More evidence on how most traders lose money

CXO Advisory Group did a study using data from Collective2, a website that lets users auto-trade off of public trading systems submitted by ‘expert traders’.

Here is some of what they found:

the typical stock trading system available on Collective2 substantially underperformed the broad U.S. stock market over the past few months. Over the past 30 days, only about 18% of these trading systems matched or beat the S&P 500 Index.

Note further the following from the Collective2 disclaimer: “All performance claims on this web site must be regarded as hypothetical. …Commissions, fees, or trading system leases/subscription fees are not included in any of the results you see here. There is often a vast difference between hypothetical results and real-life trading results achievable in a real brokerage account, and real-life results are almost always vastly worse than hypothetical results.”

If this Collective2 data is representative of the short-term trading of expert individual investors, then short-term trading generally does not work well.

Check out the full article for more details and charts.

Disclosure: I read the CXOAG blog and you should too.

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