay man's language that is one step forward and 1 step backward. BUT you still can get ahead. Just make sure that the step you step forward is longer than the step you take backward.

That means you must always look for a set up in the chart pattern that gives you a risk/reward ratio of 3:1 if not 2:1. That will ensure that you will always be moving forward.

So even though you are still taking 1 step forward and 1 step backward, you are still moving forward.

Therefore random walk is a looser walk if its unorganized walk. But if its a strategic random walk you will still get ahead.

Short term trades and the random walk goes hand in hand but banks make a decent return trading with the long term trends in mind.

That said, most of the successful forex traders trade with the trend, not against it and usually trade either with the primary trend or the secondary trend. I think that the "minor" trend tends to support the random walk theory.

To say that trading is luck period and not a learned skill is absolutely ludricrous considering that corporations and big business make profits off it. Do you think that they would be simply betting their stockholders funds if there wasn't some sort of system in place?