Last Updated on June 19, 2022 by Quantified Trading
I have previously written one article about the possibility of making money in daytrading:
- Is It Possible To Make Money Day Trading? My numbers July 2012 – July 2013
- Is It Possible to Make Money Day Trading? Can you make money day trading? (My numbers)
- Is It Possible To Make Money Day Trading? Part 2: Automated trading
In general terms I think it’s safe to conclude the following:
- The majority of day traders lose money, certainly new ones. The turnover of day traders is very high. The longer you survive, the better odds for making a living in the future. Personally, I know no trader who hit it off right off the bat.
- However, some surviving day traders are profitable and some very few make a tremendous amount of money day trading.
Tuco Trading and the percentage of profitable traders
Tuco Trading, a professional trading firm based in San Diego, was taken over by the SEC in March 2008. The reason was “illegal trading” in securities (I won’t go into detail about this case but this business is very regulated).
However, the court case revealed a lot about the profitability of the traders, which mostly were day traders. By chance, I got hold of some of the papers from the court case. One paper showed the P/L for each trader for 2007. Given that the papers are correct, they shed some light on profitability. I don’t want to publish the papers, so I’ll just summarize them and you can make your own conclusions:
- 206 active traders per 31. December 2007.
- 33 profitable (16%).
- 173 unprofitable (84%).
- 7 with more than 50 000 USD in profits (3%).
- 57 with losses over 10 000 USD (28%).
Quite bad numbers!
Why do they fail? Here’s my take in the order of importance:
- Many lack discipline and understanding of how long it takes to learn the markets.
- They don’t have the passion and work ethic.
- Take too much risk, too extrovert.
- The markets are, in the short term, a zero-sum game. Thus, most traders can’t win.
You can’t make it with an average attitude. In a salaried position, you can do ok coming in at 8 in the morning and leaving at 4. In trading, you can of course work less, but you have to do what is right or correct. I do reasonably well and spend less than 5 hours a day doing this. This is solely due to my 12 years of experience.
Day trading is a struggle
Personally, I think trading is a struggle most of the time: struggle to make money, struggle psychologically to do what is right, and a struggle to make decisions. Most people can’t accept this and will ultimately fail. Please read why day traders fail.