The truth about your chances of becoming a profitable day trader is revealed here. This information is derived from conversations with other proprietary trading firm operators as well as the success rate I saw during my six years of day trading for a proprietary trading firm. A proprietary trading firm provides traders with capital, either fully or partially, in return for a percentage of their profits (business models vary, but that is the basic idea)
When provided with instruction, funding, and guidance from seasoned traders, the day trading success rate for trainees to become consistently profitable traders was incredibly low. For traders who lack resources, assistance, or time, the odds would probably be even lower or the trip would take longer.
Despite the fact that the statistics you are going to read may appear dire, I don’t see it that way. Being successful at anything requires work, and most traders don’t put in much effort (or they focus on the wrong things, as explained in How to Become a Successful Day Trader below). If you do the kind and quantity of work necessary, your chances of success will be higher.
Here’s a video that explores the distinctions between day traders who succeeded and those who didn’t.
Day trading is a high-risk, high-reward activity that is not for everyone The vast majority of day traders lose money, with only a small percentage able to consistently generate profits
According to Investopedia, only 3% of day traders make consistent profits. This means that 97% of day traders lose money. The reasons for this are many, but they include:
- Lack of experience and knowledge: Day trading requires a deep understanding of the markets, technical analysis, and risk management. Most new traders lack the experience and knowledge necessary to be successful.
- Emotional trading: Day trading can be a very emotional experience. Fear and greed can lead to poor decision-making, which can result in losses.
- Overtrading: Many day traders trade too often, which increases their risk of making mistakes.
- Lack of discipline: Day trading requires a high level of discipline. Traders must stick to their trading plan and avoid making impulsive decisions.
The Day Trading Success Rate – The Real Answer and Statistics
A study by the TradeThatSwing website found that the day trading success rate is even lower than 3%. The study found that only 4% of day traders were able to make a living from the markets. This means that 96% of day traders lost money.
The study also found that the success rate for women was much higher than for men Women were twice as likely to be successful day traders as men,
How to Increase Your Chances of Success
If you are considering day trading, there are a few things you can do to increase your chances of success:
- Get proper training: Before you start day trading, it is important to get proper training. There are many resources available, including books, courses, and online tutorials.
- Develop a trading plan: A trading plan is a set of rules that you will follow when you trade. This plan should include your entry and exit points, your risk management rules, and your trading strategy.
- Practice with a demo account: Before you start trading with real money, it is important to practice with a demo account. This will allow you to get a feel for the markets and to test your trading plan without risking any money.
- Manage your risk: Risk management is essential for day trading. You need to know how much money you are willing to lose on each trade and you need to have a plan for how you will exit a losing trade.
- Be patient: Day trading is a marathon, not a sprint. It takes time and effort to become a successful day trader. Don’t get discouraged if you don’t see results immediately.
Day trading is a difficult and risky activity. Only a small percentage of day traders are able to make consistent profits. If you are considering day trading, it is important to be aware of the risks involved and to take steps to increase your chances of success.
Additional Resources
- Investopedia: Day Trading: The Ultimate Guide
- TradeThatSwing: The Day Trading Success Rate – The Real Answer and Statistics
- The Balance: How to Become a Day Trader
Keywords: day trading, success rate, statistics, risk, reward, training, plan, demo account, risk management, patience, resources
Meta Description: Day trading is a risky activity with a low success rate. Only 3% of day traders make consistent profits. Learn how to increase your chances of success with proper training, a trading plan, and risk management.
What about brokers saying only 70% of people lose money?
In Europe, brokers must disclose the number of clients who lose money when trading with them. I usually see numbers in the range of 20-70%, which means that 20%E2%80%9C72% of clients lose money when trading with this broker. You’ll notice it on their website or in their advertisements.
Although the regulators probably meant for this to serve as a disincentive by demonstrating how difficult trading is, in reality, it makes it appear much easier than it is! 70% of traders lose 70% of the time, so 70% of traders who win are far better off than the 4% of living traders who make the side hustles that I’m talking about.
Again, we have an availability bias. Broker statistics are based only on current clients; they do not include those who lost money and closed their accounts.
For illustration, suppose that over the course of a year, 1,000 people open accounts with a broker. 600 quickly lose a significant amount of money, close their account, and advise all of their friends not to attempt day trading. Out of the 400 that are left, 30 are doing well, 70 are making money, and the remaining 300 are losing money in varying amounts but have their accounts open.
The broker claims that 30% of the 400 individuals are profitable, or roughly 20% of the total. However, this statistic only takes into account active accounts; it ignores those who have closed their accounts or suffered significant losses. The true figure ought to be 100 out of 1,000 profitable individuals, not 400. Furthermore, even if 2010 is profitable, we naturally know that only a small percentage of people will do extremely well.
It’s pretty clear they don’t want to release those statistics if you consider all the accounts that were probably opened and closed because of losses and aren’t being counted.
Additionally, longer-term traders and investors will be included in these broker-published figures. They are not isolating only short-term traders.
Understanding the Day Trader Success Rate
Statistics are often cited, with examples being that 90% of traders lose money, but new traders assume they’ll be in the top 5% because they believe they’re smarter than most existing traders. Trading isn’t about being smart. It involves exercising discipline, systematically developing a trading strategy, and adhering to it. And it never ends. We must create guidelines for adapting to life’s changes, market fluctuations, rule changes, leverage changes, market cycles, and prosperous and poor times. We don’t just draft a plan and call it a day. Putting it into practice requires patience and methodical discipline on a constant basis.
Since they see so many people flaunting their wealth on social media or in online forums, many novice traders also think that these statistics—which show that only 5% of traders succeed—are false. It seems like many people are doing very well!.
(See The Art of Thinking Clearly on this trading book list for more on availability bias.) It is the conviction that everything, even the things we don’t see, is represented by what we see most of the time. Look at the dead space. Those groups probably have thousands of members, but only a select few consistently flaunt their wealth. Thousands or even hundreds of thousands of people may be losing money in those groups, but they are silent. Without knowing how many people are also failing, it is impossible to calculate the success rate based solely on success stories, and those who lose are usually far less vocal.
The data in the preceding section illustrates the proportion of successful individuals among the total. However, the company didn’t address this; instead, it merely highlighted to prospective employees how well the traders who did succeed were doing. Only the tinier, more glamorous side of the picture is visible to novice traders.
See The Real Reasons Most Traders Lose Money for more information on the causes of most traders’ losses.
How much MONEY do Day Traders make?
FAQ
What percentage of day traders are successful?
Do 80% of day traders lose money?
Do people actually make a lot of money day trading?
How much money do day traders make?
Exceptional Earnings Are Rare: Reports of day traders earning millions are outliers, with the median profit around $13,000, suggesting survivorship bias in reporting. Gender Disparity: 90.5% of day traders are men, though women, who make up 9.5%, tend to be better traders due to more cautious strategies.
How much money do day traders lose in a year?
A whopping 97% of day traders lose money in less than a year. A staggering 77% of eToro traders that use CFDs lose money. An incredible 85% of day traders quit within three years. Profitable traders account for 12% of all-day trading activities. A day trader’s average return rate is 10%. There are 9.6 million traders around the globe.
What percentage of day traders have a trading strategy?
A survey from the brokerage Charles Schwab revealed that 70% of day traders have established a trading strategy. Around 45% of traders dedicate 1-2 hours daily to trading, whereas a mere 14% invest over 6 hours daily. Data from the trading platform Etoro indicates that 89% of day traders incorporate technical analysis into their trading methods.
How much do retail day traders trade?
Retail day traders are responsible for only around 10% of the total trading volume in US stocks according to a study by Morgan Stanley. In Europe, retail traders are responsible for only 5% of stock trading volume. Stocks with more trading activity by individual day traders tend to outperform those with less retail trading activity.