Day trading has more than a passing similarity to the famous California Gold Rush of 1849. Few winners among the traders, but a massive industry set up to encourage and facilitate – and profit from others’ interest in – day trading. The breathless claims of easy riches that attract so many day traders do not materialize in real life, however.
Day trading has an almost mythic status in modern markets—portrayed as an exciting, fast track to financial freedom, but often described by regulators and researchers as a near‑certain path to losses.
To clear up any doubt, a large body of academic and regulatory work now paints a remarkably consistent picture: A tiny minority of day traders earn persistent profits, while the vast majority lose money, often substantially.
Day trading is the practice of buying and selling (or selling and buying) the same security within a single trading day, closing all positions before the market close. In the U.S., if you execute four or more day trades in five business days in a margin account, that usually classifies you as a “pattern day trader,” triggering minimum equity and margin requirements on your account.
Day traders typically:
- Focus on intraday charts (1–15 minute bars) and real‑time news.
- Use margin and leverage to amplify small price moves.
- Rely on technical analysis and order flow rather than long‑term fundamentals.
This very short horizon makes performance highly sensitive to transaction costs, slippage, and behavioral biases like overconfidence and loss‑aversion.
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Who Day Trades?
The available evidence from a number of studies finds that a “typical” day trader profile looks something like this:
Gender: Predominantly male (around 80–90% in many samples) – no surprise here, given the general perception of day trading as rugged individualism, often portrayed as quintessentially masculine.
Age: Either 18–34 in the app‑based retail segment or 40+ among job‑coded/professional day traders, with 40+ representing the single largest group overall.
Education/background: More likely than the general population to have at least some college and somewhat more likely to have a finance or technical background, though many are self‑taught retail participants.
Behavioral traits: High risk tolerance, interest in markets and technology, and a tendency toward overconfidence and high trading frequency.
The exact mix varies by country and platform, but these are the recurring patterns across recent demographic and statistical reviews of day trading populations.
How Do They Fare? What the Research Finds
The most influential dataset on equity day traders comes from the Taiwan Stock Exchange, where day trading has long been widespread.
“Do Individual Day Traders Make Money? Evidence from Taiwan”
Barber, Lee, Liu, and Odean analyzed every trade by individual investors in Taiwan, identifying those who repeatedly opened and closed positions within the same day. Their key findings include:
- In a typical six‑month period, more than 80% of day traders lost money after costs.
- Defining “day traders” as individuals who day traded at least NT$300,000 in the previous six months, only about 18% were profitable in the following six months.
- In aggregate, day traders as a group lost money every year once transaction costs were considered.
These results show that while a small fraction make profits in a given window, most lose—and the day trading group, as a whole, transfers wealth to the market and intermediaries.
In a follow‑up paper, “The Cross‑Section of Speculator Skill: Evidence from Day Trading,” the same authors looked at performance persistence and “skill” across the day‑trader population. They found:
- On average, individual speculators lose money from trading, even before considering broader opportunity costs.
- A very small subset shows statistically significant positive performance over multiple periods, suggesting genuine skill rather than random luck, but this group represents well under 5% of active day traders.
In other words, there are skilled day traders, but they are rare outliers in a largely loss‑making population.
Brazil: Futures Day Traders
Another high‑profile study by the Brazilian securities regulator (CVM) examined retail traders in mini equity index futures, a popular day‑trading product.
Although the technical report is in Portuguese, its core statistics are widely cited in English‑language summaries:
- Among roughly 1,600 day traders who traded for more than 300 days, 97% lost money, and only about 1% earned more than the Brazilian minimum wage from day trading.
This dataset reinforces the Taiwan results in a different market and product: persistence and experience do not translate into widespread profitability.
NASAA Day Trading Project Group
The North American Securities Administrators Association (NASAA) examined U.S. day‑trading firms during the late 1990s boom. Its “Report of the Day Trading Project Group” concluded that:
- Promotional claims that “most” or “80–85%” of customers were profitable were not supported by firms’ internal data.
- The overwhelming majority of day‑trading customers lost money, often quickly and in large amounts.
- Day trading was characterized as highly speculative and unsuitable for most investors.
Although the report is older, it remains the foundational regulatory position and is still referenced by state regulators and federal agencies.
FINRA, SEC, and Investor.gov Guidance
FINRA and SEC investor‑education materials synthesize Barber & Odean’s work and other data:
- Investor.gov notes that active day traders typically underperform buy‑and‑hold investors, once costs are included.
- SEC reviews of retail foreign exchange accounts (different market, same behavior) found that around 70% of customers lost money in each quarter, and that loss rates remained persistently high over time.
These agencies use such findings to justify strict pattern‑day‑trader rules, margin requirements, and suitability obligations for brokers.
Broader Evidence on Active Trading
Even when data are not limited strictly to “day traders,” research on active individual traders strongly echoes the same pattern.
In “Trading Is Hazardous to Your Wealth,” Barber and Odean studied over 66,000 brokerage accounts in the U.S. over several years. They found:
- The most active 20% of individual traders underperformed the market by about 6–7% per year after costs.
- Less active investors did significantly better; in many cases, simply doing less improved outcomes.
While not all of these investors were day traders, the study shows that high turnover and frequent, short‑horizon trading are strongly associated with worse performance.
Overconfidence and Day Trading
A separate study on “overconfident individual day traders” in Taiwan documented:
- Average losses of about NT$61,500 after costs, and NT$26,700 before costs, for a sample of several thousand day traders.
- Measures of overconfidence (e.g., past aggressive trading) were positively related to both higher trading volume and larger subsequent losses.
This helps explain why many traders continue despite poor outcomes: psychological biases can keep them overestimating their skill and underestimating risk.
Newer Synthesis: “The Myth of Profitable Day Trading”
A working paper titled “The Myth of Profitable Day Trading: What Separates the Winners from the Losers?” aggregates evidence across markets. While still in pre‑publication form, its summary statistics are striking:
- Across various equity and futures datasets, less than 1% of traders are consistently profitable after costs.
- Roughly 80% of traders lose money even before including commissions, spreads, and fees, implying that trading decisions themselves are, on average, value‑destroying.
- The few persistent winners exhibit common traits: rigorous risk management, consistent strategy, and emotional discipline—but they are exceptionally rare in the total population.
This paper essentially restates the academic consensus in plain language: Profitable day traders exist, but they are statistical exceptions, not the norm.
| Studies on Day Trader Profitability | ||
| Study / Source | Market / Sample | Core Profitability Findings |
| Barber et al., “Do Individual Day Traders Make Money?” | Taiwan equity day traders | >80% lose money in a typical 6‑month period; only ~18% profitable in next 6 months |
| Barber et al., “Cross‑Section of Speculator Skill” | Taiwan, multi‑year panel | Average trader loses; <5% show persistent positive net performance |
| Brazilian CVM futures study | 1,600+ index futures day traders | 97% lost money; ~1% earned more than minimum wage from trading |
| NASAA Day Trading Project Group | U.S. day‑trading customers | “Overwhelming majority” of clients lose; marketing success claims not supported |
| Barber & Odean, “Trading Is Hazardous to Your Wealth” | 66,000+ U.S. accounts | Most active traders underperform market by 6–7% p.a. after costs |
| “Myth of Profitable Day Trading” (2024) | Multiple markets, various products | <1% consistently profitable; ~80% lose money even before costs |
In Conclusion
Taken together, these studies suggest several reasons why most day traders perform badly:
- Transaction costs and slippage: Frequent trading magnifies the effect of commissions, bid‑ask spreads, and imperfect execution; even a small negative edge per trade compounds rapidly.
- Behavioral biases: Overconfidence, sensation‑seeking, and poor risk management lead traders to trade too often, hold losers too long, and cut winners too quickly.
- Competition: Day traders face professional market makers, high‑frequency traders, and institutional players with speed, information, and cost advantages.
- Leverage and concentration: Use of margin and focus on volatile instruments amplifies drawdowns and can wipe out accounts even when “hit rates” look reasonable.
It is possible to make money day trading, but the bar for skill, discipline, and structural advantage is extremely high, and the rate of success is very low. These conclusions are robust across markets (Taiwan, Brazil, U.S.), products (equities, futures, foreign exchange), and time periods, and are endorsed or repeated by major regulators as well as academic researchers:
- The majority of day traders lose money (often over 80–90% in any given year or multi‑month period) is the consistent finding of large‑sample studies of real accounts.
- A very small fraction—typically well under 5%, and often closer to 1%—achieves persistent, after‑cost profitability.
- High trading frequency by individuals is strongly associated with underperformance relative to simple buy‑and‑hold benchmarks.
While there is money to be made, selling advice to the eager day trading community, that is an area Cabot does not venture into. We know that for less effort, lower risk, and greater chances of success, long investing and options trading are a much better fit for serious investors.
Helping serious investors is what we’ve done since 1970 and we have a team of expert analysts and a menu of advisory services to help you, whatever your investing style and preferences.
For your investing success,
Ed Coburn
President, Cabot Wealth Network
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