Study says Daytrading for a living is virtually impossible.
- Thread starter traderslair
- Start date
Sorry to contradict you but the study said I believe each year they studied a new pool which included only traders who did not trade the previous year. So >300 days is capped at 360 days. It was just used to highlight traders that traded almost the entire year.
The study specifically said it targeted NEW RETAIl TRADERS over the several years and each year started NEW with traders who did not trade the year before.
So no, they did not track anyone in Year 2, year 3, year 4, etc.... If they did they would easily have seen the numbers dwindle off as a majority give up, quit, lose their small stake and walk away or just never realize the skill it takes.
Studies never take into account the human element and requirements and discipline. Most traders don't fail simply because it is impossible to day trade. Most traders start out extremely ill equipped and never realize the learning curve that is required to trade successfully. No matter how many books you read, nothing takes the place of experience and thousands of hours of screen time. newbies mostly are looking for the get rich quick approach so they should be expected to fail.
Also, more importantly, day trading returns for non-rich people are piss poor compared to the time and effort invested when compared to starting a business. Any trader you see on the lists of wealthy people are because they turned their floor trading into a trading company enterprise/business and oversee that (i.e. Steve Cohen). If someone had $10k had told me they wanted to start day trading, I would tell them to look for a business to start with the same money as their potential returns and odds of success are far better versus newbie trading with 0% knowledge.
The tragedy of this study is that it lead with the wrong main summary point and as a result offended many traders. That said, taken the right way, it can provide some decent insight for struggling traders.
The way I understood the study, is that the attack isn't on traders, but on the brokers and instructors promoting an "easy path" to becoming a successful day trader - and having a high enough level of success to be able to trade for a living.
We all know the type of false/deceptive advertising out there - doing their best to lure all those thinking they have a shortcut to gaining success and wealth with trading.
One thing I've observed with ET is that anyone trying to promote "get rich quick" trading plans get roasted hard by most of the members because we know better.
The majority us us agree that the companies and people putting the images of living on a tropical island, exotic travel, driving lambos, etc, from using their trading plans/methods are scam artists looking to dupe people to paying $$$ for their information.
The study shows that learning to trade isn't easy and very few show any improvement even after over a year of trying- contradicting the "promises" of those "learn to trade fast" courses/chat rooms.
Now here is the "gem" of info provided:
They stated the percentage profitable based on time trading:
Trading Days Experience Percent Successful
1 29.8%
2-50 15.5%
51-100 8.9%
101-200 6.8%
201-300 5.4%
300+ 3.0%
These stats show that the more experience one has in day trading, the worse one performs. Taken another way- the more "ignorant" the trader, the better they do.
This is counter intuitive, but it makes sense.
In the beginning you have little bias so you are acting more by natural instinct, but once you start actually "thinking" about what you're doing, much of that instinct becomes suppressed. Did you ever walk down the stairs fast and start thinking about how you are able to go down the stairs so fast, and then start stumbling? It's similar to that.
Trading requires you to rewire your mind and way of thinking. Trading success depends on having these rewired brain insights, rather than from the additive effects of rote learning. You can't learn trading from simple rote methods. It's not about the quantity of time spent, but the quality of time spent.
Without being able to put aside ones natural way of thinking, trading success will remain elusive. The study clearly shows that as people start to apply their mind to trading with a non rewired brain, the worse they become over time.
Obviously changing ones way of thinking is very difficult which explains the low success rates. This is why even if a qualified mentor tells someone how to trade, unless they are also able to rewire their thought process, they won't really understand it.
So the question becomes how does one rewire their brain? It starts with dropping ones ego and admitting they know nothing about trading, forget the news and business news pundits and anything you've read. Just focus on the charts, and keep your mind open to let your subconscious start processing solutions that will work for you.
From personal experience, I lost a lot of time ignoring the natural solutions my mind was telling me in favor of the "trading rules" I read in books or saw on video. Then I tried force fitting insights I had into my books learned systems. It wasn't until I started giving up what I thought I knew from reading those books and just trying to apply my own insights did I start improving in day trading proficiency.
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Spot-on observations. I have found that my over-thinking my trading, because of what I have learned through my greater and greater experience gathered over time, is harming my performance. I liked to chalk that up to changing market conditions, that tired old blanket of why performance is down. But that really does feel like a cop-out at this point.
its very true, Day trading is possible but to say that you make a living day trading year after year, you need discipline and dedication. They are my heroes too.You are my hero. Those who can make a good living day trading full time are truly special.
From the study:
We do not consider the individuals who began to day trade in 2016 and 2017 since we need to have at least two years of data to evaluate performance.
The study wasn't very clear about how long they followed trader performance beyond the 300 day interval, but it's safe to say that they followed their performance for at least 2 years based off this statement.
I've always wished that someone would do a study showing the success rate of traders that have traded for at least 5 years. I would assume it would be higher than most studies. It might still be pretty low though.
There are so many people here trying to defend their feeble attempts at day trading. It would be hilarious if it wasn't so sad. This is how I know the study has power - it has inflamed so many people for literally no reason. You'd think you just told them God doesn't exist.
Spend some time listening to Schwager, the only person to actually chronicle the stories of supertraders. I have read each of his books, and of the HUNDREDS of traders he's interviewed I can think of 2 or 3 that qualified as "day traders". Keep in mind these people are at the top of their game and only 2 or 3 of them can day trade.
Get off your high horse and accept this the first (of likely many) proofs that day trading is a mostly fruitless effort. You only stand to win with this study. If your ignorance keeps you blind I will be happy to take your money as a swing trader. In fact, I should thank you ahead of time!
Spend some time listening to Schwager, the only person to actually chronicle the stories of supertraders. I have read each of his books, and of the HUNDREDS of traders he's interviewed I can think of 2 or 3 that qualified as "day traders". Keep in mind these people are at the top of their game and only 2 or 3 of them can day trade.
Get off your high horse and accept this the first (of likely many) proofs that day trading is a mostly fruitless effort. You only stand to win with this study. If your ignorance keeps you blind I will be happy to take your money as a swing trader. In fact, I should thank you ahead of time!
This is a hilarious thread. Here is some actual intelligent comment:
The Brazilian Real collapsed over 50% from 2011-2016.
It doesn't take a genius to figure out that this is going to make daytrading brazilian equity futures challenging to say the least.
Some relevant headlines:
Brazil downgraded to junk rating by S&P, deepening woes (Sep 2015)
https://www.reuters.com/article/us-...ng-by-sp-deepening-woes-idUSKCN0RA06120150910
Emergent political risks...
The President was impeached
https://en.wikipedia.org/wiki/Impeachment_of_Dilma_Rousseff
and scandals and corruption
Petrobras scandal, Brazilian political corruption scandal beginning in 2014 that involved the indictment of dozens of high-level business people and politicians...
Brazil has a history of economic problems:
Between 1985 to 1994, an accumulated inflation rate was estimated to be around at 184,901,570,954.39% caused by uncontrolled printing of money. There were many economic plans that tried to contain hyperinflation with zeros cuts, price freeze and even confiscation of bank accounts.
-Wikipedia
Brazil’s future - Has Brazil blown it?
A stagnant economy, a bloated state and mass protests mean Dilma Rousseff must change course
-The Economist (Oct 1, 2013)
Here is a chart of the brazilian equity index over the period
The chart is pretty nasty looking even on a daily time frame.
Given the unique mix of economic and political risks, and set against the backdrop of a Euro crisis and global economic slowdown at the time, I can say that randomly selected newbie traders didn't have a chance in hell of even surviving this action, let alone maintaining profitability.
The stated conclusion
"it is virtually impossible for an individual to day trade for a living"
without at least a few qualifiers is in my opinion irresponsible, or perhaps even a little embarrassing for the authors. If the scientific community is to be tasked with validating the conclusion, this study by Chague, De-Losso, and Giovannetti will certainly not be sufficient.
The Brazilian Real collapsed over 50% from 2011-2016.
It doesn't take a genius to figure out that this is going to make daytrading brazilian equity futures challenging to say the least.
Some relevant headlines:
Brazil downgraded to junk rating by S&P, deepening woes (Sep 2015)
https://www.reuters.com/article/us-...ng-by-sp-deepening-woes-idUSKCN0RA06120150910
Emergent political risks...
The President was impeached
https://en.wikipedia.org/wiki/Impeachment_of_Dilma_Rousseff
and scandals and corruption
Petrobras scandal, Brazilian political corruption scandal beginning in 2014 that involved the indictment of dozens of high-level business people and politicians...
Brazil has a history of economic problems:
Between 1985 to 1994, an accumulated inflation rate was estimated to be around at 184,901,570,954.39% caused by uncontrolled printing of money. There were many economic plans that tried to contain hyperinflation with zeros cuts, price freeze and even confiscation of bank accounts.
-Wikipedia
Brazil’s future - Has Brazil blown it?
A stagnant economy, a bloated state and mass protests mean Dilma Rousseff must change course
-The Economist (Oct 1, 2013)
Here is a chart of the brazilian equity index over the period
The chart is pretty nasty looking even on a daily time frame.
Given the unique mix of economic and political risks, and set against the backdrop of a Euro crisis and global economic slowdown at the time, I can say that randomly selected newbie traders didn't have a chance in hell of even surviving this action, let alone maintaining profitability.
The stated conclusion
"it is virtually impossible for an individual to day trade for a living"
without at least a few qualifiers is in my opinion irresponsible, or perhaps even a little embarrassing for the authors. If the scientific community is to be tasked with validating the conclusion, this study by Chague, De-Losso, and Giovannetti will certainly not be sufficient.
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