Crypto trader reveals secrets of 3% who actually make money

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A recent study found that 97% of day traders lose money. A well known crypto trader returns fire and reveals how you can be part of the 3%.

Australian crypto trader Craig Cobb – from the Trader Cobb podcast – isn’t surprised by the results of a recent study of 1100 Brazilian day traders that found almost all of them lost money.

“I can’t argue with the results of a study – if you’re in Brazil and you’re day trading, don’t!” he said.

“At the end of the day, it’s like any business – 95% of businesses fail in the first year. (Trading) is a business so why would the numbers skew any other way?”

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Australian cryptocurrency trader Craig Cobb

Brazilian whack

The University of San Paulo Brazil study found that of those share market day traders who persisted for more than 300 days:

“97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560).”

“It doesn’t really surprise me in the sense that most people who call themselves traders are not,” Cobb said.

“There’s a big difference between playing poker professionally – understanding probabilities and reward to risk ratios – and the average Joe who rocks up to the casino once every six months and has a crack.”

No evidence traders learnt on the job

The study authors, Fernando Chague, Rodrigo De-Losso, and Bruno Giovannetti, also found no evidence that day traders learned on the job or improved their strategies over the year.

“Considering those who day traded for only one day (1,111 individuals), 29.8% obtained positive net prot.

“Those who day traded for 2 to 50 days (9,978), 51 to 100 days (3,100), 101 to 200 days (2,738), 201 to 300 days (1,168), and more than 300 days (1,551), 15.5%, 8.9%, 6.8%, 5.4%, and 3.0% obtained positive net profit, respectively.”

You need the right mindset

Cobb said many people didn’t put in the work, or have the right mindset, to get better.

“If you continue to do something that’s not working, and you’re not willing to improve on that … it’s normally mindset,” he said.

“Often you can have the same strategies I’ve used day in, day out, for 13 years but if you have the wrong headspace you can still take sh– trades.”

Cobb revealed he experienced a pretty steep learning curve too.

“I lost money for the first 18 months, after that i worked out what I needed to do to stop losing money and from there slowly but surely getting better

“I’ve been making profits for nine years now.”

Craig Cobb chats with Tone Vays

Three rules for staying in the black

Risk management

“Trading is risk management – you have to manage your risk. Know how much of your capital you are willing to have at risk in the market. You might have five trades and all five get stopped out, losing you five percent. So understand what your cutoff point is”.

Strategy

“Have a structured approach to the market. You have a strategy and see if the market will play your game, as opposed to going to the market and saying: ‘Let’s see what I can trade today’. People go looking for trades, I go looking for reasons to leave everything. If I can’t find a reason to leave it, I take it.”

Routine and measurement

Routine is super important, and so is taking screenshots. Measure your trade outcomes by taking screenshots. It’s boring but it’s so important. You’re going to have to do a stocktake if you have a shop, but no one likes doing it.

Research suggests day traders have a 97% chance of losing money.

Good news for crypto traders

The good news is that Cobb believes it is far easier to be successful trading cryptocurrencies, than trading equities.

“It’s far easier because of the volatility,” he said.

“You can be a very average trader and have a very low win/loss ratio, but a very high reward/risk ratio on your winning trades and that is the difference.

“Effectively if you have ten losing trades and then get one good one on Bitcoin or whatever then it can very quickly give you a 20%-30%-40% net gain on your account balance.

“That’s why traders who, in traditional markets, would be average, look very, very good (in crypto).

“The market makes them look better than they are.”

Trader Cobb is a Micky partner, but this isn’t partner content. We interviewed him because he knows his stuff.