Study says Daytrading for a living is virtually impossible.

[trdes]

For skilled traders, the problem with "day trading" as a main focus isn't that it's impossible but that it's stupid. Longer holding periods offer dramatically better strategy metrics (as measured by e.g. profit factor or per-trade expectancy) at a small fraction of the overall effort, far less time in the market, far lower commission costs, and with no requirement to operate at 100% peak focus and performance for hours on end. Capacity constraints mean that you won't be able to deploy more than a fraction of your capital in day trading, unless you're just starting out - and if you are just starting out, you won't make money because day trading requires higher skill compared to swing/position trading.

This is why you don't see self-described "day traders" in Market Wizards and similar. Almost by definition, those at the top of the field (in trading or any other field) are the ones who make maximally efficient use of scarce resources, which in our case means capital and the trader's time/attention/focus. Day trading does neither.

EDIT: Not in the mood for a debate.

 

[tiddlywinks]

Longer holding periods offer dramatically better strategy metrics (as measured by e.g. profit factor or per-trade expectancy) at a small fraction of the overall effort

True.

far less time in the market

False.

far lower commission costs

If apples to apples trade size, and strategy executions, True.
Otherwise, apples to oranges and a big maybe.

no requirement to operate at 100% peak focus and performance for hours on end.

those at the top of the field (in trading or any other field) are the ones who make maximally efficient use of scarce resources, which in our case means capital and the trader's time/attention/focus.

Contradiction. Those on top of the mountain didn't fall there!

Capacity constraints mean that you won't be able to deploy more than a fraction of your capital in day trading,

Dependent more so on the particular instrument, than the total amount to be deployed. If you are talking 10's of millions and magnitudes thereof, than this entire conversation is off topic.

 

[lentus]

This is a hilarious thread. Here is some actual intelligent comment:

The Brazilian Real collapsed over 50% from 2011-2016.

View attachment 209051

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

View attachment 209052

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.

I don't see how macro stuff prevents daytraders from being profitable. I think the main reasons are:

1) they don't have an edge
2) if they do it's not big enough to beat transaction costs
3) daytrading attracts idiots which is related to #1

 

[lentus]

Day traders can make tons of money.

But, the vast majority can't hang with the pros. What's funny about it is that the guys who don't know how to day trade love to hate successful day traders.

Sour grapes.

I have never heard nor read about any successful day trader hating on swing traders.

Not once.

The hate always goes in one direction.

Tons of locals and pros in open outcry have traded and trade HUGE SIZE during the day.

This is a FACT.

There have always been day traders and there always will be. Not all of them lose either. Huge money can be made on short term trading. Some traders do thousands of round trips in a day on globex. Even more than that. It is crazy.

Most daytraders in the open outcry (when it was a thing) and prop firms are losers too! The winners in daytrading are the Citadels of the world where they have teams of Ranjeet PhDs working for them.

 

[lentus]

To be clear I specifically stated that day trading is a waste of time and resources for the money you get.

What I did criticize is the conclusion reached by the study based on the flawed analysis of the data. Studies with flawed samples and flawed analysis are often used to make generalized conclusions in all topics and this study is more of the same.

I was very clear on both points.

How is it flawed exactly?

 

[lentus]

For skilled traders, the problem with "day trading" as a main focus isn't that it's impossible but that it's stupid. Longer holding periods offer dramatically better strategy metrics (as measured by e.g. profit factor or per-trade expectancy) at a small fraction of the overall effort, far less time in the market, far lower commission costs, and with no requirement to operate at 100% peak focus and performance for hours on end. Capacity constraints mean that you won't be able to deploy more than a fraction of your capital in day trading, unless you're just starting out - and if you are just starting out, you won't make money because day trading requires higher skill compared to swing/position trading.

This is why you don't see self-described "day traders" in Market Wizards and similar. Almost by definition, those at the top of the field (in trading or any other field) are the ones who make maximally efficient use of scarce resources, which in our case means capital and the trader's time/attention/focus. Day trading does neither.

Except HFTs. You should these fuckers equity curves. Barely a losing day in a year. But you need be something like Citadel and an army of Ranjeets.

 

[bbpp]

Those who know nothing about day trading hurry to come out to make conclusion on daytrading.I used to daytrade 4 instruments at same time. Now I daytrade 2 and at same time read novels.How much daytrading makes?None of you guys dare to dream.

 

[El OchoCinco]

How is it flawed exactly?

Using a limited sample survey of new retail day traders in Brazil (who do not make up a representative sample of all daytraders to begin with) to determine day trading is impossible.

I said this several times. the study hypes how detailed it looked at the data but every study falls under the garbage in/garbage out model. Does not matter how closely you look at the data, if your conclusion is arbitrary and based on limited subsets then any general conclusion reached on the entire population is flawed.

 

[lentus]

Using a limited sample survey of new retail day traders in Brazil (who do not make up a representative sample of all daytraders to begin with) to determine day trading is impossible.

I said this several times. the study hypes how detailed it looked at the data but every study falls under the garbage in/garbage out model. Does not matter how closely you look at the data, if your conclusion is arbitrary and based on limited subsets then any general conclusion reached on the entire population is flawed.

1. Almost every study is limited sample. And it's a nice, big, statistically significant sample here.

2. You have a point about retail vs non-retail but do you think Citadel will let researchers study their shit? If you want you can change the conclusion to "retail daytrading impossible". That's fine.

3. It's not impossible according to the study. 3% won but meager amounts. Impossible is the word used by those discussing the study to make sound more entertaining.

 

[trdes]

1. Almost every study is limited sample. And it's a nice, big, statistically significant sample here.

2. You have a point about retail vs non-retail but do you think Citadel will let researchers study their shit? If you want you can change the conclusion to "retail daytrading impossible". That's fine.

3. It's not impossible according to the study. 3% won but meager amounts. Impossible is the word used by those discussing the study to make sound more entertaining.

I mean it's a well known fact day trading as your only source of income is one of the more difficult things to accomplish consistently year over year, but it's also clearly and objectively not impossible... so there's zero value in this study, unless you're looking for entertainment.