Study says Daytrading for a living is virtually impossible.

Slope Trader said:
I tracked down a description of a slightly more optimistic study on Brett Steenbarger's TraderFeed site. This study found that a small number of daytraders "are able to outperform consistently".

Steenbarger's article is pasted below and can be found at
http://traderfeed.blogspot.com/2014/08/what-proportion-of-daytraders-actually.html

What Proportion of Daytraders Actually Makes Money?
I strongly recommend reading the research study of speculator skill from Barber, Lee, Liu, and Odean. They studied the returns of daytraders over a 15-year period, the largest sample I am aware of in such a study. Their study is also unique in that it looks at the ability of traders to make money in a second year after having made money in the first.
The authors conclude that "there is clear performance persistence." The very top traders who make money net of fees tend to continue to make money going forward. The traders who lose money tend to continue losing money.

Here is the most important conclusion, however:

"In the average year, 360,000 individuals engage in day trading. While about 13% earn profits net of fees in the typical year, the results of our analysis suggest that less than 1% of day traders (less than 1,000 out of 360,000) are able to outperform consistently." (p. 15).

In other words, 87% of day traders in a given year lose money after fees are taken into account. About .28%--one in 360--is able to make money after fees year over year.

To be sure, that small group of very successful day traders earns a significant return. After expenses, they average +28 bps per day. Compare that to the 350,000 out of 360,000 daytraders who average a daily loss of 5.7 bps per day after expenses.
The authors conclude that day trading skill genuinely exists. They also conclude that it is very, very rare.

Further Reading: Can Day Traders Be Successful?
More...
Times said:
There is another study by University of California, Berkeley

That shows less than 1% of day traders predictably earn profits.
https://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trading and Learning 110217.pdf

Anyone who has traded for some time should know this is pretty much true, for every 1 trader that makes it, you will find 99 that dont.

Just go into any trading chatroom, its very clear there, its even clear here.

Just think of the math, for someone to make a living, someone has to make a quite a bit of money from trading, where does that money come from? must be from the 99 that filled the other side of their trade

At minimum Market markers & arbitragers surely take the money from the retailers.
More...
There is just one study: About day trading in Taiwan and it has been cited and mentioned by numerous folks here and in academia multiple times as if there are lots of research in this topic.
 
There are various types of trading:

- swing trade stocks
- day trade stocks
- trade options (vertical, horizontal, diagonal ....) on stocks / futures ...
- trade commodity calender spreads
- trade spot forex
- heavy scalping futures
- day trade futures
etc etc etc

of all these, the easiest to trade is DAY TRADE FUTURES.
Because it is easiest to earn tons of money.
and every day after trading, you wouldn't have sleepless night.

But do note it may take many years / decades to develop your own holy grail.
 
traderslair said:
Abstract
We show that it is virtually impossible for an individual to day trade for a living, contrary to what course providers claim. We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101
More...
The research/study seemed quite rigorous to me. It is much better, in my non professional opinion, than the Taiwan study. Those of you who said they only studied new day traders obviously did not read the paper. They studied the outcome of those who persisted and traded > 1 year. There were no improvements.
 
What is telling about day trading is the following:

After all these years, there are exactly two rigorous studies on day trading, one from Taiwan the other from Brazil. The US, where financial markets are supposed to be the most transparent, data are most complete and available, has none? When I first learned to day trade I ask Schwab to see if there were studies, either internal or external on day trading, got a blank stare. Why is it so difficult to study when data are available? Could it be all brokerages are afraid to let the cat out of the bag?

On ET, most who spoke out against the paper claimed to be successful day traders making a nice living day trading and I don't have reasons to doubt you. I am just telling you I couldn't and gave up, went swing, later swing options and never look back.

My hat off to those who are able to make a living day trading.
 
ironchef said:
What is telling about day trading is the following:

After all these years, there are exactly two rigorous studies on day trading, one from Taiwan the other from Brazil. The US, where financial markets are supposed to be the most transparent, data are most complete and available, has none? When I first learned to day trade I ask Schwab to see if there were studies, either internal or external on day trading, got a blank stare. Why is it so difficult to study when data are available? Could it be all brokerages are afraid to let the cat out of the bag?

On ET, most who spoke out against the paper claimed to be successful day traders making a nice living day trading and I don't have reasons to doubt you. I am just telling you I couldn't and gave up, went swing, later swing options and never look back.

My hat off to those who are able to make a living day trading.
More...

right mister.
what works for one person may not work for another person.
I went from swing to day trading.
 
This discussion could all just finish with:

1. Daytraders posting their broker P&L of the last 3 years combined with their Tax Returns
2. Educators posting their broker P&L of the last 3 years combined with their Tax Returns

There is a reason why we do not see that.

The reason is that no educator makes enough money doing what he is teaching. If it would be. I would probably not be able to open a browser to go on the internet with adds flying in my face showing these P&Ls with Tax Returns.

Yes, day trading for a living is possible, but realize it is a 1% thing, literally, so most people should just save their money and time and take up another route in life for financial independence. Trading must be officially one of the worst paths in life to become financially independent.
 
traderslair said:
Yes, day trading for a living is possible, but realize it is a 1% thing, literally, so most people should just save their money and time and take up another route in life for financial independence. Trading must be officially one of the worst paths in life to become financially independent.
More...

True. I would agree
 
How are American or European daytraders smarter than Brazilian daytraders? Oh right, CNBC is American lol. If you can demonstrate this other than shitting on an entire nation without any factual reason then you would start to make sense. So far you don't.

Looking at most on this site who dropped out from highschool I totally believe this study equally applies in other countries.

El OchoCinco said:
So Brazil speaks for the rest of the world now huh? Fuck Brazil. Also who the @#$% trades the Brazilian futures market??
More...
 
Bullshit. What's the percentage of carpenters who train and subsequently work but fail? My hunch is that it's lower than 30%. 70% make a decent living. Smae with plumbers, farmers, nurses, electritions, teachers, police men. Daytraders? The percentage of failure was always in the upper 90s and I always stated and believed it's closer to 97-99%

speedo said:
Anything is "virtually impossible" if you don't know how to do it and most will not do what it takes to be able to day trade. But hey, it doesn't take much to deduce that something is "virtually impossible". Studies like this don't even know what the confounding variables are, no less understand how to control for them. At least these kinds of things give solace to those who walk away bloodied and feel the need to believe if they couldn't do it, it can't be done.
More...
 
You must log in or register to reply here.
Back
Top