What proportion of day traders find themselves profitable? – Data Science Society (2024)

Approximately 1–20% of day traders actually profit from their endeavors. Exceptionally few day traders ever generate returns that are even close to worthwhile. This means that between 80 and 99 percent of them fail.

What proportion of day traders find themselves profitable? – Data Science Society (1)

What exactly is day trading?

Day trading is when you buy and sell stocks in a short amount of time, usually within a single day. The objective is to make a small profit on each trade, which will compound over time.

With the rise of online stock brokers like Robinhood and cheap or free trades, day trading has become a way for small investors to make a lot of money in a short amount of time, even though it is very risky.

“Successful day traders treat it as a full-time job, as opposed to trading between business meetings or over lunch.”

In practice, however, day trading is difficult for retail investors to profit from. Brad Barber of the University of California, Davis, did a study in 2010 that found that only 1% of day traders are always making money.

The study studied trades from 1992 to 2006, a span of fourteen years. The few people who do make money consistently spend their days trading, and it becomes their full-time job instead of something they do between meetings or at lunch.

If this all sounds like a bit more risk than you’re comfortable with, you may do what many investors do and engage in long-term, buy-and-hold investing in a diversified portfolio of low-cost index funds and ETFs.

Invest regularly in the account and allow the growth of companies to drive your portfolio’s long-term gains.

Long-term investing is significantly more likely to increase your wealth than day trading. Still, if you want to trade stocks every day, you should first learn as much as you can about the process.

KEY TAKEAWAYS

  • Day traders purchase and sell stocks and other assets during the trading day to profit from the quick price variations.
  • Day trading utilizes an extensive array of tools and strategies to benefit from these perceived market inefficiencies.
  • Day trading, which is often based on a technical analysis of how the market moves, requires a lot of self-discipline and objectivity.

The Day Trading Success Rate

Day trading has a 4% success rate as a source of income. The actual rate I saw during my many years of trading at a proprietary trading firm and in discussions with other firm operators.

10% to 15% of prop firm trainees could make some money through day trading (a side activity). For many, their earnings were insufficient to warrant their time.

These individuals spend more than six hours each day at the office, day trading five days per week. They had access to capital and knowledgeable traders to ask inquiries (few did).

Six to twelve months was the minimum time required to earn a living through trading (I had a part-time job up till month 7). Some individuals took longer. Nobody is shorter.

Investing less effort or time lengthens the journey or decreases the success rate.

I believe poor success rates pertain to “I’ll give it a shot” individuals (most ppl). NOT those with love for trading. People with passion do whatever it takes. Give-it-a-shot people… try and fail.

“But I see so many people making a fortune; it must be simple!” This is an example of availability bias: accepting what is visible without contemplating what is not visible. If people talked about losing, you probably wouldn’t follow them on social media.

Follow those that seem to know what they’re doing when studying! It is the only world you can see, but it is not the only one in existence.

How to Be in the Top 4% (or 10%) want to at least swap. If you intend to only “test it out,” you should not bother. Mondays are the favorite day of the week for traders.

Devote a minimum of six months to learning a single approach. Inconsistency and experimentation lengthen the path to profitability.

The act of logging hours is not a practice. Only deliberate practice is relevant. Reviewing errors, generating remedies, and identifying ways to marginally increase risk/reward and win rate.

Confidence comes from doing something repeatedly until you believe in it and know you can do it. Most worries about “trading psychology” can be solved by practicing the strategy until it feels natural.

You do not consider money or produce money. You carry it out, as with any other repeated duty in life. That is only achievable if you consistently trade in the same manner. You will lack (justifiable) confidence and profitability if you are always attempting new things.

The Day Trader Success Rate

During my tenure at the proprietary trading firm, before leaving to trade independently, I witnessed a large number of aspiring day traders apply, but only a handful was accepted.

In order to become professional day traders, these people were willing to go through many interviews, sign contracts, and make a promise to show up every day while following risk management rules. These were, at least superficially, committed individuals.

Approximately 2,000 traders passed through the doors of my firm and other proprietary firms over the years, based on talks with their owners. The rate of success was about 4%, where success was defined as being able to make a living from the markets, which only sometimes means making a lot of money.

So, of the approximately 2,000 inhabitants, approximately 80 could trade for a living. The remaining 1920 gave up, departed, or were terminated.

These individuals trained and practiced for six to eight hours each day, every weekday. They had access to funds and assistance from successful traders, but only some utilized it. And yet, only approximately 4% of day traders could make a living from the trading.

The day trading success rate, including those who were somewhat lucrative but unable to support themselves, was likely between 10% and 15% of those who walked through the doors. These people might have kept trading as a side job, but they needed to make more money to support themselves.

If you want to make a living from day trading, your chances are about 4% if you have adequate funds and invest several hours daily for at least six months. Early streaks of good fortune do not count. I’m discussing regular month-to-month profits.

The majority of profitable traders required at least five months to accomplish so. For four months, I suffered (minor) financial losses. I earned a small sum in my fifth year, the equivalent of part-time work in my sixth, a minimal amount sufficient for subsistence in my seventh, and continued to increase from there.

It will depend on your income objectives, the amount of capital you have, and the profitability of your trading plan. Here are some potential profit scenarios for day trading FX. For day trading in stocks, you need at least $25,000 to start, and you can often get 4x leverage. With that level of capital, success is feasible. Futures trading can also be initiated with minimal capital.

The likelihood of making a living through day trading is unlikely if you lack enough funds and time to invest. It is conceivable, but it will take a great deal of effort and dedication to growing a tiny account into a source of income.

If you want to earn money on the side, you will still need the same level of commitment, putting in months to refine a system and fighting self-destructive inclinations. But the chance of meeting these lower goals is higher, with a success rate of 10 and 15%.

These numbers could be better. There are numerous factors to consider. But, conditions at the trading firm(s) were quite beneficial, and it is undeniable that most people could only make money slowly and slowly.

See the whole approach for day trading and dominating the market in less than two hours per day. My course on forex day trading will teach you how.

Conclusion:

Approximately 1–20% of day traders actually profit from their endeavors. Exceptionally few day traders ever generate returns that are even close to worthwhile. This means that between 80 and 99 percent of them fail.

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What proportion of day traders find themselves profitable? – Data Science Society (2024)

FAQs

What proportion of day traders find themselves profitable? – Data Science Society? ›

Studies have shown that more than 97% of day traders lose money over time, and less than 1% of day traders are actually profitable. One percent! But of course, nobody thinks they will be the one losing out.

What percentage of day traders are profitable? ›

Studies have shown that more than 97% of day traders lose money over time, and less than 1% of day traders are actually profitable. One percent! But of course, nobody thinks they will be the one losing out.

What is the success ratio of traders? ›

The win/loss, or success ratio, is a trader's number of winning trades divided by the number of losing trades. The win/loss ratio can indicate how many times a trader will have successful, money-making trades relative to how many times they'll have money-losing trades.

How many successful day traders are in the world? ›

Key Takeaways

Very few people day trade. Astonishingly few (1%-3%) day traders are able to consistently earn above-market returns. Data is mixed on whether or not it is even possible to improve performance at day trading. In most studies, the most active traders tend to lose the most money.

What percentage of swing traders are successful? ›

However, it's important to note that an estimated 90% of swing traders do not make money. This suggests that the average success rate of swing traders who do earn a profit annually is about 10%. As such, swing trading isn't a get-rich-quick scheme, but a strategic approach that requires skill, patience, and discipline.

Is day trading actually profitable? ›

Day trading is tough. A University of Berkeley study found that 75% of day traders quit within two years. The same study found that the majority of trades, up to 80%, are unprofitable. While some day traders end up successful and make a lot of money, they are the exception rather than the norm.

Who is most successful day trader ever? ›

Who is the most successful day trader? There are a lot of successful traders but Jesse Livermore is often regarded as the most successful day trader. His success came from trading on the capital earned by himself and by trading on setups made by himself.

Are there any day trading billionaires? ›

The top billionaire day traders, like Jim Simmons, Ken Griffin, and George Soros, have different ways of trading, but they all use a mix of technical analysis, fundamental analysis, and risk management to make their choices.

How many people make a living from day trading? ›

4% of people were able to make a living with adequate capital, access to mentors, and practicing multiple hours every day during the week. Roughly 10% to 15% could make some money, but not enough to make it worth their while to continue trying to do it for a career.

Can you live off day trading? ›

The reality is that consistently making money as a day trader is a rare accomplishment. It's not entirely impossible, but it's certainly an imprudent way to invest your hard-earned cash. For people considering day trading for a living, it's important to understand some of the pitfalls.

Is day trading more profitable than swing trading? ›

Swing trade positions have a better potential for larger gains and losses than day trade positions since they are generally open longer. Because each trading approach is unique, traders should select a strategy that suits their talents, interests, and lifestyle.

Which type of trading is most profitable? ›

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

What is the success rate of intraday trading? ›

Intraday trading is the most popular, yet data suggests that most intraday traders lose money. A 70 percent don't last beyond the first year, and 95 percent stop trading by the third year.

What are the odds of being a successful day trader? ›

Approximately 1–20% of day traders actually profit from their endeavors. Exceptionally few day traders ever generate returns that are even close to worthwhile. This means that between 80 and 99 percent of them fail.

How much money do day traders with $10,000 accounts make per day on average? ›

On average, day traders with $10,000 accounts can make $200-$600 per day, with skilled traders aiming for 2%-5% returns daily. So, it is possible to achieve a daily profit of $200 to $600 with a $10,000 account.

Is it possible to make 1 percent a day trading? ›

Attempting to consistently generate 1 percent gains per day requires accurately predicting and capitalizing on these price movements, which is incredibly difficult, if not impossible, to do consistently.

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