Results are not typical and will vary from person to person. Becoming an experienced trader takes hard work, dedication and a significant amount of time. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. Precise Trading Analytics may publish testimonials or descriptions of past performance but these results are NOT typical, are not indicative of future results or performance, and are not intended to be a representation, warranty or guarantee that similar results will be obtained by you. Profit figures may represent gross or net gains. Gross profits reflect trading performance prior to the deduction of transaction costs. These figures do not include the impact of commissions, taxes, margin interest, or other brokerage fees.
The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.
A 2000 study called "Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors" evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.
A 2014 paper (revised 2019) titled "Learning Fast or Slow?" analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.
A 2019 research study (revised 2020) called "Day Trading for a Living?" observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.
These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money.
Precise Trading Analytics LLC. 7 W Square Lake Rd, Bloomfield Twp, MI 48302 United States (800) 497-4074. This is for information purposes only as Precise Trading Analytics nor any of its affiliates are registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Precise Trading Analytics and any of its affiliates cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Precise Trading Analytics and any of its affiliates in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Precise Trading Analytics and any of its affiliates accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.
Citations for Disclaimer
- Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors.
- Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies.
- Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020).
- Garvey, Ryan and Murphy, Anthony, The Profitability of Active Stock Traders. Journal of Applied Finance, Vol. 15, No. 2, Fall/Winter 2005.
- Douglas J. Jordan & J. David Diltz (2003) The Profitability of Day Traders, Financial Analysts Journal, 59:6, 85-94.